By Jack Phillips
Treasury Secretary Janet Yellen said that a U.S. recession is still “not completely off the table” in the near future, but she claimed the country is on the right path in bringing down decades-high inflation.
“It’s not completely off the table,” Ms. Yellen told CBS News’ “Face the Nation” on Sunday about a possible recession after the Department of Labor’s June jobs report was the weakest in more than two years. American employers, the report said, added about 209,000 jobs in June 2023—the worst showing since December 2020.
In the interview, she characterized the relatively poor U.S. jobs report as routine.
“But we would expect, with the job market as strong as it is now, to see a slower pace of ongoing job gains,” she told CBS. “Prime age labor force participation is at the highest level in several decades, so we’ve seen this strong job market attract workers back to it. But as that stabilizes at a high level, we should expect the monthly job gains to be coming down toward a more normal level.”
Ms. Yellen, who recently faced criticism for bowing to a Chinese Communist Party (CCP) official, added that “when the pandemic struck, there was huge job loss and a contraction in our economy … and as recovery took place, due to President [Joe] Biden’s economic policies, and success with our vaccination effort, there was a very rapid, a dramatic rebound, the labor market recovered. And now growth has slowed somewhat back to more normal levels.”
The treasury secretary said that inflation is still “too high” but asserted that overall, the consumer price index has started to ease. Prices rose 4 percent year-over-year in May, according to the Labor Department’s figures, which is more than the Federal Reserve’s target of 2 percent.
“It’s my hope that, and belief, that there is a path to bring inflation down in the context of a health labor market and the data that I’ve seen suggests we’re on that path,” Ms. Yellen stated Sunday.
Still, threats loom: The Fed is all but certain to keep raising interest rates at least once more, and to keep them high for months, thereby continuing to impose heavy borrowing costs on consumers and businesses. That’s why some economists caution that a full-blown recession may still occur.
Late last month, Fed Chair Jerome Powell reinforced that message, saying the central bank’s key rate hasn’t been restraining the economy for “very long” and that “the bottom line is that policy hasn’t been restrictive enough for long enough.”
Mr. Powell spoke at a global conference in Sintra, Portugal, along with three other central bank leaders whose economies are also struggling with persistently high inflation. The Bank of England last week raised its key rate a substantial half-point, which could send the UK into a recession, while Europe’s economy has stagnated in the past six months.
The World Bank just raised its 2023 outlook as the United States and other major economies have proven more resilient than forecast, though it said this year will still mark one of the slowest for growth in the last 50 years.
Goldman Sachs lowered its odds of a U.S. recession in the next year to 25 percent from an already below consensus 35 percent, given easing banking sector stress and the debt ceiling deal which it sees resulting in only small spending cuts. The International Monetary Fund, meanwhile, no longer expects a UK recession this year.
But the outlook is souring.
The World Bank expects 2024 growth to take a bigger toll than previously expected as higher interest rates and tighter credit bite. Talk of stimulus in China to support the economy is growing. Global economic data is delivering negative surprises at the fastest rate since September, a Citi index shows.
Meanwhile, some analysts believe the United States is currently experiencing what they call a “richcession,” or major job cuts, they note, have been concentrated in higher-paying industries like technology and finance, heavy with professional workers who generally have the financial cushions to withstand layoffs. Job cuts in those fields, as a result, are less likely to sink the overall economy.
What Americans Think
Many Americans fear a U.S. economic downturn is coming soon despite what Ms. Yellen and others say. Some believe it could be as bad as the 2008 financial crisis, according to a recent Nationwide survey.
That survey of 2,000 American adults said that 68 percent are expecting a recession in the coming six months, while 80 percent of them believe it’s going to be severe.
“We’re still in the camp that we get a recession,” a Nationwide analyst, Kathy Bostjancic, said, according to CNBC. “We think it’s been delayed, but not canceled.”
The Associated Press and Reuters contributed to this report.