Treasury Secretary Janet Yellen said Thursday in an exclusive interview with CNN that she saw no signs of an imminent recession as the US economy rebounded from six months of contraction.
During a one-on-one interview in Ohio that aired on CNN’s “Erin Burnett OutFront,” Yellen said third-quarter GDP data released Thursday underscored the strength of the U.S. economy as policymakers move urgently to curb inflation and soaring to cool. It had a sharp impact on America’s views on the economy – and threatened Democratic majorities on Capitol Hill less than two weeks from the midterm elections.
“Look, what we’re seeing right now is strong growth this quarter. It’s clear that growth has slowed after a very quick recovery from high unemployment,” Yellen said when asked if the latest GDP data allayed any recession worries. “We have a full employment economy. It is very natural that growth would be slow. And it’s over the first three quarters of this year, but it’s still okay. We have a very strong labor market. I don’t see any signs of a recession in the economy at this point.”
Yellen’s optimism comes amid growing concern from economists and financial officials that a recession is likely at some point in the next year, but was based in part on aspects of the latest data that showed signs of a necessary slowdown in key areas of the economy paving the way for a “soft landing” as the Federal Reserve prepares to continue its rapid pace of rate hikes.
Gross domestic product – the broadest measure of economic activity – rose 2.6% during the third quarter, according to preliminary estimates released by the Bureau of Economic Analysis on Thursday. That’s a turnaround from a decrease of 1.6% in the first quarter of the year and a negative 0.6% in the second.
But Yellen’s view also underscored the complex balancing act that President Joe Biden and his top economic officials have attempted this year, as they try to highlight a rapid economic recovery and major legislative wins while also promising to cope with rising prices.
“Inflation is very high – it’s unacceptably high and Americans feel that every day,” Yellen said when asked how the administration squared its view on the US economy with very high dissatisfaction among the voters. Yellen acknowledged that it would take a long time for prices to recover, saying that efforts to return it to the levels “that people are more used to” would likely cover “the next couple of years .”
It’s a reality that officials say has undermined the administration’s efforts to capitalize on a strong record. Asked about the economy last week, Biden told reporters that it is “strong as hell,” drawing criticism from Republicans.
But Yellen agreed with the President’s assessment that the economy remains strong, standing out compared to how other economies around the world are fairing.
“If you look around the world, there are many economies that are really suffering from not only high inflation but very poor economic performance, and the United States stands out. We have unemployment under 50 years. … We saw in this morning’s report – consumer and investment spending continued to grow. We have solid household finance, business finance, well capitalized banks,” she said.
She added, “This is not an economy in recession and we continue to do well.”
Yellen also acknowledged frustration within the administration that the efforts to pull the US economy out of the crisis have not received the credit officials deserve.
“There were some problems that we could have, and difficulties that many families in America could have,” Yellen said. “These are problems that we don’t have, because of what the Biden administration has done. So, one often doesn’t get credit for problems that don’t exist.”
Yellen traveled to Cleveland as part of an administration push to highlight the major legislative wins — and the billions of dollars in private sector investment those policies have spurred toward manufacturing across the country.
It is a critical piece of an economic strategy designed to address many of the vulnerabilities and failures laid out as Covid-19 ravaged the world, with significant federal investments in infrastructure and sustaining – or creating from start – key pieces of critical supply chains.
Listing a series of major private sector investments, including a $20 billion Intel plant that opened a few hours’ drive outside of Columbus, Yellen said they were “real, tangible investments happening now,” even as she acknowledged she that it would take time to give full effect.
Yellen promised that those efforts would be felt as they rippled through the economy in the coming months and years. Asked if the administration’s general message to Americans was one of patience, Yellen said: “Yes.”
“But you’re starting to see repaired bridges coming online — not in every community, but pretty soon. There are many communities to improve roads, repair bridges that are falling apart. We’re seeing money flow into research and development, which is really an important source of long-term strength for the American economy. And America’s strength is growing and we’re going to be a more competitive economy,” she said.
Yellen also addressed the battle lines drawn this week over raising the debt ceiling, now a perennial Washington crisis of its own that House Republicans have again vowed to use for leverage if they take the heavy.
“The President and I agree that America should not be held hostage by members of Congress who think it’s okay to compromise the United States’ credit rating and threaten default on US Treasuries, which are the bedrock of markets global financial crisis,” Yellen said. .
But Yellen, who has long emphasized the “destructive” nature of the recessions, has advocated eliminating the debt limit entirely through legislation. A group of House Democrats wrote to Democratic leaders to ask for that action in the lame-duck session of Congress, but Biden rejected the idea this week.
When asked about the split, Yellen said only that she and Biden agreed that it is “really up to Congress to raise the debt ceiling.”
“It’s absolutely necessary that it be done, and I want it to happen in the way that it can happen,” Yellen added.
As the administration moves toward a time period that traditionally allows top officials to leave an administration, she made it clear that she did not plan to be one of them. Asked about reports that she had informed the White House that she wanted to wait into next year, Yellen said it was an “accurate reading.”
“I really enjoy the program we talked about,” Yellen said. “And I see it as greatly strengthening economic growth and addressing climate change and strengthening American families. And I want to be a part of that.”