There is no sign of recession in the U.S., Treasury Secretary Janet Yellen said on Thursday, pointing to the rising labor-force participation rate, strength in consumer spending, and decelerating inflation as evidence of how well the economy is doing.
“What we have looks like a soft landing, with very good outcomes for the U.S. economy,” Yellen said Thursday at an event hosted by Bloomberg News. “I think there’s a lot to be pleased about.”
Yellen was reacting in part to the third-quarter gross domestic product data, released earlier Thursday, which showed the economy expanded at a blockbuster 4.9% annual rate from July through September. The largest contributor to headline growth during the period was a jump in consumer spending as U.S. households, fueled by rising wages and excess savings, spent big on both goods and services.
Yellen highlighted that “good, strong consumer spending” during the Bloomberg event, saying it contributed to an economy that was doing “very well.” She also pointed to a Bloomberg economic model that just over a year ago forecast a 100% chance of U.S. recession within 12 months, adding, “I don’t think we have that.”
The comments by the Treasury secretary, Jerome Powell’s predecessor as chair of the Federal Reserve, come as economists continue to debate whether the U.S. economy will have to sputter and unemployment will have to rise in order for inflation to fall back to the Fed’s target of 2% annual price growth. While the economy’s resilience despite 11 interest- rate since March 2022 has come as welcome news, many economists continue to believe a downturn is coming, potentially as soon as early next year.
Yellen acknowledged on Thursday that she doesn’t expect growth to continue at the red-hot pace set in the third quarter. She does expect it will remain strong, however, forecasting it could land at roughly 2.5% for the year. That would be above the 2% average rate set in the 2010s and well above the 0.5% growth for the year the Fed was forecasting in December 2022.
For now, at least, “you don’t really see any signs of recession here,” she said, adding that she continues to believe it will be possible to bring inflation down even as the labor market remains strong.
One factor contributing to some economists’ wariness over the path forward for the economy has been the recent sharp rise in yields on the 10-year U.S.
Treasury
note, which recently briefly edged past the symbolic level of 5%.
Asked whether that rise could be due to investors’ concerns about growth in the U.S. fiscal deficit, Yellen indicated she didn’t agree. The increase stems instead from the economic growth people are seeing, she said.
“The economy is continuing to show tremendous robustness, and that suggests interest rates are going to stay higher for longer,” she continued. “So part of the increase in yields, I think, is simply a reflection of the strength of the economy.”
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