Treasury Secretary Janet Yellen says she doesn’t believe a recession is imminent, despite the country experiencing two declines in the first quarter.
Real gross domestic product, a measure of all economic output in the country, up 2.6 percent in the third quarter despite a 1.6 percent decline in the first and a 0.6 percent decline in the second.
Amid inflation rates, rising living costs and mortgage rates, some economists — including Goldman Sachs CEO David Solomon and JP Morgan CEO Jamie Dimon — believe a recession will be coming within the next year.
Yellen noted that while “inflation is very high — it’s unacceptably high and Americans feel it every day,” the US economy is still strong.
“If you look around the world, there are many economies that are suffering not only from high inflation but also very weak economic performance, and the United States stands out” she said.
“We have unemployment at its lowest point in 50 years… We saw in this morning’s report, consumer spending and investment spending continued to grow. We have solid household finances, corporate finances, well-capitalized banks.
“This is not an economy in recession and we will continue to do well.”
Treasury Secretary Janet Yellen doesn’t believe a recession is imminent – despite the country experiencing two declines, inflation and rising cost of living in Q1
Gross domestic product, or GDP, fell 1.6 percent in the first quarter before falling 0.6 percent in the second. It then rose 2.6 percent in the third
President Joe Biden was one of the first to celebrate the economy’s recent growth.
“For months, doomsayers have argued that the US economy is in recession and Congressional Republicans are keeping their fingers crossed,” Biden said in a statement.
“But today we have further evidence that our economic recovery is continuing,” he added.
In his statement, Biden also took credit for falling gas prices, which have fallen from their June peak of more than $5 a gallon to a national average of $3.79 earlier this week.
“Now we need to make more progress on our most important economic challenge: lowering the high prices for American families,” Biden said.
However, economists have expressed fears that the economy is on shaky ground, and skeptical that the latest GDP report represents healthy growth.
“If you step back and look at GDP, it’s basically gone nowhere in the past year,” said Mark Zandi, chief economist at Moody’s Analytics. NPR.
‘It’s a quarter or two less. It’s a little bit up this quarter. But just-just, we’re kind of treading water,’ he added.
Inflation remains near a four-decade high, and the Fed has aggressively raised interest rates to keep prices in check
To fight inflation, the U.S. central bank raised its benchmark overnight interest rate from nearly zero in March to the current range of 3 to 3.25 percent, the fastest rate of tightening in a generation or more.
Yellen believes the current administration has not been given enough credit for its efforts to turn the economy around.
“There were several problems that we could have had, and difficulties that many American families could have faced,” she said.
“These are problems we don’t have because of what the Biden administration has done. So you often don’t get credit for problems that don’t exist.’
In addition to the government’s laudatory words, Yellen said “real tangible investments are underway,” including a new $20 billion Intel plant outside of Columbus, Ohio.
The country’s infrastructure also continues to grow, she added.
“But you’re starting to see repaired bridges coming online — not in every community, but pretty soon,” Yellen said.
“Many communities will see roads being improved, bridges being repaired that have fallen apart. We see money flowing into research and development, which is a really important source of long-term strength for the US economy.
“And America’s strength will increase and we’re going to become a more competitive economy”
Yellen believes the current government has not been given enough credit for its efforts to turn the economy around
The most recent GDP report showed that stronger exports and steady consumer spending, supported by a healthy job market, helped restore growth in the US economy.
Consumer spending, which accounts for about 70 percent of U.S. economic activity, grew 1.4 percent year-on-year, up from 2 percent from April to June. Last quarter’s growth was also boosted by exports, which jumped 14.4 percent year-on-year.
However, residential investment fell at an annual rate of 26 percent, hammered by rising mortgage rates as the Federal Reserve raises borrowing costs to fight chronic inflation.
The Fed has raised rates five times this year and will do so again next week and in December.
Fed Chair Jerome Powell has warned that the Fed hikes will bring “pain” in the form of higher unemployment and possibly a recession.
Headline inflation remains stubbornly high at 8.2 percent, and core inflation, which excludes volatile food and energy prices, reached a four-decade high of 6.6 percent in September.
Biden praises ‘historic economic recovery’ and criticizes ‘doomers’
Biden issued the following statement in response to the preliminary GDP report showing the U.S. economy grew 2.6 percent in the third quarter:
For months, doomsayers have been claiming that the US economy is in recession and that Congressional Republicans are keeping their fingers crossed for a downturn. But today we have further evidence that our economic recovery is continuing. This is a testament to the resilience of the American people. As I’ve said before, betting against the American people is never a good bet. Our economy has created 10 million jobs, unemployment is at its lowest point in 50 years and US manufacturing is booming. Today’s data shows that in the third quarter, Americans’ incomes have risen and price increases in the economy have slowed down.
“Now we need to make more progress on our biggest economic challenge: lowering the high prices for American households. Even with our historic economic recovery, gas prices are falling – down $1.26 since the summer and down for the past three weeks. The most common price at gas stations in America today is $3.39 per gallon. That’s progress, but we need to do more to bring other prices down as well. My administration has passed laws that will reduce prescription drug prices and health insurance premiums starting next year. We need to do more.
Congressional Republicans have a very different agenda — one that would drive inflation and widen the deficit by cutting taxes on the richest Americans and big corporations. It would increase the cost of drugs, health care and energy for American families. That failed economic vision is not the way to give families more breathing room and grow our economy so that working families can move forward.’