Debunks the misperception that it is exclusively based on GDP, highlights a historically strong labor market and solid consumer spending
Appearing on Meet the Press with Chuck Todd on NBC, Treasury Secretary Janet Yellen explained the state of the economy, including its historical strengths, its efforts to bring inflation down and how to interpret the initial GDP reading of the second quarter announced this week. As she explains, the technical and real definition of a recession takes into account “a wide range of data” and declares “it is not an economy that is in recession”.
TODD: “If the technical definition is two quarters of contraction, you’re saying that’s not a recession?”
YELLEN: “It’s not the technical definition. There is an organization called the National Bureau of Economic Research that looks at a wide range of data to decide whether or not there is a recession. And most of the data they’re looking at right now continues to be solid. I would be surprised if they declared this period a recession, even though it happened to have two quarters of negative growth. We have a very strong labor market. when you create close to 400,000 jobs a month, that’s not a recession.
Secretary Yellen also went further, explaining that some economic downturn is healthy right now with such a strong labor market, as the Federal Reserve tackles inflation and we transition to stable growth and sustainable, and discussed the actions of the Biden administration. taken to lower prices for the American people.
YELLEN: “Well, look, the economy is slowing down. Last year, it grew very rapidly by about 5.5%, which succeeded in getting people who had lost their jobs during the pandemic back to work. The labor market is now extremely strong. Even in the past three months, job gains have averaged 375,000. This is not an economy that is in recession. But we are in a period of transition where growth is slowing down and that is necessary and appropriate and we need to grow at a steady and sustainable pace. So there is a slowdown and businesses can see that and that’s to be expected given that people now have jobs and we have a strong labor market.
“But you don’t see any of the signs now – a recession is a generalized contraction that affects many sectors of the economy – we just don’t have that. Consumer spending remains strong. It continues to grow. Production, the Industrial production has increased in five of the past six months Credit quality remains very strong Household balance sheets are generally in good shape.
“But inflation is way too high. And, you know, the Fed is responsible for putting in place policies that will bring inflation down and I expect them to succeed. The administration, for its part , supplement these Fed policies with things we can do We cut the deficit by a record $1.5 trillion this year, gas releases from the Strategic Petroleum Reserve put pressure on the drop on gas prices. Over the past few weeks, we’ve seen gas prices go down about 50 cents, and there should be more in the pipeline. And hopefully we’ll pass a draft legislation that will reduce prescription drug costs and maintain current levels of health care costs.