Yellen downplays US recession risk

WASHINGTON

Treasury Secretary Janet Yellen has said the U.S. economy is slowing but pointed to healthy hiring as proof that it is not yet in recession.

Yellen spoke on NBC’s “Meet the Press’’ on July 24 just before a slew of economic reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates.

The data will cover sales of new homes, consumer confidence, incomes, spending, inflation, and overall output.

The highest-profile report will likely be July 28 when the Commerce Department will release its first estimate of the economy’s output in the April-June quarter.

Some economists forecast it may show a contraction for the second quarter in a row. The economy shrank 1.6 percent in the January-March quarter. Two straight negative readings is considered an informal definition of a recession, though in this case economists think that’s misleading.

Yellen argued that much of the economy remains healthy: Consumer spending is growing, Americans’ finances, on average, are solid, and the economy has added more than 400,000 jobs a month this year, a robust figure. The unemployment rate is 3.6 percent, near a half-century low.

“We’ve got a very strong labor market,” Yellen said. “This is not an economy that’s in recession.”

Still, Yellen acknowledged the economy is “in a period of transition in which growth is slowing,” from a historically rapid pace in 2021.

She said that slowdown is “necessary and appropriate,” because “we need to be growing at a steady and sustainable pace.”

Slower growth could help bring down inflation, which at 9.1 percent is the highest in two generations.

Still, many economists think a recession is on the horizon, with inflation eating away at Americans’ ability to spend and the Federal Reserve rapidly pushing up borrowing costs. Last week, Bank of America’s economists became the latest to forecast a “mild recession” later this year.