U.S. economy slowing, but recession not inevitable, Yellen says

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen mentioned on Sunday that U.S. financial progress is slowing and she or he acknowledged the chance of a recession, however she mentioned a downturn was not inevitable.

Yellen, talking on NBC’s “Meet the Press,” mentioned robust hiring numbers and shopper spending confirmed the U.S. economic system just isn’t presently in recession.

U.S. hiring remained sturdy in June, with 372,000 jobs created and the unemployment charge holding at 3.6%. It was the fourth straight month of job positive aspects in extra of 350,000.

“This isn’t an economic system that’s in recession,” mentioned Yellen. “However we’re in a interval of transition during which progress is slowing and that’s needed and applicable.”

Nonetheless, information final week instructed the labor market was softening with new claims for unemployment advantages hitting their highest level in eight months.

Yellen mentioned inflation “is manner too excessive” and up to date Federal Reserve rates of interest hikes have been serving to to convey hovering costs again in test.

As well as, the Biden administration is promoting oil from the Strategic Petroleum Reserve, which Yellen mentioned has already helped decrease gasoline costs.

“We have seen gasoline costs simply in latest weeks come down by about 50 cents (a gallon) and there ought to be extra within the pipeline,” she mentioned.

Yellen, who beforehand served as chair of the Federal Reserve, hopes the Fed can cool the economic system sufficient to convey down costs with out triggering a broad financial downturn.

“I am not saying that we are going to positively keep away from a recession,” Yellen mentioned. “However I feel there’s a path that retains the labor market robust and brings inflation down.”

U.S. gross home product, a broad measure of financial well being, shrank at a 1.6% annual charge within the first quarter, and a report on Thursday is anticipated to indicate a achieve of simply 0.4% within the second quarter, in accordance with economists polled by Reuters.

Yellen mentioned that even when the second-quarter determine is adverse, it might not sign {that a} recession has taken maintain, given the power within the job market and powerful demand.

“Recession is broad-based weak spot within the economic system. We’re not seeing that now,” she mentioned.

Journalists, some economists and analysts have historically outlined a recession as two consecutive quarters of GDP contraction. However the personal analysis group that’s the official arbiter of U.S. recessions seems at a broad vary of indicators as a substitute, together with jobs and spending.

Brian Deese, director of the White Home Nationwide Financial Council, mentioned on Twitter on Sunday that the upcoming second-quarter figures can be “backward trying,” which he referred to as necessary context. “Hiring, spending, and manufacturing information look stable,” he mentioned.

(Reporting by Joel Schectman and David Lawder; Modifying by Lisa Shumaker and Leslie Adler)