Debunks misperception that it is exclusively based on GDP, points to historically strong labor market and solid consumer spending
Appearing on NBC’s Meet the Press with Chuck Todd, Treasury Secretary Janet Yellen explained the state of the economy, including its historic strengths, efforts to bring down inflation, and how to interpret the initial reading of second quarter GDP being announced this week. As she explains, the technical and actual definition of a recession takes into account “a broad range of data” and states “this is not an economy that’s in recession.”
TODD: “If the technical definition is two quarters of contraction, you’re saying that’s not a recession?”
YELLEN: “That’s not the technical definition. There is an organization called the National Bureau of Economic Research that looks at a broad range of data in deciding whether or not there is a recession. And most of the data that they look at right now continues to be strong. I would be amazed if they would declare this period to be a recession, even if it happens to have two quarters of negative growth. We have a very strong labor market. when you are creating almost 400,000 jobs a month, that is not a recession.”
Secretary Yellen also went further in-depth, explaining that some economic slow-down is healthy right now with such a strong labor market, as the Federal Reserve addresses inflation and we transition to steady and sustainable growth, and discussed the actions the Biden Administration has been taking to lower prices for the American people.
YELLEN: “Well, look, the economy is slowing down. Last year it grew very rapidly at about 5.5%, and that succeeded in putting people back to work who had lost their jobs during the pandemic. The labor market is now extremely strong. Even just during the last three months, job gains averaged 375,000. This is not an economy that’s in recession. But we’re in a period of transition in which growth is slowing and that’s necessary and appropriate and we need to be growing at a steady and sustainable pace. So there is a slowdown and businesses can see that and that’s appropriate, 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 broad-based contraction that affects many sectors of the economy—we just don’t have that. Consumer spending remains solid. It’s continuing to grow. Output, industrial output has grown in five of the six most recent 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 charged with putting in place policies that will bring inflation down and I expect them to be successful. The Administration, for its part, is supplementing those Fed policies with things we can do. We’ve cut the deficit by a record one-and-a-half trillion dollars this year, releases of gas from the Strategic Petroleum Reserve are putting some downward pressure on gas prices. we have seen gas prices just in recent weeks come down by about 50 cents, and there should be more in the pipeline. And hopefully we will pass a bill that will lower prescription drug costs and maintain current levels of health care costs.”