Most economic analysts are all but assured that the U.S. economy is going to dip into a recession some time either later this year or early next.
Yet, there’s one very prominent economic analyst who believes otherwise – and she has major control of U.S. fiscal policy.
Janet Yellen, the Treasury Secretary, said earlier this week that she doesn’t expect that the U.S. will dip into a recession, even though China is experiencing economic growth that’s much lower than they expected.
While the economic problems that China is facing right now certainly could slow economic growth across the globe, Yellen said that the strong labor market in the U.S. suggests that America could potentially avoid dipping into a recession.
During a Monday interview with Bloomberg Television, Yellen said:
“Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia – and slow growth in China can have some negative spillovers for the United States.
“[U.S. economic] growth has slowed, but our labor market continues to be quite strong. I don’t expect a recession.”
Yellen further added that she believes the U.S. economy is on a “good path” to continue to bring down inflation, without having to significantly weaken the “strong” market for labor.
The latest U.S. jobs report showed that there were 209,000 jobs added in June, with unemployment falling down to 3.6%. The average hourly wage for June was 0.4% higher than it was in May, with a 12-cent increase up to $33.58.
As Yellen explained:
“Wage growth is moderating and inflation is subsiding.”
The Department of Labor also released decent economic news last week. Data showed that consumer prices increased only 3% on an annual basis for June, which signals that there’s some relief in sight after the last two years that brought extremely high inflation.
From May to June, prices increased only 0.2%, which is the smallest month-to-month increase since back in August of 2021.
Yellen said these reports were “quite encouraging,” even though she also said the target of 2% inflation that the Federal Reserve aims for is still very elusive. During its June meeting, the central bank decided not to increase interest rates, though they have forecast that there will be two more interest rate increases this year.
Yellen spoke to Bloomberg Television from India, where she was attending the Group of 20 nations meeting.
Over the weekend, she said she was hoping to build on the “groundwork” that she laid during a recent visit she made to China so that she could continue to help improve the relations between the U.S. and China. However, she said the option of reducing tariffs wasn’t on the table as a tool she could use to “de-escalate” the tensions between the two countries.
As she explained:
“We put tariffs in place on China because we had underlying concerns about unfair trade practices, particularly those affecting intellectual property and technology transfer.”