Top officials in the Biden administration made the rounds on the Sunday news shows to tout the strength of the economy and downplay the likelihood of a recession — an assessment at odds with that of some CEOs and economists.
Treasury Secretary Janet Yellen claimed on ABC that a recession is not inevitable, though she foresees the US economy slowing down in the months ahead.
“Well, I expect the economy to slow, it’s been growing at a very rapid rate as the economy – as the labor market has recovered and we have reached full employment, it’s natural now that we expect to transition to steady and stable growth. But I don’t think recession is at all inevitable,” Yellen said on ABC News’ “This Week.”
The priorities of President Biden and Fed Chairman Jerome Powell are to lower the high rate of inflation while maintaining a strong labor market, she said.
Brian Deese, director of the National Economic Council, echoed Yellen’s optimism — even as he acknowledged that Americans pulling up to the pump and seeing the shock of gas prices around $5 a gallon “creates some uncertainty and creates real economic hardship.”
“But at the same time, it is important as Americans that we recognize the unique strengths that we have in this economy,” he said on “Fox News Sunday,” noting the unemployment rate of 3.6% and low mortgage and credit card delinquencies.
“As we move through this transition, not only is a recession not inevitable, but what we as policymakers can do is take steps to build on our unique strengths in the American economy and try to get to that stable and steady growth that we all want to get to as quickly as possible,” Deese said.
Last week, Biden admitted that Americans are “really, really down” because of record-high gas prices, inflation and shortages of baby formula — and blamed the crises on the lasting effects of the coronavirus pandemic.
He said he felt confident that America will be able to recover.
“First of all, it’s not inevitable,” Biden said. “Secondly, we’re in a stronger position than any nation in the world to overcome this inflation.”
Larry Summers, who served as Treasury secretary from 1999 to 2001 and was an economic adviser in the Obama administration, said he doesn’t want to “make forecasts with certainty.”
But judging by a range of indicators, including what’s happening in the stock market, consumer expectations and “the simple fact that what drives inflation is supply and demand … the dominant probability would be that by the end of next year, we would be seeing a recession in the American economy,” Summers said on NBC News’ “Meet the Press.”
The Federal Reserve has been scrambling to tighten monetary policy in response to inflation and last week raised its benchmark interest rate by three-quarters of a percentage point this week for the first time since 1994.
Despite the aggressive action, economists surveyed by the Wall Street Journal said the probability of the country entering into a recession in the next year is 44% – a marked increase from 28% who said so in April and 18% who agreed in January.
“The Fed is slamming on the brakes. It is hard to avoid a recession … in this situation,” Michael Moran, chief economist at Daiwa Capital Markets America Inc., told the Wall Street Journal.
During the “Fox News Sunday” interview, host Shannon Bream asked Deese about another survey in the Wall Street Journal that found 60% of CEOs expect a recession in their geographic region in the next 12 to 18 months.
Deese said in his conversations with CEOs, they have told him that the US economy is moving through a transition and that consumers are changing their spending habits to adjust.
“For some companies, that’s a real challenge. For others, that’s an opportunity,” he answered.
“So when you hear us talking about these policy measures, it’s because of what we can do right now is send a signal that we all get it, that inflation has to be our top economic priority, but there are things that we can do. There are tools that we can deploy. There are steps that we can take right now,” he said.