© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen speaks during a news conference ahead of a meeting of G20 finance ministers and central bank governors in Nusa Dua, Indonesia, July 14, 2022. via REUTERS/Made Nagi/Pool
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said on Sunday that U.S. economic growth was slowing and acknowledged the risk of a recession, but said a downturn was not inevitable.
Yellen said on NBC’s “Meet the Press” that the strong U.S. hiring data and consumer spending suggest the U.S. economy is not in a recession right now.
US hiring remained strong in June, with 372,000 jobs created, and the unemployment rate held at 3.6%. It was the fourth consecutive month that employment exceeded 350,000.
“This is not an economy in recession,” said Yellen, a former Fed chair. “But we are in a transitional period of slower growth, which is necessary and appropriate.”
Data last week, however, showed the labor market was softening, with new jobless claims hitting an eight-month high.
Yellen said inflation was “too high” and that the recent Fed rate hikes have helped stem the surge in prices.
In addition, the Biden administration is selling oil from the Strategic Petroleum Reserve, which Yellen said has helped bring down natural gas prices.
“We’ve seen natural gas prices drop about 50 cents (a gallon) in recent weeks, and there should be more,” she said.
Former Federal Reserve Chair Janet Yellen hopes the central bank will be able to cool the economy enough to keep prices down without triggering a broad economic downturn.
“I’m not saying that we will definitely avoid a recession,” Yellen said. “But I think there is a path to keep the labor market strong and lower inflation.”
U.S. gross domestic product shrank at an annualized rate of 1.6 percent in the first quarter, according to economists polled by Reuters, and Thursday’s report expected growth of just 0.4 percent in the second quarter.
Yellen said that even a negative second-quarter reading does not mean a recession has begun, given a strong job market and strong demand.
“A recession is a generalized weakness in the economy. We’re not seeing that right now,” she said.
Economists have traditionally defined a recession as two consecutive quarters of economic contraction, but a wide-ranging indicator is watched by private groups seen as the official arbiters of U.S. recessions.