The United States' economy is slowing down, but the country is not in a recession — at this time — Treasury Secretary Janet Yellen said Sunday.
"I'm not saying that we will definitely avoid a recession, but I think there is a path that keeps the labor market strong and brings inflation down," Yellen told NBC's "Meet the Press." "We have a very strong labor market [and when you are creating almost 400,000 jobs a month, that is not a recession."]
Still, the economy is slowing down, after growing rapidly in 2021 at about 5.5%, said the secretary.
"That succeeded in putting people back to work who had lost their jobs during the pandemic," Yellen said. "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."
However, the United States is in a "period of transition in which growth is slowing and that's necessary and appropriate," she added. "We need to be growing at a steady and sustainable pace."
Businesses can also see the slowdown, which is appropriate, as people have jobs and there is a strong labor market, said Yellen, but still, there are not any signs of a widespread recession.
"A recession is a broad-based contraction that affects many sectors of the economy," said Yellen. "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."
However, she acknowledged that inflation remains "way too high," and she expects that the policies being put in place by the Federal Reserve to bring inflation down will be successful.
The Biden administration is also supplementing the Fed's policies, said Yellen, including cutting the national deficit "by a record $1.5 trillion this year."
Also, the releases from the strategic petroleum reserve are bringing down gas prices by almost 50 cents a gallon, said Yellen.
"Hopefully, we will pass a bill that will lower prescription drug costs and maintain current levels of health care costs," she said.
But even with the positive signs, there is likely to be a slowdown of job creation, Yellen said, but she does not 'think that's a recession."
"A recession is a broad-based weakness in the economy," she said. "We're not seeing that now and I absolutely don't think that's necessary."
There are also risks that must be taken in consideration, and inflation is not only high in the United States but in the United Kingdom, Canada, and more, which the central banks are addressing, the secretary said.
"We have a war in Ukraine that threatens potentially even higher oil prices than we're seeing right now," she continued.
Meanwhile, the nation's GDP will be "closely watched" for signs of recession, said Yellen.
"A common definition of recession is two negative quarters of GDP growth, or at least that's something that's been true in past recessions," said Yellen. "When we have seen that, there has usually been a recession. And many economists expect the second-quarter GDP to be negative. The first quarter GDP was negative. So we could see that happen, and that will be closely watched."
However, she said she wanted to emphasize that a recession is a broad-based contraction in the economy, so even if the second quarter GDP is negative, it would not necessarily mean the United States has entered a recession.
"That's not the technical definition," she said. "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."
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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