Yellen Doesn’t ‘See Signs of a Recession’ as Another Business Activity Gauge Drops Into Recession Zone

Treasury Secretary Janet Yellen participates in a discussion at the annual Freedman's Bank Forum at the Treasury Department in Washington, on Oct. 4, 2022. Michael A. McCoy/Reuters

Secretary of the Treasury Janet Yellen does not believe there are any signs of the U.S. economy slipping into a recession, despite the fact that business activity indicators have been signaling dismal performance.

“I don’t see signs of a recession in this economy at this point … We have unemployment at a 50-year low. There are two job vacancies for every American who is looking for work. We have solid household finances, business finances, banks that are well-capitalized, and we’ve been creating, [on] average, 300,000 jobs a month,” Yellen said in an interview with CNN.

Due to the actions of the Biden administration, America is not facing the problems it might have following the COVID-19 pandemic economic recovery, she said. “One doesn’t get credit for problems that don’t exist.”

Money is flowing into research and development, an “important source” of the economy’s long-term strength. Communities are going to see falling bridges repaired and roads improved, she said, while adding that the United States is going to become a “more competitive economy.”

In October 2021, Yellen had said that inflation was a “transitory” occurrence. More than a year since then, inflation has now become a major economic problem.

Yellen’s recent comments come as a survey from the Federal Reserve Bank of Kansas City reported a decline in factory activity in the region.

The month-over-month composite index—which is a measure of raw materials, production, employment, new orders, and supplier delivery time—fell to negative 7 in October from 1 in September. This is the lowest reading for the index since May 2020, according to a press release on Oct. 27.

The S&P Global Flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, also fell in October, to 47.3, from 49.5 in September.

The decline was led by “a downward lurch in services activity, fueled by the rising cost of living and tightening financial conditions,”said Chris Williamson, chief business economist at S&P Global Market Intelligence, in a statement.

US Recession

In an interview with NBC, CNBC Economics Editor Jeff Cox pointed out that as prices continue to rise, consumer spending growth is falling. In addition, the real estate market is “not doing well” at present. Most economists are expecting a “flat-ish number” when it comes to fourth-quarter growth.

“What I’m hearing, though, from most economists, is that going into 2023, at some point, early or mid-2023, we will in fact be in a recession,” he said.

In a remark at an investment conference in Riyadh, Saudi Arabia, on Oct. 25, Goldman Sachs CEO David Solomon said that the U.S. economy will “likely” tip into a recession. BNP Paribas analysts expect a recession in the county in the second quarter of 2023 due to “a more aggressive ... response”by the Federal Reserve to curtail inflation.

Meanwhile, former Treasury Secretary Steve Mnuchin believes America is already in an economic downturn that will continue for the next two years.