Yellen: US Economy Has Achieved a ‘Soft Landing’

Treasury Secretary Janet Yellen speaks at an event on the Biden Administration’s economic strategy toward the Indo-Pacific in Washington on Nov. 2, 2023. Madalina Vasiliu/The Epoch Times

The U.S. economy has achieved the goal of a “soft landing” as inflation slows without enduring an economic downturn, says Treasury Secretary Janet Yellen.

Appearing on CNN shortly after the release of the December jobs report on Jan. 5, Ms. Yellen revealed that she thinks the current economic conditions could be described as a soft landing.

“The American people did it,” she said. “The American people go to work everyday, participate in the labor market, form new businesses. But President [Joe] Biden has tried to create incentives that give Americans the tools they need to help this economy grow.”

Ms. Yellen noted that President Biden and the administration’s policies have helped spark growth by investing in U.S. infrastructure and facilitating private investment in semiconductors and clean energy.

She narrowed in on the latest wage data, showing that average hourly earnings rose to 4.1 percent year-over-year last month.

“Wage increases are running over price increases now,” Ms. Yellen stated. “American workers are getting ahead, and the progress for the middle-income families is very noticeable.”

While the former Federal Reserve chief refrained from advising how the central bank should proceed, Ms. Yellen noted that the economy’s path “suggests they’ve made a set of good decisions.”

Her remarks come after a better-than-expected December jobs report.

Last month, the economy added 216,000 new positions while the unemployment rate remained below 4 percent for the 23rd consecutive month.

In 2023, the country created about 2.7 million new jobs.

“This morning’s report confirms that 2023 was a great year for American workers,” President Biden said in a White House statement. “The economy created 2.7 million new jobs in 2023—a year when the unemployment rate was consistently below 4 percent—more jobs than during any year of the prior Administration.”

Soft Landing Opinions

Many economists and organizations believe the nation will pull off a soft landing: fighting inflation, keeping the robust labor market intact, and averting a recession.

According to recent projections by the Congressional Budget Office (CBO), the economy is poised to avoid a recession as inflation normalizes. The non-partisan budget watchdog predicted a moderating economy with slower growth and higher unemployment rates.

CBO officials anticipate the economy will expand by 1.5 percent in 2024 and rebound by 2.2 percent in 2025. These expectations closely resemble what the Fed is projecting in the year ahead.

In the updated Summary of Economic Projections, central bank policymakers forecasted a 1.4 percent real GDP growth in 2024 and 1.8 percent in 2025. The jobless rate is expected to be 4.1 percent over the next three years.

This week, the head of the International Monetary Fund (IMF) concurred that the United States is “definitely” on track for a soft landing due to the Fed’s “decisiveness” in battling with inflation.

“It has brought the desired impact without pushing the economy into recession,” IMF director Kristalina Georgieva told CNN International.

However, one regional central bank president urged caution before declaring that a soft landing had been accomplished.

Richmond Fed President Tom Barkin said at a North Carolina event that a soft landing is “conceivable” but not “inevitable.”

“The airport is on the horizon,” Mr. Barkin said in a speech at the Raleigh Chamber of Commerce on Jan. 3. “But landing a plane isn’t easy, especially when the outlook is foggy, and headwinds and tailwinds can affect your course.”

Looking ahead, the Cleveland Fed’s Inflation Nowcasting anticipates the December consumer price index (CPI) will rise to 3.3 percent, up from 3.1 percent in November.

The Atlanta Fed’s GDPNow model estimate points to a fourth-quarter growth rate of 2.5 percent.

Growing Confidence

Following nearly a year of abysmal consumer confidence in the economy, recent data suggest that many Americans are becoming more ebullient over present conditions.

The Wallet Hub Economic Index, released on Jan. 5, showed that consumers feel more than 15 percent more confident about their financial outlook than they did a year ago.

“The 15% increase in consumer sentiment over the past year is an encouraging sign that our economy is recovering from the damage it suffered as a result of the pandemic and inflation,” said Cassandra Happe, WalletHub analyst, in a statement accompanying the index. “People who have high financial confidence are likely to spend more money and reduce their debts, both of which are good for the economy as a whole.”

Last month’s University of Michigan Consumer Sentiment Index popped to a five-month high and erased the pessimism seen since July.

With disinflation trends becoming more prevalent, households are beginning to react more favorably to the economic landscape.