Treasury Secretary Janet Yellen predicts that the U.S. economy will likely remain solid amid several weaker-than-expected jobs reports and after the stock market posted its worst week in months.
“We’re seeing less frenzy in terms of hiring and job openings, but we’re not seeing meaningful layoffs,” Yellen said during an event on Sept. 7, CNBC reported. “I’m attentive to downside risk now on the employment side, but what I think we’re seeing, and hope we will continue to see, is a good, solid economy.”
The secretary said that the decline in job growth was due to a slowdown after a “hiring frenzy” following the COVID-19 pandemic, adding that the overall economy is “deep into a recovery” and “operating at full employment.”
This past week, the Federal Reserve reported that U.S. economic activity expanded more slowly from the middle of July through late August and businesses pulled back on hiring
“Economic activity grew slightly in three districts, while the number of districts that reported flat or declining activity rose from five in the prior period to nine in the current period,” the Fed said on Sept. 4 in the survey known as the “Beige Book,” which polled business contacts of each regional Fed bank through Aug. 26.
The central bank found that “employers were more selective with their hires and less likely to expand their workforces” due to concerns about an uncertain economic outlook and demand.
Employers added 89,000 jobs in July, also lower than the 114,000 jobs the department had originally reported. The unemployment rate “changed little at 4.2 percent,” the report said.
During the start of September, the three main U.S. stock indexes saw one of their worst weeks in recent months. The Nasdaq dropped 5.8 percent for the week, the S&P 500 tumbled 4.3 percent, and the Dow Jones Industrial Average dropped 2.9 percent.
As of Monday morning, the Dow was up about 1 percent, Nasdaq was up about 0.62 percent, and the S&P 500 increased nearly 1 percent.
Yellen tried to reassure Americans on Sept. 7 about the current state of the U.S. economy, saying, “I don’t see red lights flashing.”
The Treasury secretary went a step further and said that the Federal Reserve has been able “to get inflation down as meaningfully as we have,” adding, “This is what most people would call the soft landing.”
A soft landing is a period when economic growth slows down but the overall economy doesn’t enter recession territory.
Fed Chair Jerome Powell and his colleagues have made it clear they intend to cut the central bank’s benchmark interest rate at their upcoming policy meeting on Sept. 17 and 18 from the current 5.25 percent-to-5.50 percent range, where it has remained since 2023. It’s not clear how much the central bankers plan to cut.
Fed officials have indicated they are trying to engineer a soft landing for the economy in which economic growth gradually slows and the unemployment rate remains relatively low even if inflation, which spiked to a 40-year high two years ago, returns to the central bank’s 2 percent target rate.
Fed Governor Christopher Waller said on Sept. 6 that “the time has come” for the central bank to start slashing interest rates.
“If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings,” Waller said during an event at the University of Notre Dame.
“If the data suggests the need for larger cuts, then I will support that as well. I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate.”
