‘You don’t have a recession when you have 500,000 jobs,’ says US Treasury Secretary Janet Yellen

US Treasury Secretary Janet Yellen. Photo: Kevin Dietsch/Getty Images

Andrea Shalal

February 07 2023 02:30 AM

US Treasury Secretary Janet Yellen sees a path for avoiding a US recession, with inflation coming down significantly and the economy remaining strong, given the strength of the US labour market.

“You don’t have a recession when you have 500,000 [new] jobs and the lowest unemployment rate in more than 50 years,” Ms Yellen told ABC’s Good Morning America program.

“What I see is a path in which inflation is declining significantly and the economy is remaining strong.”

Ms Yellen said inflation remained too high, but it had been falling for the past six months and could decline significantly given measures adopted by the Biden administration, including steps to reduce the cost of gasoline and prescription drugs.

US Labour Department data released on Friday showed job growth accelerated sharply in January, with non-farm payrolls up by 517,000 jobs and the unemployment rate dropping to a 53-and-a-half year low of 3.4pc.

The strength in hiring, which occurred despite layoffs in the technology sector, reduced market expectations that the US Federal Reserve was close to pausing its monetary policy tightening cycle.

Mr Yellen told ABC that reducing inflation remained President Joe Biden’s top priority, but the US economy was proving “strong and resilient”.

Three separate pieces of legislation – the Inflation Reduction Act, the Chips Act and a massive infrastructure law – would all help drive inflation down, along with a price cap imposed on the cost of Russian oil, she said.

Ms Yellen called on Congress to raise the US debt limit, warning that failure to do so would produce “an economic and financial catastrophe”.

“While sometimes we’ve gone up to the wire, it’s something that Congress has always recognised as their responsibility and needs to do again.”

The US government hit its $31.4trn (€29.3trn) debt ceiling last month, prompting the Treasury Department to warn that it may not be able to stave off default past early June.

Republican US House Speaker Kevin McCarthy and Mr Biden met last week for talks on the debt limit and have agreed to meet again, but the standoff has unsettled markets.