Treasury Secretary Janet Yellen said she sees a good chance of the US economy achieving a soft landing, with the unemployment rate — which has ticked up in recent months — averting a sharp increase.
“Signs are very good that we’ll achieve a soft landing, with unemployment stabilizing more or less where it is, or in the general vicinity,” Yellen told reporters Thursday following a speech in North Carolina.
The jobless rate has climbed to 3.9% as of October, from 3.4% in April. Increases of that scale in the US since World War II have typically foreshadowed a more serious rise in joblessness, according to analysis by Bloomberg Economics.
New data out Thursday showed US consumer spending and inflation had cooled in recent weeks, and provided fresh evidence the labor market was continuing to soften.
Yellen also suggested she doesn’t believe the Federal Reserve will need to push as harshly in lowering inflation as it did in past instances when price rises ran out of control.
“Those recessions you’ve talked about were times when the Fed, similar to now, was tightening policy to bring down inflation, but found it necessary to tighten so much that they flipped the economy into a recession,” Yellen said. “Perhaps it was necessary in order to reduce inflation and expectations of inflation that became ingrained, but we don’t need that now.”
Warns on China overdependence
The Treasury Secretary reiterated that the US needs to reduce over-reliance on China in key supply chains as she touted major investments in US productive capacity in a pitch for Bidenomics.
“Key supply chains in areas like clean energy are overconcentrated in China, in part due to unfair non-market practices over decades,” Yellen said.
The Treasury chief also said that “overdependence, including on China, makes America more vulnerable to risks that disrupt our access to that foreign production, from natural disasters to macroeconomic forces, to deliberate actions such as economic coercion.”
Thanks to the Biden administration’s Inflation Reduction Act, investments in new energy sources, “America is seeing a renaissance in manufacturing,” Yellen added.