Portrait of Janet Yellen
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Janet Yellen on Recession

Avoids recession (strong)

TL;DR

Janet Yellen has consistently argued that while economic growth must slow, a recession is not inevitable and the economy remains resilient.

Key Points

  • She stated in December 2022 that a recession was not inevitable for bringing down inflation, though risks remained.

  • Around February 2023, Janet Yellen pointed to the unemployment rate being at a 53-year low as evidence that the U.S. did not have a recession.

  • In early 2020, before the pandemic's widespread effects, she assessed the U.S. economy as being on 'pretty solid ground' despite some international headwinds.

Summary

Janet Yellen, as Treasury Secretary, has frequently characterized the economy as resilient despite inflationary pressures and concerns over a potential downturn, often asserting that a recession is not a necessary outcome of controlling inflation. She defined a recession by traditional metrics like substantial job losses, mass layoffs, and a broad-based weakening, stating that the labor market remained strong with low layoffs as evidence against a current recessionary state in early 2023. Even when acknowledging that economic growth needed to slow down from its rapid post-pandemic pace to bring inflation down, she maintained that this deceleration did not mandate a recession, pointing to continued job creation and strong household finances.

Historically, when speaking in early 2020 before the pandemic's major impact, Janet Yellen had described the U.S. economy as being on solid ground, though she recognized external risks like weak international growth and manufacturing slowdowns. Her more recent commentary focuses on the success of bringing down inflation through necessary growth moderation, while maintaining key positive indicators like the unemployment rate achieving a 53-year low around February 2023. Her administration's priority has been managing the delicate balance between curbing inflation and preserving the strong labor market she observed, suggesting that proactive policy can steer the economy away from a significant contraction.

Key Quotes

"Most economists and most Americans have a similar definition of recession - substantial job losses and mass layoffs. Businesses shutting down, private sector activity slowing considerably, family budgets under immense strain," said Yellen Thursday.

“There is nothing about the consumer driving the economy that looks unsustainable,”

Frequently Asked Questions

Janet Yellen has generally maintained that a recession is not inevitable, even as the Federal Reserve works to curb inflation, according to her statements in late 2022 and early 2023. She defined a recession by severe job losses, which she noted were not occurring while the unemployment rate was near historic lows. She views the economy as remaining resilient despite economic slowdowns.

According to Treasury Secretary Janet Yellen in early 2023, the primary evidence against a recession includes continued job creation and strong household finances. She emphasized that the labor market was healthy with low layoffs, contrasting this with the 'substantial job losses' that define a traditional recession. She told reporters in February 2023 that the U.S. did not have a recession given these conditions.

Yes, in a discussion from February 2020, Janet Yellen acknowledged that there were risks to the U.S. economy, including weak global growth and manufacturing slowdowns, even while viewing the overall domestic economy as solid. She noted that a manufacturing recession was seemingly occurring in the United States at that time. However, she was also unequivocal that the Federal Reserve would not overtighten policy into a recession.