Yellen: No red lights flashing for the U.S. economy

U.S. Treasury Secretary Janet Yellen sought to reassure the public last Saturday, asserting that the U.S. economy remains strong despite a series of weak employment reports that have unsettled investors and put pressure on U.S. stock markets.

Speaking at the Texas Tribune Festival in Austin, Yellen stated, “We have seen a reduction in the frenzy around hiring and job openings, but we have not seen meaningful layoffs. I am currently concerned about downside risks to the labor market, but what we are seeing now, and hope to continue seeing, is a good, solid economy.”

Employment growth has slowed

Yellen noted that while employment growth has slowed compared to the “hiring frenzy” seen after the pandemic, the economy is “deeply in recovery” and “essentially at full employment.”
Her comments came the day after the U.S. Bureau of Labor Statistics released another disappointing employment report. The August non-farm payrolls increased by 142,000, below the Dow Jones estimate of 161,000. This fueled concerns about a slowing labor market and led to a drop in the S&P 500 Index last Friday, marking the worst week since March 2023.
However, the unemployment rate slightly fell to 4.2%, and employment growth in August was higher than in July. Early last month, weak economic reports from July had triggered a significant sell-off in the stock market amid fears of a U.S. recession.

The economic anxiety is growing

Yellen attempted to ease economic anxiety last Saturday, saying, “I don’t see any red lights flashing.” The employment data has raised concerns about whether the Federal Reserve can achieve a so-called “soft landing”—tightening rates to control inflation and then cutting rates before the economy enters a recession. There is widespread expectation that the Fed will lower rates this month.

Yellen expressed that the U.S. is on a path where “it is remarkable to be able to reduce inflation meaningfully as we have. This is what most people are referring to as a soft landing.”
When asked about whether she might step down when the new administration takes office in January or continue in her role or assume a new position, Yellen responded, “It’s possible I might step down, but… we’ll see.”

Yellen's comments on the presidential race

As the presidential race heats up between Vice President Harris and former President Trump, Yellen's comments represent the closest she has come to announcing her future plans. At 78, Yellen is the first woman to have served as Treasury Secretary, Fed Chair, and White House National Economic Council Director.

The comments are the closest that Yellen, 78, has come to announcing her plans as the presidential race between Vice President Kamala Harris and former President Donald Trump heats up. Yellen has been the first woman to serve as Treasury Secretary, Federal Reserve Chair and director of the White House National Economic Council.

Reports indicate that Yellen still has significant work ahead in the coming months, including potentially meeting again with Chinese officials. Yellen said the U.S.-China relationship "needs to be prioritized and nurtured" by the next U.S. administration, with discussions at the highest levels and among agency staffs.

"We have enough differences and without a chance to discuss them and put them in context, it's certainly possible for tensions to rise," Yellen said. "So, this is something that really requires ongoing attention. I hope that it would get it."

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