Treasury Secretary Janet Yellen said Monday she does not expect a recession in the United States despite slower-than-expected economic growth in China.
While Yellen acknowledged China’s economic problems could also slow growth in other parts of the world, she argued that the strong U.S. labor market suggested the U.S. could avoid a recession.
“Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia — and slow growth in China can have some negative spillovers for the United States,” Yellen told Bloomberg Television in an interview Monday.
“[U.S. economic] growth has slowed, but our labor market continues to be quite strong — I don’t expect a recession,” Yellen added, expressing confidence that the economy is on a “good path” to curb inflation without significantly weakening the “strong” labor market.
The U.S. labor market added 209,000 jobs in June, and unemployment fell to 3.6 percent, according to the latest jobs report. The average hourly wage rose by 12 cents to $33.58 last month, a 0.4 percent increase from May.
“Wage growth is moderating and inflation is subsiding,” Yellen noted.
Consumer prices rose just 3 percent on an annual basis in June, according to data released last week by the Department of Labor, signaling relief after nearly two years of high inflation. Prices rose just 0.2 percent from May to June, the smallest single advance since August 2021.
While the Federal Reserve’s target of keeping inflation at just 2 percent remains elusive, Yellen called the latest report “quite encouraging.” The Fed left interest rates unchanged at the end of June but forecast two additional increases in 2023.
The Treasury secretary joined Bloomberg Television from the Group of 20 nations meeting in Gandhinagar, India.
Yellen said Sunday that she hoped to build on the “groundwork” laid during her recent visit to China to help improve relations between Beijing and Washington.
But Yellen also said reducing tariffs was not among the tools available to “de-escalate” tensions with China.
“We put tariffs in place on China because we had underlying concerns about unfair trade practices, particularly those affecting intellectual property and technology transfer,” Yellen said.
While Yellen said there’s a “good chance” the Treasury would enact controls on outbound U.S. investments in China, she emphasized any action would be narrowly targeted and based on national security concerns.