Treasury Secretary Janet Yellen said she is more confident that the United States will be able to contain inflation without further damage to the labor market, praising data showing a steady slowdown in inflation and a new surge in job seekers.
“I feel very good about that forecast,” Yellen said Sunday when asked about her initial hope that the United States could avoid a recession while controlling rising consumer prices. “I think you have to say we’re on a path like that.”
In an interview on his plane on his return from the Group of 20 summit in New Delhi, the Treasury chief also played down any risk from China’s efforts to increase the influence of the BRICS group, which is made up of major developing countries. “The G20 remains the main forum for global cooperation,” he said.
Yellen and President Joe Biden attended the meeting, where Chinese President Xi Jinping was absent. Headline inflation slowed to 3% (although well above the Federal Reserve’s 2% goal), without any reduction in payrolls or GDP.
“All the signs of inflation are on the way down,” Yellen said. He also noted that while the U.S. unemployment rate rose in August after hitting its lowest level in more than half a century earlier this year, that increase was not driven by massive layoffs.
The unemployment rate hit 3.8% last month, due in part to an increase in the labor force participation rate to its highest level since February 2020, just as the spread of COVID began.
Seeing some slack in the labor market is “an important and good thing” and “it’s a clear advantage” coming from more people looking for work, Yellen said.
The data marked a validation of sorts for the Treasury chief, who has consistently said last year that he expected inflation to reach the Federal Reserve’s 2% target without a rise in unemployment.
While other figures show steady increases in consumer spending and signs of stabilization in the housing market despite rising mortgage rates, economists are abandoning or postponing their bets on a recession.
The positive signs for the United States contrasted with disappointing data from China that suggested the world’s second-largest economy could miss Beijing’s target of 5% growth this year.
Divergent data from the two economies contributed to the Chinese currency depreciation against the dollar, with the yuan falling to a record low last week. This led Beijing to take a series of measures to prevent casualties. Yellen noted that such steps are understandable.
Regarding China’s recent push to expand the BRICS group to include six new members, Yellen noted that the assembly has countries with “very different interests.”
India, which hosts the G20 summit and is also a BRICS member, has a long-standing border dispute with China, and Xi’s absence from the New Delhi meeting this weekend has fueled speculation of a snub to his giant neighboring country.
The United States has “many strong and strengthening alliances” with many of the BRICS-11 countries, including recent cooperation on biofuels involving Brazil and South Africa, Yellen said. He also noted the importance of the G20’s work in recent years on global challenges, including health, food security and loans.
The United States’ push into emerging markets also involves deepening ties with Vietnam, a consumer electronics hub that has its own border tensions with China. Biden headed to Vietnam after his stop in India, and Yellen previously traveled this summer.