Treasury Secretary Janet Yellen acknowledged Sunday that the U.S. is experiencing an economic "slowdown" but downplayed the potential for a recession, arguing that the country is in a period of "transition" following rapid economic growth.
"The economy is slowing down," Yellen said on NBC News’ "Meet the Press," adding that a correction is "appropriate" for a healthy economy.
"The labor market is now extremely strong," she said. "This is not an economy that's in recession, but we're in a period of transition in which growth is slowing. And that's necessary and appropriate, and we need to be growing at a steady and sustainable pace. So there is a slowdown, and businesses can see that and that's appropriate, given that people now have jobs, and we have a strong labor market."
"But you don't see any of the signs now – a recession is a broad-based contraction that affects many sectors of the economy. We just don't have that," she added. "I would say that we're seeing a slowdown."
Yellen went on to say that a "common definition" for a recession is two consecutive quarters of negative GDP, and while economists expect to see negative growth again this quarter after seeing -1.4% last quarter, that still wouldn’t mean the U.S. is in a recession.
"Even if that number is negative, we're not in a recession now, and we should not be characterizing that as a recession," she said.
NBC anchor Chuck Todd pushed back, saying the secretary was "splitting hairs" over the definition.
"I mean, if the technical definition is two quarters of contraction, you're saying that's not a recession," Todd said.
"That's not the technical definition," Yellen argued. "There's an organization called the National Bureau of Economic Research that looks at a broad range of data in deciding whether or not there is a recession, and most of the data that they look at right now continues to be strong. I would be amazed if the NBER would declare this period to be a recession, even if it happens to have two quarters of negative growth. We've got a very strong labor market. When you're creating almost 400,000 jobs a month, that is not a recession."
Yellen's comments come as former Obama economic advisor Larry Summers told CNN on Sunday that "there is a very high likelihood of recession" and it's "very unlikely" the United States will have a "soft landing." Last month, Summers warned that a recession is "almost inevitable, probably a 75%, 80% chance within the next two years, and there's certainly a real risk that it will come sooner."
The United States has experienced 13 straight months of soaring inflation ever since the Biden administration, including Yellen, dismissed concerns about rising costs and said the contributing factors were "transitory."
Yellen admitted in May of this year that she "was wrong then about the path that inflation would take."
Inflation surged to 9.1% in June, marking the fastest pace of inflation since December 1981.