Janet Yellen, US Treasury Secretary, has set the record straight about the state of the economy. Despite weak job reports rattling investors and tanking the stock market, Yellen has assured everyone that the US is in solid shape. In her own words:
“We’re seeing less frenzy in terms of hiring and job openings, but we’re not seeing meaningful layoffs. I’m attentive to downside risk now on the employment side, but what I think we’re seeing, and hope we will continue to see, is a good, solid economy.”
Her comments came just a day after the Bureau of Labor Statistics dropped new data showing slower job growth in August.
Nonfarm payrolls—the key number for US job creation—grew by just 142,000 in August. That’s far below the forecast of 161,000 by Dow Jones.
The shortfall triggered a sharp selloff in the stock market, with the S&P 500 taking a nosedive to wrap up its worst week since March 2023. But Yellen remained unfazed by the numbers.
The unemployment rate actually edged lower, dropping to 4.2% in August, a slight improvement over July’s rate. But “I don’t see red lights flashing,” said Yellen.
She seemed confident. “It really has been amazing to get inflation down as meaningfully as we have,” she added.
Inflation has been a major pain point for the economy, but the central bank has managed to bring it down from its pandemic highs.
Still, some analysts remain skeptical, wondering if the Fed can balance interest rate cuts and inflation control without triggering a full-blown recession.
Economists expect the Fed to lower rates later this month, hoping that will further stabilize the economy. But there’s a lot riding on how quickly they move and whether the labor market can hold up in the meantime.
We’ve seen real GDP growth climb by 2.8% on a quarterly annualized basis. This was up from 1.4% in the first quarter and largely driven by stronger domestic demand and a surge in inventories.
Forecasts suggest the second half of 2024 will see much slower growth. Economists are predicting GDP growth to drop to 0.6% in the third quarter and around 1% by the fourth quarter.
High prices and elevated interest rates are expected to drag down consumer and business spending, adding to the slowdown. Consumer spending—a key component of GDP—has been mixed too.
After a sharp fall in spending on durable goods in the first quarter, it rebounded in the second quarter as prices for big-ticket items like cars and furniture dropped.
However, overall growth in consumer spending remains weak, clocking in at just 0.2% for the first half of the year.
The US trade deficit widened by $15.9 billion in the first quarter of 2024, bringing the total to $237.6 billion—a 7.2% increase.
While Yellen remains confident in the economic recovery, consumer confidence hasn’t quite caught up. Polls show that despite positive data on inflation and unemployment, many Americans remain pessimistic about the economy.
And it remains the top concern for them heading into the next election, with many expressing dissatisfaction with their personal financial situations.
Whether or not the economy can sustain its relative stability into 2025—especially with potential changes in administration—remains to be seen.
