NEW YORK – US Treasury Secretary Janet Yellen told Reuters that a “soft-landing” scenario for the US economy can withstand near-term risks including a United Auto Workers strike, a government shutdown threat, a resumption of student loan payments and spillovers from China’s economic woes.
Dr Yellen said on Monday that she sees evidence that the economy is keeping to a path of making substantial progress to reduce inflation while maintaining a strong labour market and healthy consumer spending.
“What I’m seeing in the economy is a cooling in the labour market that’s taking place in a healthy way, that does not involve mass layoffs,” Dr Yellen said during a discussion with Reuters editors, reporters and columnists on Monday. “It’s some of the heat coming out of the job market.”
The Federal Reserve on Tuesday starts a two-day meeting to weigh its options in its aggressive campaign of rate hikes to contain inflation as economists say the auto strike, the potential for a government shutdown and the Oct 1 end of a three-year moratorium on student loan repayments all could conspire to cool the economy more quickly than expected.
Dr Yellen acknowledged that the soft-landing outlook, which has gained traction among economists in recent weeks as recession predictions fade, may be buffeted by headwinds such as the UAW strike against Detroit automakers.
The union has threatened to widen the strike, already idling some 13,000 workers, to more plants if no progress was made towards a deal by Friday.
President Joe Biden’s administration is working to encourage both sides to resolve the strike quickly, Dr Yellen said.
“The President is monitoring it closely, has sent people to Detroit to be ready to assist, and is really urging the automakers to actively negotiate 24/7 with the unions to get a fair deal,” Dr Yellen said.
She added that since the government has poured in resources including tax breaks to ensure a strong future for electric vehicles in the United States, it was important to President Biden that “the jobs that are created in that industry are good jobs”.