Former Treasury Secretary Larry Summers said that millions of Americans would have to lose their jobs in order to contain decades-high inflation.
“We need five years of unemployment above 5 percent to contain inflation—in other words, we need two years of 7.5 percent unemployment or five years of 6 percent unemployment or one year of 10 percent unemployment,” said Summers, who was in charge of the Treasury under former President Barack Obama.
Currently, the U.S. unemployment rate sits at around 3.6 percent. Department of Labor figures show that year-over-year inflation hit 8.6 percent in May 2022, reaching highs not seen in 40 years.
“My best guess is that a recession is ahead. I base that on the fact that we haven’t had a situation like the present with inflation above 4 percent and unemployment beyond 4 percent without a recession following within a year or two. And so I think the likelihood is that in order to do what’s necessary to stop inflation the Fed is going to raise interest rates enough that the economy will slip into a recession,” Summers told NBC News over the past weekend.
And also over the weekend, President Joe Biden told reporters Monday in Delaware that he spoke recently with Summers. Despite Summers’ prediction that there will be a recession, Biden said that he doesn’t believe a downturn will occur.
“Economists are saying that a recession is more likely than ever,” a reporter asked the president.
“Now you sound like a Republican politician, I’m joking, that was a joke, that was a joke,” Biden said. “But all kidding aside, no I don’t think it is. I was talking to Larry Summers this morning, there’s nothing inevitable about a recession.”
“I expect the economy to slow,” Yellen stated. “It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered and we have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”