(Finance) – The resilience of the US labor market could ward off the possibility of a recession. And the hope is that the country can reduce inflation while maintaining the strength of the labor market. This is the scenario traced by US Treasury Secretary Janet Yellen in remarks prepared for a talk at PosiGen. “The US economy has proved more resilient than expected despite forecasts of a recession,” Yellen said. “I continue to believe that it is possible to reduce inflation while maintaining a healthy labor market. Data we’ve seen so far suggests we’re on that path.”
Yellen said the strength of the labor market and the strength of household and corporate balance sheets should help support the economy going forward, even if activity slows down due to falling inflation. “Although there are parts of our economy that are slowing down, families – she said Treasury secretary – are spending at a robust pace and businesses are continuing to invest.”
Finally, illustrating the positive results of what has been called the “Bidenomics”, i.e. Biden’s economic policy, the Treasury Secretary stressed that such achievements are rooted in a “modern supply-side economy,” where the idea is to “prioritize investment in the workforce and its productivity, in order to raise the ceiling on what our economy can produce”.
To deem “illogical” a recession “without unemployment” in the USA it is also the president of ExportUSA, Lucio Miranda.
“After the Lehman Brothers crisis in 2008, the situation was similar, albeit antithetical: economic recovery, without employment. At the time – explains Miranda in an analysis published in Formiche – it was the fear of hiring staff following the most ferocious recession in years of the depression of the 1930s. Today, the underlying causes of this situation are completely different. In the States – he continues – the current unemployment rate is among the lowest in the last fifty years: 3.7%, a figure that continues to astonish everyone considering, in fact, that there is still talk of a recession in the United States. In reality, this situation is easily attributable to the maxi investment plan implemented by President Biden. An injection of capital that is generating new jobs, encouraging the exports of our companies to the United States and promoting an unprecedented development in the last 30 years of US economic history.New infrastructures, the transition to electricity and particular attention to the use of green technologies which – together with the reorientation of the supply chain and the boost to friend shoring – is re-establishing a solid trade relationship between Europe and the United States. All of this has inevitably generated new hires and this explains the 3.7% unemployment rate in America despite the restrictive monetary policy implemented by the Fed”.
But, despite this favorable situation, “US GDP – notes Miranda – is in decline”. One of the causes could be traced back to Covid. “After the pandemic, the biggest challenge for US companies – underlines the president of ExportUSA – was to find new personnel to cope with the recovery of economic activities. Mindful of that difficult situation, companies are reluctant to lay off for fear of finding themselves in the same post-pandemic situation. In our opinion, this is one of the reasons why we are seeing a drop in GDP in the States: employees are kept on the payroll, for fear of not being able to hire others in the future and this, on the one hand, supports employment levels, while on the other it causes a deterioration in productivity and, consequently, a slowdown in GDP growth”.
The American economy – according to Miranda’s analysis – is unbalanced on three fronts: “an announced recession which, however, does not find justification if we think of an unemployment rate so below the average; GDP figures are falling which can find a logical explanation in the protection of jobs so as not to risk running out of personnel; a policy restrictive monetary policy, in the face of an expansionary fiscal policy”.
“We are facing a strange trichotomy that sooner or later will find a solution. Our hope – concludes Miranda – is that common sense will prevail because reaching the 2% inflation target with unemployment of ten would be a real own Pyrrhic victory”.