Treasury Secretary Yellen says the economy is ‘transitioning,’ not falling into recession

Treasury Secretary Janet Yellen said Thursday that the U.S. is not in a recession, but the inflation-wracked economy is “transitioning.”

At a news conference in Washington, Ms. Yellen addressed a report showing that second-quarter gross domestic product contracted 0.9% — the second straight quarter of negative growth. She said a slowdown is “appropriate” after strong growth last year, as the U.S. emerges from the COVID-19 pandemic.

“This report indicates an economy that is transitioning to more steady, sustainable growth,” Ms. Yellen said. “That’s to be expected given how rapidly the economy grew when it was recovering from the pandemic and all of those job losses.”

Republicans pointed to the GDP report as proof that the U.S. is already in a recession, with inflation at a 41-year high, due to Democrats’ high spending in the past 18 months. Ms. Yellen said she didn’t want to get into “a semantic battle,” agreeing that most consumers are worried about the economy due to inflation.

“I think their biggest concern is with inflation and high prices,” she said. “They feel they can’t afford to put gas in their gas tank. …The discomfort that households feel, it’s not because of the job market. Jobs are readily available.”

She noted that the unemployment rate is at a 50-year low of 3.6% and business bankruptcies are relatively low, factors that were not in play during past recessions.

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“Most economists and most Americans have a similar definition of recession — substantial job losses and mass layoffs, businesses shutting down, private sector activity slowing considerably, family budgets [that] are under immense strain, a broad-based weakening of our economy,” she said. “That is not what we’re seeing right now. When you look at the economy, job creation is continuing, household finances remain strong. Consumers are spending and businesses are growing.”