Janet Yellen wasn’t letting Tuesday’s Labor Department report showing inflation was still a tad higher than economists predicted it would be in January deter her message that the U.S. economy is booming.
The U.S. Treasury Secretary, speaking during a joint appearance with Michigan Gov. Gretchen Whitmer at Wednesday’s Detroit Economic Club meeting at Huntington Place, said her overall assessment is that the “U.S. economy is very strong.”
According to a federal report released Tuesday, the annual U.S. inflation rate continued to ease in January, dropping to 3.1% from December’s 3.4% rate, but overall prices on goods and services were up .3% for the month, outpacing most economists’ expectations.
“We have a labor market that is the envy of the world,” Yellen told a packed house. “We have a string of national unemployment readings that have been under 4% for the longest string of time in 50 years. People can feel confident about the job market.
“Economic growth is also strong,” said Yellen, appointed to her post in 2021. “In spite of the fact the economy had recovered and the job market was operating at something close to full employment, we still enjoyed 3.1% growth last year. Productivity growth is improving, as well, and that’s important over time if we can keep that up for living standards.”
Yellen brushed off the fact inflation was “a tad higher” than most people were expecting.
“The market responded to that,” she said. “But I think it is a tremendous mistake to focus on minor fluctuations and fail to see the longer term and the bigger trend. And the trend here is that inflation is moving decisively down.
“We did have a burst of inflation, rally it rose to levels we hadn’t seen since the late 1970s or early 1980s,” she added. “(But) inflation has fallen almost to levels consistent with the Fed’s objective (2%).”
The federal data released Tuesday pointed out the consumer price index rose 0.3% from December to January, up from a 0.2% increase the previous month. Compared with a year ago, prices are up 3.1%, above the Federal Reserve Board’s 2% target.
But Yellen pointed to the stastistic she said she finds “the most useful.” According to the secretary, the median worker in the country can buy the “same basket of goods and services, compared to 2019.
“And they have $1,400 left over on top of that to spend or save,” she said.
Yellen touted the Inflation Reduction Act – “A seminal piece of legislation … the most historic in our country’s history to address climate change and clean energy,” she said — and American Rescue Plan, which gave some $6.5 billion to Michigan.
“I see Michigan as a state positioned to benefit from that legislation,” Yellen said.
However, she said “there are serious problems that policymakers need to address to support middle class families so that they can enjoy better lives and the Biden administration is focused on that.”
Yellen’s visit to Detroit was part of a trip to promote the Biden administration’s economic policies. Her swing through Michigan, which included a stop at Ford’s Rouge Electric Vehicle Center in Dearborn, followed stops Tuesday in Pennsylvania.
Yellen joined a host of other economic experts who spoken to the club in its long history – the DEC is celebrating its 90th birthday – including every U.S. president since Richard Nixon and economic and business experts such as Bill Gates, Michael Dell (the founder of Dell Technologies) and, most recently, JPMorgan Chase CEO Jamie Dimon.
