Treasury Secretary Janet Yellen declared Friday the US economy had achieved a long-sought soft landing, a historically unusual event in which high inflation is tamed without significantly damaging the labor market.
“What we’re seeing now I think we can describe as a soft landing, and my hope is that it will continue,” Yellen said Friday in an interview with CNN.
Government figures out earlier Friday showed job gains and wage increases in December both exceeded expectations, with payrolls climbing 216,000. The report, which suggested continued upside risk for inflation, prompted investors to trim bets that the Federal Reserve would begin cutting rates in March.
Yellen zeroed in on the latest wage data, which showed average hourly earnings rose 4.1% in the year through December. Given consumer inflation for the year is projected by economists to come in at 3.2%, that would mean wages exceeded price growth in 2023.
“Wage increases are running over price increases now,” she said. “American workers are getting ahead and the progress for the middle-income families is very noticeable.”
Yellen declined to comment on how she thought the Fed should proceed but said the central bank had handled monetary policy well.
“The path the labor market and economy and inflation have followed suggests they’ve made a set of good decisions,” Yellen said.
For two years the Treasury chief consistently rejected the gloomiest predictions for the US economy even as the central bank pursued an aggressive rate-hiking campaign through much of 2022 and 2023. While never ruling out a recession altogether, she repeatedly said she saw a “path” to a so-called soft landing.
In recent weeks Yellen has been on something like a victory lap. In December she said economists who predicted recession were now “eating their words,” and she repeated her critique Friday.
“There has been a lot of pessimism about the economy that’s really proven unwarranted,” she said. “A year ago, most forecasters believe we would fall into a recession. Obviously, that hasn’t happened.”