Larry Summers, former Secretary of Treasury under Bill Clinton and economic adviser to Barack Obama, said he is “more worried” about inflation following July’s jobs report. Inflation was at 9.1 per cent in June according to the latest consumer price index. It is now the highest reading since 1981.
Summers spoke out about the July job report:
“I’m more worried about inflation tonight than I was last night … And I think it’s misleading not to see things that way.”
CNN heard the economist continue to tell CNN that:
“There’s nothing in this report to suggest that we’re getting inflation under control — rather the opposite … Look, it’s always welcome news when people are getting jobs.”
CNN’s Wolf Blitzer pushed back, stating that the United States regained jobs lost during the COVID-19 pandemic. Summers replied:
“It’s welcome news when wages are going up. But I have to say, I don’t think it’s quite as rosy as your report suggested … The principal problem of the economy for some time has been inflation.”
Summers had previously stated that high product prices would fall if the unemployment rate did not rise. He mentioned that while wages have increased, they remain behind the inflation rate. He told Yahoo Finance that the unemployment rate “could cross six percent” in two or three years.
Yahoo Finance Live’s former Treasury Secretary Larry Summers joins the discussion #inflation, #unemploymentand how likely it is for the U.S. #recession. pic.twitter.com/ZG3UE5ieUO
— Yahoo Finance (@YahooFinance) August 5, 2022
Summers said:
“Yes, wages did go up half a percent last month. But that’s about a 6% annual rate, and inflation has run at about 9% over the last year. I think our core problem, which is that we have an unsustainably overheated economy that’s leading to high inflation, which is cutting people’s paychecks, that, unfortunately, has not been addressed by the news in this report … So, I’m glad to see it, and it brings good news to a large number of families. But I’m afraid we’re still in the kind of unbalanced situation that you and I have been talking on — talking about on this show for quite a long time.”
He noted that July’s jobs report would make it difficult for the Federal Reserve to accomplish a “soft landing.” The so-called “soft landing” means the Federal Reserve will raise interest rates while avoiding guiding the economy into a recession.
Summers continued:
“[W]hen you’ve got large numbers of vacancies, which we still do, when you’ve got such a labor shortage, which we still have, when you have wages going up rapidly in dollar terms, but not in purchasing power terms because prices are going up faster, you’re getting more and more of a cycle … And that’s making engineering the proverbial soft landing that much harder for the Fed.”
https://www.youtube.com/watch?v=wskqa9QnzDs
Summers added that he believes the economy is headed for a recession due to “the fundamental challenge that the economy faces is a kind of overheating, and this just shows that we’re overheating more.”
About Post Author
