President Joe Biden’s senior adviser Gene Sperling told MSNBC in an interview that people worried about a recession in the United States should overlook the run of softer economic data and instead focus on “more reassuring elements of resilience” in the economy, like the jobs market.
Sperling was asked by the host of MSNBC’s “Chris Jansing Reports” program on June 17 what he thought about many Americans’ “concrete fears of a recession” in light of soaring inflation and a recent survey that showed some 60 percent of CEOs expect a U.S. recession within the next year or so.
“The president believes a recession is not inevitable. Is that his natural optimism or based on something you can share with us?” Jansing asked.
Sperling replied by saying that people were focusing too much on the negative and not enough on the bright spots in the U.S. economy—such as unemployment numbers—and the Biden administration’s accomplishments.
“I think we think that too many people are not looking at the more reassuring elements of resilience in this economy right now and they’re not realizing that the American Rescue Plan put a historic number of people back to work. People have called it the great return to work,” he said.
While the post-pandemic rebound in employment has been sharp, it has also been accompanied by the so-called “Great Resignation” that has seen many Americans leave the workforce due to a variety of factors, driving down the labor force participation rate and leading to a shortage of available labor.
While the labor force participation rate has rebounded from pandemic lows of just over 60 percent to 62.3 percent in May, according to recent data (pdf), it remains below the recent pre-pandemic high of nearly 63.5 percent.
Sperling also cited “remarkable progress” in unemployment, noting that the jobless rate in 30 states has dropped below pre-pandemic levels.
Asked whether he thought the Fed’s current rate-hike cycle would raise corporate borrowing costs and prompt companies to lay off workers and so lead to higher unemployment going forward, Sperling conceded that this “type of record performance doesn’t go on forever,” suggesting that the transition away from the current inflationary environment to “more stable and balanced economic growth with lower prices” could mean some job losses.
Still, he insisted that American households enjoy a “degree of resilience” to the shock of monetary tightening and the associated economic impact thanks to high savings that they could dip into to maintain their standard of living.
“So we do believe that we can make this transition while keeping a large amount of the historic gains that we’ve seen in the labor market, in the job market,” he said.
Sperling’s remarks come on the heels of a Conference Board survey (pdf) that showed just over 60 percent of global CEOs expecting a recession in their primary location of operations within the next 12 to 18 months. At the same time, CEO confidence has seen a “significant drop” in many regions, including the United States.
“In the US, the Measure of CEO Confidence fell to 42, levels not seen since the start of COVID-19,” the Conference Board said in its report, while noting that it does not see a recession as its base case scenario, but rather a period of stagflation, marked by high prices and low growth.
Recent economic data in the United States suggests the economy is coming into a softer patch.
New weekly filings for unemployment insurance—a proxy for layoffs—inched down by 3,000 last week, but analysts expected them to fall by a far higher number, suggesting the jobs market might be in for some chop going forward.
The Philadelphia Federal Reserve manufacturing survey index declined for the third consecutive month and turned negative for the first time since May 2020, while a separate Fed factory activity report found that production at U.S. factories fell more than forecast—both signs of cooling economic activity.
The red-hot housing market has also slowed, with U.S. housing starts and building permits both plunging in May by double digits, suggesting that residential construction is facing headwinds as mortgage rates push higher.
U.S. retail sales delivered a downside surprise when the figures were released on June 15, with analysts expecting a 0.2 percent advance while sales fell by 0.3 percent. And the University of Michigan consumer confidence index plunged to a record low in June, hitting a level comparable to the mid-1980s recession.
A growing number of analysts and economists have expressed concern about a possible U.S. recession as high prices continue to bedevil the economy.