Former Treasury Secretary Lawrence Summers said a “soft landing” for the US economy is looking more likely, though inflation gauges remain too high.
“I’d say I’m encouraged, but I still think it would be a mistake to say we’re out of the woods,” Summers said in an interview on CNN’s “Fareed Zakaria GPS” broadcast Sunday. Inflation indicators remain “unimaginably high” compared to two or three years ago, and getting back to the Federal Reserve’s target “may still prove quite difficult,” he said.
With the pace of US price increases slowing, the economy added 517,000 new jobs in January, far exceeding estimates and driving the unemployment rate to 3.4%, the lowest since 1969.
“It looks more possible that we’ll have a soft landing than it did a few months ago,” Summers said.
On Friday, Summers highlighted the risk of a sudden downturn in the economy after the surge in jobs growth.
The question is whether the income will be spent and lift the economy or whether companies at some point conclude they have too much inventory and too many workers, leading to a “fairly sudden stop,” Summers, a Harvard University professor and paid Bloomberg contributor, said on Bloomberg Television’s “Wall Street Week” with David Westin.
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Former Treasury Secretary Larry Summers recently spoke out about the U.S. economy, predicting that a “soft landing” looks increasingly likely. In an interview with Bloomberg, Summers said the country is seeing a “great improvement” in economic measures such as consumer spending, unemployment levels, and manufacturing output.
Yet, while expressing optimism that the overall State Of the US Economic could be stabilizing, Summers warned that certain indicators – particularly those concerning inflation – remain “unimaginably high”. He further commented on the recent decision by the Biden administration to end Major Trump-era tax cuts for corporations, noting that “it’s not very clear” whether such action will help or hinder overall economic activity.
Finally, Summers cautioned against reading too much into recent positive economic indicators, saying it is “too soon” to make any definitive statements about the outlook for the U.S. economy. He argued that short-term trends should be taken with a “large grain of salt” and that the current economic environment requires “careful monitoring and policy action.”
Overall, Summers’ comments present a measured tone of optimism that a soft landing could be the end result of the Covid-induced economic downturn, but he also emphasized that caution should remain the primary approach of the Biden administration in considering economic policy.
