Larry Summers Predicts a Recession, While Biden Says It’s ‘Not Inevitable’
Former Treasury secretary Larry Summers has predicted a recession in the U.S. What do other economists have to say on the matter?
June 20 2022, Published 6:09 a.m. ET
Recession fears have been piling up as the Fed stuggles to tame inflation, and many economists, including former Treasury secretary Larry Summers, believe that a U.S. recession is inevitable. Morgan Stanley CEO James Gorman believes that there's a 50 percent probability of a recession, and Bank of America puts the figure at 40 percent.
However, current Treasury Secretary Janet Yellen disagrees, as does Joe Biden. The president has said a recession is “not inevitable.” Goldman Sachs chief economist Jan Hatzius has aligned with Biden, and thinks a recession may only happen if the economy sees new shocks.
Summers was U.S. Treasury secretary during the dot-com bust
Summers was U.S. Treasury secretary between 1999 and 2001, amid the dot-com boom and bust and an eventual recession. Appearing on NBC’s Meet The Press, Summers said that his “best guess” was that the U.S. economy was headed for a recession. He did add, however, that “nothing is certain, and all economic forecasts have uncertainty.”
Summers predicts a recession on rising inflation
On his recession prediction, Summers said, “I base that on the fact that we haven’t had a situation like the present with inflation above 4 percent and unemployment beyond 4 percent without a recession following within a year or two.” U.S. inflation has far from “transitory,” as the Fed first saw it. Instead of peaking as some predicted, U.S. inflation rose 8.6 percent year-over-year in May, the most since 1981.
Jerome Powell on a potential recession
Many think the Fed is could lead the U.S. economy into a recession as it attempts to bring down prices. It hiked rates by 75 basis points at its June meeting, the most in almost 30 years. However, Fed chair Jerome Powell said the bank doesn't intend to “induce a recession now,” and said he doesn't see signs of a slowdown in the broader economy.
Others argue that there are signs of a slowdown, though, such as in housing. Analysts reduced their housing market predictions for 2022 after U.S. housing starts fell for two consecutive months.
Retailers are feeling pressured by unsold inventory, and global ad spending has also been hit. The yield curve inverted as well, and this seen as one of the best indicators of a recession.
Larry Summers's net worth
Born on Nov. 30, 1954, Summers was the 71st U.S. Treasury secretary. He graduated from Harvard University and later became a professor of economics. CelebrityNetWorth estimates he's worth $40 million.