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Near-record inflation and looming recession concerns

Former Treasury Secretary Larry Summers worries the combination of low unemployment and high inflation, means a recession is almost certain.
Posted at 5:33 PM, Jun 06, 2022
and last updated 2022-06-06 20:33:51-04

On one hand, the labor market is booming. The latest jobs report shows the unemployment rate stayed at 3.6% in May, that's a near-historic low.

But on the other hand, Americans can't ignore the steep price of essentials, like food and gas, straining just about everyone's budget.

 "The grocery prices, and the inflation, and the things going up and it's hard," said shopper Deborah Curtis.

Sunday on ABC, Transportation Secretary Pete Buttigieg said the Biden administration is working to strengthen the supply chain and increase capacity amid steep inflation.

"The President has made it clear inflation is his top economic priority, and he's laid out a very clear strategy for doing that," said Buttigieg. 

Treasury Secretary Janet Yellen acknowledged this week that the administration 

"I think I was wrong then about the path that inflation would take. As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices, and supply bottlenecks that have affected our economy badly that I didn't at the time didn't fully understand," said Yellen.

Across the country, drivers are paying an average of $4.85 a gallon of gas, with at least nine states averaging more than $5. An analyst with GasBuddy warns we could see the average at $5 nationally by mid-June. 

Recession fears loom as well. Former Democratic Treasury Secretary Larry Summers worries the combination of low unemployment and high inflation, means a recession is almost certain within the next two years.

"There's no denying that high prices, particularly around gasoline and food, are a real problem for people. But there's every reason for the American people to feel confident that will meet these challenges," said President Joe Biden. 

Despite the president's optimism, a number of CEOs addressing whether the Fed can cool inflation without causing a recession. Tesla CEO, Elon Musk said in an email to executives Thursday he has a "super bad" feeling about the economy, adding the electric carmaker needs to cut about 10% of jobs. President Biden dismissed Musk's stark warning of a potential recession.

"That hurricane is right out there, down the road coming our way," said Jamie Dimon, JP Morgan Chase CEO.

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