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Fortune: Fed's Yellen Ignoring 3 Recession Warning Signs

Image: Fortune: Fed's Yellen Ignoring 3 Recession Warning Signs
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By    |   Wednesday, 08 Jun 2016 08:53 AM


Federal Reserve Chairman Janet Yellen is blatantly ignoring three obvious warning signs that the nation is about to plunge into yet another recession.

“Make no mistake about it, economic data released over the past week is beginning to paint a much bleaker picture of the U.S. economy than what we were seeing even just a month ago,” Fortune’s Chris Matthews explains.

But Yellen went out of her way Monday to stress that the U.S. economy appears fundamentally solid, the Associated Press reported.

The job market has rebounded. Consumer spending is picking up along with confidence. Higher home prices have lifted household wealth. Low energy prices have strengthened spending power, the AP reported.

However, Fortune highlighted 3 areas of major concern:
  • Job creation is plunging. “The most disturbing part of Friday’s jobs report is not that the headline number was as low as it was, but that revisions to previous month’s estimates were revised downward to the point that there is now a clear trend of slowing job growth in the American economy,” he said.
  • Businesses aren’t investing in capital equipment. ‘The decline in companies’ willingness to invest in people is matched by its lack of interest in investing in new capital equipment,” he said.
  • ISM data confirms payroll weakness. “Data from the Institute for Supply Management released Friday showed the growth in the services sector slowing in May, with the employment component falling into contractionary territory,” he said.
Yet Yellen also sent a contrasting message in a speech in Philadelphia: So many uncertainties surround the economy that it's impossible to sketch any timetable for when the Fed might raise interest rates again, the AP reported.

Thirteen times Yellen mentioned some variation of the word "uncertainty" — starting with a question raised by a dismal jobs report the government issued Friday: "Is the markedly reduced pace of hiring in April and May," Yellen asked, "a harbinger of a persistent slowdown in the broader economy?"

She didn't claim to know the answer. The Fed, she said, "will be wrestling" with that question in the months ahead — just as it will be studying other uncertainties she pointed to.

In contrast to what she signaled late last month, when Yellen said a rate hike would likely be appropriate in "coming months," she offered no timetable Monday for the Fed to resume raising rates, the AP explained.

Meanwhile, Larry Summers, the former Treasury secretary under President Bill Clinton, predicts electing Donald Trump as president could easily plunge the U.S. and the world into a recession.

"If he were elected, I would expect a protracted recession to begin within 18 months," Summers writes in the Washington Post. "The damage would in all likelihood be felt far beyond the United States."

Summers lists many reasons he fears that Trump could seriously damage the world economy. Trump is unpredictable and could easily create instability — and markets don't like uncertainty.

"Creating an environment where every tradition of the rule of law, internationalism and consistency in policy is up for grabs would be the best way to damage a still-fragile U.S. economy," writes Summers,  professor at and past president of Harvard University.

"In no election in my lifetime has a major-party candidate for president been so dangerous for the economy," Summers, who was treasury secretary from 1999 to 2001 and an economic adviser to President Barack Obama from 2009 through 2010.

For his part, Trump has repeatedly said he would replace Yellen as the Fed chairman. He also has said the Fed had kept rates low to help President Barack Obama's administration.

"I have nothing against Janet Yellen whatsoever," the presumptive nominee recently told CNBC's "Squawk Box" program. "I don't know her. She's a very capable person. People I know have a high regard for her. But she's not a Republican."

Yellen, who was named as the Federal Reserve chairwoman in 2014, is appointed through January 2018.

(Newsmax wire services contributed to this report).

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Federal Reserve Chairman Janet Yellen is blatantly ignoring three obvious warning signs that the nation is about to plunge into yet another recession.
fed, janet yellen, recession, economic
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2016-53-08
Wednesday, 08 Jun 2016 08:53 AM
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