On Friday’s show of CNN’s “Situation Room,” Harvard professor, economist, director of the National Economic Council under President Barack Obama and Treasury Secretary under President Bill Clinton, Larry Summers, said that even while it’s a good thing that the jobs report shows people getting jobs and wages are rising, “there’s nothing ‘to suggest’ that we’re getting inflation under control, rather the opposite.” And that as wages go up in dollars, purchasing power goes down because prices go up faster, and “you get more and more of a cycle” that will make it harder to avoid a recession and drive down the inflation.
Summers said, “Look, it’s always good news when people get jobs. That’s good news when salaries go up. But I have to say that I don’t think it’s as rosy as your report suggests. For some time now, the main problem in the economy has been inflation. And nothing in this report indicates that we have inflation under control, quite the contrary. Yes, wages increased by half a percent last month. But that’s an annual rate of about 6%, and inflation has been around 9% in the last year. I think our main problem, which is that we have an unsustainably overheated economy which is leading to high inflation, which is cutting people’s wages, which unfortunately hasn’t been addressed by the news in this report. So I’m glad to see it, and it brings good news to a lot of families. But I’m afraid we’re still in the kind of unbalanced situation that you and I have been talking about – that we’ve been talking about on this show for quite a long time.
He added, “[W]When you have a lot of vacancies, which we always do, when you have such a shortage of labor, which we always have, when wages are rising rapidly in dollars, but not in power to buying because prices are going up faster, you get more and more of a cycle. And that makes engineering the proverbial soft landing all the more difficult for the Fed.
Summers further stated that while he is pleased that the Reconciliation Bill and the CHIPS Act are positive developments for the economy, “I am more concerned about inflation tonight than I was yesterday. evening. And I think it’s misleading not to see it that way. And that the report doesn’t change its belief that there’s a 75% chance of a recession in the next two years because “the fundamental challenge facing the economy is some sort of overheating, and that just shows that we overheat more. ”
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