Former Obama administration economic adviser Larry Summers warned Sunday that all precedents in the economy are pointing to a recession happening in the next two years.
Summers, appearing on “Meet The Press,” told NBC News host Chuck Todd that “a whole range of indicators” — including markets, relative levels of interest rates at different durations, consumer expectations, and supply and demand — are pointing toward a recession, which is defined as two consecutive quarters of negative economic growth.
“All of that tells me that, while I wouldn’t presume whether to judge the timing, the dominant probability would be by the end of next year we will be seeing a recession in the American economy,” said Summers, who also served as treasury secretary in the 1990s. He also said that this perspective had become the common view among a number of statistical models and forecasters.
Noting economic precedents, Summers said in a different Bloomberg interview, “If you look at history, there has never been a moment when inflation was above 4% and unemployment was below 5% when we did not have a recession within the next two years.”
The Biden administration, for its part, has been acknowledging the challenge of the economy but has also echoed in lock-step that an economic downturn isn’t inevitable. Department of Energy Secretary Jennifer Granholm and Department of Treasury Secretary Janet Yellen both spoke to this point on Sunday morning news shows, as well.
“I expect the economy to slow,” Yellen told George Stephanopolous on ABC News. “It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered. We have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”
According to a Conference Board survey of 750 CEOs released on Friday, a majority of top company execs foresee a recession in the next 12 to 18 months. A small minority, 15%, said in the same survey that the region in which their company operates is already in a recession. In a National Association of Manufacturers Survey, nearly 6 in 10 business leaders indicated that a recession was more likely in the next year due to inflationary pressures.
President Joe Biden himself has suggested Vladimir Putin is partly responsible for rising costs and accused businesses of price gouging. On Thursday, in an interview with the Associated Press, Biden encouraged Americans to wait and see whether economists were correct about their recession predictions.
“They shouldn’t believe a warning. They should just say: ‘Let’s see. Let’s see, which is correct.’ And from my perspective, you talked about a recession. First of all, it’s not inevitable,” said Biden.