Treasury Secretary Janet Yellen expressed her expectations about economic growth in the United States in the virtual session of the World Economic Forum in Davos. She was optimistic when talking about the current pace of recovery in both the economy and the labor market. Although soaring inflation in the United States raises concerns, Yellen is sure it is just a temporary phenomenon.
According to the Treasury Secretary, the pace of the current recovery has exceeded even the most optimistic expectations. “That’s due in large part to rapid vaccine deployment and the robust support to families, businesses, and state and local governments provided by the American Rescue Plan,” Yellen emphasized.
The US Treasury Department assumes that the country’s real GDP will expand by 5.3% in 2021 and come at 3.3% in 2022. Neither COVID-19 nor supply chain disruptions are expected to disturb economic growth, Yellen noted.
As for the labor market, the American economy added over 6 million jobs last year, and the unemployment rate fell below 4%, the Treasury Department estimated.
“I believe that the pronounced shift in spending away from services and toward goods contributed to outsized price increases. Additionally, the associated supply chain bottlenecks are boosting costs and holding back the production of automobiles and other key products,” Janet Yellen said. Despite these challenges, most experts, including the Treasury Secretary herself, think that inflation will slow down next year.
No doubt, these expectations are fueled by hopes that the Federal Reserve will continue to take action in response to inflationary pressure as it fulfills its mandate. President Joseph Biden has repeatedly said that his administration is seeking ways to reduce inflationary pressure. Yellen mentioned the easing of congestion in ports and the expansion of labor supply as one of these measures.
The head of the Treasury Department also reminded that the key condition of a steady economic recovery in the United States would be the end of the COVID-19 pandemic, no matter the ways of curbing inflation.
