Treasury Secretary Janet Yellen on Thursday defended the Biden administration’s economic achievements over the president’s first year in office and said that she hopes to see inflation closer to 2% by the end of 2022.
She highlighted robust gains in the U.S. labor market over the last 12 months, including the addition of over 6 million jobs and an unemployment rate under 4%.
“A year ago, if you go back to the challenges that we were facing, and the Federal Reserve was facing, unemployment was extremely high. We were all worried that we would be facing a situation like we had after 2008, when it took almost a decade to get back to full employment,” Yellen said.
“I think it has to be viewed as a remarkable success that the unemployment has fallen the most in a year in American history,” the Treasury secretary told CNBC’s “Closing Bell.”
Employment remains a strong point for the White House and the Treasury secretary. Rebounding from the Covid-19 pandemic, U.S. employers added a record 6.4 million jobs in 2021 while the unemployment rate holds under 4%, according to the latest Labor Department data.
As President Joe Biden’s choice to lead the department, Yellen spent much of 2021 coordinating White House economic policy and the disbursement of Covid-19 emergency funds to American consumers and businesses.
Yellen did acknowledge that economic landscape isn’t perfect and pain inflation is causing households that haven’t seen proportional wage gains.
“I expect inflation throughout much of the year – 12-month changes – to remain above 2%,” she said. “But if we’re successful in controlling the pandemic, I expect inflation to diminish over the course of the year and hopefully revert to normal levels by the end of the year around 2%.”
She and other administration advisors have in recent months sought to quell public concerns about a sharp rise in prices thanks to widespread supply-chain disruptions and fierce demand for goods. The Labor Department said earlier in January that prices rose 7% in December on a year-over-year basis, the fastest pace of inflation since 1982.
Yellen iterated comments made by Biden on Wednesday, when the president said he thinks it’s time the Federal Reserve and Chairman Jerome Powell “recalibrate” monetary policy to tamp down on prices. The Fed is tasked with keeping inflation around 2% and has the power to raise interest rates to fight prices across the economy.
Powell and fellow Fed officials have been signaling for months that the globe’s most powerful central bank will soon hike borrowing costs. While the timing of the first increase is unclear, Wall Street puts a 90% probability of a quarter-point rate hike in March.
Yellen advised the president on his nominees to the Fed’s board, including a second term for Powell, whom she has repeatedly praised for helping the central bank support the economy during the pandemic.
More recently, Yellen has defended the Biden administration’s attempt to pass a massive climate change, child care and worker-focused piece of legislation known as the Build Back Better plan. Republicans are united in their opposition to the bill, which they say will make the current rash of inflation even worse.
But resistance from within Democratic ranks is ultimately what’s paused progress in the Build Back Better legislation. Centrist Democrats like Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have repeatedly voiced concerns over the bill’s size and scope and how it could affect prices.
Yellen and the rest of the Biden administration have disputed those concerns and have tried to show that the already-enacted infrastructure legislation and the Build Back Better plan will help address supply chain issues and hot inflation.