U.S. Economy on Course for Soft Landing: Yellen

Treasury Secretary Janet Yellen expressed confidence in the robustness of the U.S. economy, adding that recent signs of cooling job growth indicate a soft landing rather than an impending recession. She noted that while there is a slowdown in hiring compared to the post-pandemic surge, the economy remains deeply in recovery and operates near full employment.

Her remarks came shortly after the Bureau of Labor Statistics reported that nonfarm payrolls increased by 187,000 in August, slightly below economists' expectations. The unemployment rate increased to 3.8%, a modest rise that some analysts attribute to more individuals entering the labor force. Despite concerns about a slowing labor market, job growth in August surpassed July's, indicating sustained momentum.

Investor worries about the labor market have contributed to stock market volatility, with the S&P 500 experiencing fluctuations and recently closing out its worst week since March 2023. Yellen sought to alleviate fears by stating she did not observe any alarming economic indicators, emphasizing that the moderation in job growth aligns with efforts to cool inflation without triggering a recession.

What Does This Mean for Me?

The recent employment data has intensified discussions about the Federal Reserve's ability to achieve a "soft landing"—raising interest rates to control inflation and adjusting them without causing an economic downturn. The Fed has maintained the federal funds rate between 5.25% and 5.50%, the highest level in 22 years, and is closely monitoring economic indicators before making further adjustments. Amid investor jitters and market fluctuations, Yellen's reassurances underscore the resilience of the U.S. economy.