Larry Summers says Americans will have to lose jobs to ease inflation
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The U.S. unemployment rate must rise before Americans see any relief from inflation, economist and former Treasury Secretary Larry Summers said Monday.
U.S. inflation is sitting at roughly 8.6% year-over-year, the highest point in 40 years, and shows no signs of slowing down. Summers argues the U.S. must sustain a jobless rate of more than 5% for five years if inflation is to drop.
"We need five years of unemployment above 5% to contain inflation – in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment," Summers said in a London speech, according to Bloomberg.
"There are numbers that are remarkably discouraging relative to the Fed Reserve view," he added.
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The U.S. unemployment rate currently sits at 3.6%.
First lady Jill Biden listens as President Joe Biden talks to reporters before boarding Marine One on the South Lawn of the White House, Friday, June 17, 2022, in Washington. (Evan Vucci / AP Newsroom)
Summers' statement came hours after President Joe Biden argued that a recession was not "inevitable." He said he came to that conclusion after a conversation with Summers.
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Biden made the statement during a testy exchange with reporters while on vacation in Delaware this weekend.
"Economists are saying that a recession is more likely than ever," a reporter can be heard saying to Biden on a beach.
"Now you sound like a Republican politician, I'm joking, that was a joke, that was a joke," Biden said. "But all kidding aside, no I don't think it is. I was talking to Larry Summers this morning, there's nothing inevitable about a recession."
During a Sunday appearance on NBC, Summers himself had predicted that a recession was likely. Several high powered CEOs have also begun bracing for a recession.
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"My best guess is that a recession is ahead. I base that on the fact that we haven't had a situation like the present with inflation above 4% and unemployment beyond 4% without a recession following within a year or two. And so I think the likelihood is that in order to do what's necessary to stop inflation the Fed is going to raise interest rates enough that the economy will slip into a recession," Summers said this weekend.