One day after an unexpectedly hot inflation report sparked a sell-off in stocks, Treasury Secretary Janet Yellen told a Detroit audience it's important to keep the long-term trend in sight.
January's headline inflation figure rose to 3.1% year-over-year and core inflation hit 3.9%. The Magnificent Seven stocks lost more than $250 billion in market value in the resulting sell-off Tuesday.
"The trend here is that inflation is moving decisively down," Yellen told Michigan Gov. Gretchen Whitmer Wednesday in a conversation before the Detroit Economic Club.
After inflation rose to levels last seen in the late 1970s and early 1980s, it is now falling to levels consistent with the Federal Reserve's goal, Yellen said.
The S&P 500, which is tracked by the SPDR S&P 500 ETF Trust
Yellen Says Americans Feel Better About Economy: The treasury secretary singled out new and used cars, gasoline - particularly after Russia's invasion of Ukraine - and housing as areas where Americans felt an economic squeeze in the aftermath of the COVID-19 pandemic.
Gas is now averaging under $3 per gallon, and the price of eggs and new and used car prices have declined, she said.
"Most importantly, wages have gone up. And they've gone up quite a lot. They've gone up especially large amounts for lower-income workers," Yellen said.
The median U.S. worker can buy the same basket of goods and services they could in 2019 as inflation has declined and wages have risen, she said - and have $1,400 left on top of that for spending and saving.
"I think most Americans are beginning to feel better about the economy."
In contrast to how other advanced economies weathered the COVID-19-driven economic downturn and the rise of inflation, the U.S. has fared better, she said.
"Our economy has grown more. Inflation has come down more. Wages adjusted for inflation have risen more than in any other advanced country."
Yellen noted the struggles middle-class families continue to face, including child care, jobs for those without a college degree and health care and education expenses.
"There are serious problems policymakers need to address to support middle-class families so they can enjoy better lives, and the Biden administration is focused on that."
Yellen and Whitmer touted investments being made in clean energy and advanced manufacturing with funds from the Inflation Reduction Act signed into law by President Joe Biden in August 2022.
Clean energy investment translates to less exposure to events in Russia and the Middle East that affect oil prices, Yellen said,
The Last Word: The U.S. has achieved the longest string of national unemployment readings under 4% in 50 years, Yellen told the Detroit audience.
Data on unemployment in Detroit is widely conflicting: Bureau of Labor Statistics data showed a 4.2% unemployment rate in the city in April 2023 and a University of Michigan survey a few months later concluded the city's unemployment rate is 16%.
The U.S. economy grew 3.1% last year while operating near full employment, Yellen said.
"Overall, my assessment is that the state of the U.S. economy is very strong."
