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.
The U.S. unemployment rate currently sits at 3.6%.
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.
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.
“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.