Larry Summers, former Treasury Secretary, said Monday that the U.S. unemployment must rise before Americans can see relief from inflation.
U.S. inflation stands at 8.6% year-over, which is the highest level in over 40 years and shows no sign of slowing. Summers claims that the U.S. should maintain a rate of unemployment greater than 5% for five consecutive years in order to reduce inflation.
According to Bloomberg, Summers stated that to control inflation, five years of unemployment over 5% is necessary. In other words, two years of 7.5% unemployment, five years at 6% unemployment, or one year at 10% unemployment are required.
He added that “there are numbers which are remarkably disconcerting relative to the Fed Reserve views.”
The U.S. unemployment rate is currently at 3.6%
Summers’ statement was made hours after President Joe Biden said that a recession wasn’t inevitable. After a conversation with Summers, he said that he reached this conclusion.
Biden made the statement in a heated exchange with reporters this weekend while on vacation to Delaware.
“Economists say that a recession will be more likely than ever,” can be heard a reporter saying to Biden while on a beach.
Biden stated, “Now you sound like an American politician, I’m laughing, that was a joke, that wasn’t a joke, that is a joke,” “But all jokes aside, I don’t believe it is. Larry Summers told me this morning that a recession is not inevitable.
Summers predicted a recession during a Sunday interview on NBC. Many high-ranking CEOs are also starting to prepare for a recession.
“I believe there will be a recession. This is based on the fact that there has never been a situation such as this with inflation exceeding 4% and unemployment above 4%, without a recession within a year or so. Summers stated this weekend that the Fed will raise interest rates to prevent inflation.