‘We’re In A Deep Hole’: Yellen Warns Unemployment Will Stay Elevated For Years Without Stimulus

Topline

Treasury Secretary Janet Yellen on Sunday sought to quell concerns over the size of the $1.9 trillion Covid-19 relief plan President Biden is trying to push through a divided Congress, emphasizing the need to act quickly to remedy a “stalling” job market and combat “tremendous suffering in the country.” 

WASHINGTON, DC – FEBRUARY 05: Treasury Secretary Janet Yellen listens to President Joe Biden as he … [+] delivers remarks on the national economy and the need for his administration’s proposed $1.9 trillion coronavirus relief legislation in the State Dining Room at the White House on February 05, 2021 in Washington, DC. Biden hosted lawmakers from both parties at the White House this week in an effort to push his pandemic relief plan forward. (Photo by Stefani Reynolds-Pool/Getty Images)

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Key Facts

Yellen told CBS’ “Face the Nation” that the U.S. is in a “deep hole” with respect to the job market with a “long way to dig out,” citing the 779,000 unemployment claims filed last week, a number only slightly lower than the week prior. 

“We need a big package and we need to get this done quickly,” said the recently confirmed treasury secretary in a separate interview with CNN.

Yellen said that with a substantial stimulus package passed quickly, she predicts the U.S. could return to full employment by next year.

Without, Yellen said it could take until 2025 to get the unemployment rate below 4% again, referencing the findings of a recent Congressional Budget Office analysis.

Key Background 

The $1.9 trillion package includes a wide range of immediate assistance, including $1,400 stimulus checks and unemployment, funding for vaccine distribution, and funding for state and local governments. Republicans argue that Biden’s package is too expensive, and contains measures that won’t successfully target Americans in need of relief. Earlier this week, former Treasury Secretary Larry Summers outlined his concern that the package would drive inflation in a Washington Post op-ed. “Whereas the Obama stimulus was about half as large as the output shortfall, the proposed Biden stimulus is three times as large as the projected shortfall,” wrote Summers. 

Crucial Quote

“My predecessor has indicated that there’s a chance that this will cause inflation to rise, and that’s also a risk that we have to consider,” Yellen said on Sunday morning. “We have the tools to deal with that risk if it materializes. But we face a huge economic challenge here and tremendous suffering in the country. We’ve got to address that. That’s the biggest risk.”

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