Larry Summers Points Out US Never Evaded A Recession At These Unemployment, Inflation Levels: 'Powerful Historical Truth'

Former Treasury Secretary Lawrence Summers reportedly highlighted the absence of past examples in which the U.S. managed to avoid a recession when the unemployment rate fell below 4% and inflation rose above 4%.

"That's a powerful historical truth and I think it's one that's relevant to our current situation," Summers said.

Summers said Federal Reserve policymakers will have to "stay nimble and flexible" in the current economic environment and said the central bank should "resist the pressure to be giving strong signals about what it's going to do next," according to the Bloomberg report.

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Summers also pointed out that concerning signs of a potential sharp decline in activity coupled with strength in other indicators indicate an uncertain economic outlook.

"We've got an extremely difficult economy to read," Summers told Bloomberg. "People may be reading a bit too much into the moment in terms of economic strength — relative to the way things could look very different in a quarter or two," he said.

Summers' comments come in the backdrop of strong economic data releases this year that showed a tight labor market, higher-than-expected inflation, and accelerating retail sales and services activity.

The former Treasury Secretary also pointed out that there are a variety of leading indicators that are more troubling. Among the indicators that look concerning include a rise in inventories relative to sales, order book concerns, high payroll count relative to output, and depleting savings of consumers.

"There is stuff when you look down the road a bit that has to be substantially concerning about the Wile E. Coyote kind of moment," Summers said.

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Posted In: NewsEconomicsFederal ReserveInflationLarry SummersRecessionUnemployment
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