Former Clinton Treasury Secretary Larry Summers is defending his comments from last month in which he claimed that millions of Americans may need to lose their jobs in order for inflation to come under control.
Summers, who has emerged as a chief critic of the Biden administration’s economic policies, told the London School of Economics recently: “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 those figures were “remarkably discouraging” compared to the Federal Reserve’s prediction that it could tame inflation while keeping unemployment at or around 4%.
Summers said Friday that unemployment, which is currently at 3.6%, needs to rise to 5% in order to bring down inflation. Summers told Slate magazine that his statement was a “back of the envelope calculation.”
“A calculation like this is highly uncertain and every business cycle is different,” Summers told the online news site.
“So I certainly didn’t mean to suggest that there was any iron law of this being necessary.”
He added: “But I thought a calculation like this was probably a better approach for thinking about it than the Fed’s approach.”
The comments drew an angry response from Rep. Alexandria Ocasio-Cortez, the progressive Democratic Party lawmaker from Queens and The Bronx.
“It’s reckless to manufacture a recession that would devastate our most vulnerable,” Ocasio-Cortez tweeted.
Fed Chair Jerome Powell told a forum of European bankers late last month that there’s “no guarantee″ the central bank can tame runaway inflation without hurting the job market.
Powell repeated his hope that the Fed can achieve a so-called soft landing — raising interest rates just enough to slow the economy and rein in surging consumer prices without causing a recession and sharply raising the unemployment rate.
“We believe we can do that. That is our aim,″ he said.
But the Russian invasion of Ukraine, he said, had made the job more difficult by disrupting commerce and driving up the price of food, energy and chemicals.
US job growth increased more than expected in June and the unemployment rate remained near pre-pandemic lows, signs of persistent labor market strength that give the Federal Reserve ammunition to deliver another 75-basis-point interest rate increase later this month.
Nonfarm payrolls increased by 372,000 jobs last month, the Labor Department’s closely watched employment report showed on Friday.
Data for May was revised slightly down to show payrolls rising by 384,000 jobs instead of the previously reported 390,000.
Economists polled by Reuters had forecast 268,000 jobs added last month. Estimates ranged from as low as 90,000 to as high 400,000.