Mortgage rates reached 7% this week, the highest they’ve been in nearly 20 years, as the Fed continues efforts to curb persistent inflation. The rapidly rising mortgage rate (more than double what it was this time last year) reflects the ongoing fight to tame inflation and cool the housing market. Such moves by the Fed have historically led to an inevitable recession. However, the current economic climate is unlike history’s past, and despite looming recession fears, some economists say we’re still not heading toward economic fallout.
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Treasury Secretary Janet Yellen said she “doesn’t see signs of a recession” on CNN’s Erin Burnett OutFront, and that “there were several problems that we could have had, and difficulties many American families could have faced.”
In essence: it could be worse — a lot worse.
“These are problems we don’t have, because of what the Biden administration has done,” she added. “So, often one doesn’t get credit for problems that don’t exist.”
It can be difficult to think of the economy moving forward in times when mortgage rates are skyrocketing, inflation remains high and layoffs are happening left and right. Still, the economy and the labor market are stronger than they may appear on the surface, U.S. Secretary of Labor Marty Walsh told CNBC.
“I still think that we’re going to have job gains as we move into the end of this year, early next year. A lot of people are still looking at different jobs,” he told the outlet. “We saw a lot of moving around over this last course of the year. People leaving jobs, getting better jobs, and I’m not convinced yet that we’re headed towards that.”
However, although Walsh — like Yellen — agrees we’re likely not heading toward a recession, a “catastrophe” of different proportions could be underway.
Walsh pointed to a lack of immigration and childcare reform as possible pressure points that could negatively impact the job market and eventually the larger economy.
Related: Now Is the Time to Press Even Harder for Immigration Reform
The size of the working population in the U.S. is concerning, he told CNBC, and “if we don’t solve immigration … we’re talking about worrying about recessions, we’re talking about inflation. I think we’re going to have a bigger catastrophe if we don’t get more workers into our society, and we do that by immigration.”
Furthermore, Walsh mentioned that Biden’s broken promise to do more for childcare could have similar consequences.
“Childcare is a basic necessity to get millions of women back into the workforce on a full-time basis,” he said, per CNBC.
In short, we might not be headed to a recession now, but key changes need to be made to protect sectors of the labor market, or a “bigger catastrophe” than a recession could be on the horizon.
