The Cable

Janet Yellen Bursts Donald Trump’s Bubble on U.S. Economy

The Federal Reserve chair touted a robust U.S. economy, brushing off rhetoric from the 2016 campaign trail.

DALLAS, TX - SEPTEMBER 14:  Republican presidential candidate Donald Trump speaks during a campaign rally at the American Airlines Center on September 14, 2015 in Dallas, Texas. More than 20,000 tickets have been distributed for the event.  (Photo by Tom Pennington/Getty Images)
DALLAS, TX - SEPTEMBER 14: Republican presidential candidate Donald Trump speaks during a campaign rally at the American Airlines Center on September 14, 2015 in Dallas, Texas. More than 20,000 tickets have been distributed for the event. (Photo by Tom Pennington/Getty Images)

Republican front-runner and billionaire real estate magnate Donald Trump is fond of saying the U.S. economy is “in a bubble” — and he doesn’t want it to burst on his watch. But Federal Reserve Chair Janet Yellen says the economy is floating along just fine toward a continued recovery.

Yellen, the first female head of the U.S. central bank, appeared Thursday on a panel in New York with former Fed chairs Ben Bernanke, Paul Volcker and Alan Greenspan. When asked whether the U.S. economy is as perilous as made out by “some people on the political campaign,” Yellen seemed to burst that bubble by noting U.S. financial markets have made “tremendous progress in recovering from the damage from the financial crisis.”

“Slowly but surely the labor market is healing,” she said, citing the addition of a monthly average of roughly 225,000 jobs for well over a year. She also noted an unemployment rate now standing at 5 percent, bringing the U.S. close to a congressionally mandated goal of maximum employment.

“This is an economy on a solid course,” she said. “Not a bubble economy.”

It’s rare for Yellen to delve into politics; most of her speeches are enough to bore all but the wonkiest economist to tears. And while she didn’t address Trump directly by name, it’s a rare occasion where she dipped her toe — ever so slightly — into the pool of U.S. politics, even when asked.

In February, Trump said U.S. markets appear overvalued, describing them as a “big, fat, juicy bubble.” The month before, he described the whole of the U.S. economy as “in a bubble” about to pop.

“We’re in a bubble,” he said. “And, frankly, if there’s going to be a bubble popping, I hope they pop before I become president because I don’t want to inherit all this stuff. I’d rather it be the day before rather than the day after, I will tell you that.”

In November, Trump alleged that the Federal Reserve is keeping interest rates low to help President Barack Obama, saying higher interest rates would — you guessed it — burst the U.S. economic bubble.

In December, the Fed hiked interest rates for the first time in nearly a decade.

The unemployment rate has hovered around a more than seven-year low of 5 percent, and recent U.S. job growth has been strong. The economy is growing at about a 2 percent annual rate. Still, some sectors, such as manufacturing and industrial areas, have been sluggish, and sinking oil prices and apparently slowing growth in China have dampened global economic outlooks.

Said Yellen, “I certainly wouldn’t describe this as a bubble economy.”

FP reporter David Francis contributed to this article. 

Photo credit: TOM PENNINGTON/Staff

Molly O’Toole is a senior reporter at Foreign Policy, covering immigration, refugees, and national security. She was FP’s sole 2016 presidential campaign reporter, on the trail from New Hampshire to Nevada. Previously, she covered the politics of national security for Atlantic Media’s Defense One, where she reported from Congress, the White House, the Pentagon, and the State Department. Before that, she was a news editor at the Huffington Post. Molly has also reported on national and international politics for Reuters, the Nation, The Associated Press, and Newsweek International, among others, from Washington, New York, Mexico City, and London. She received her dual master’s degree in journalism and international relations from New York University and her bachelor’s from Cornell University and in 2016 was a grant recipient of the International Women’s Media Foundation. She will always be a Californian. @mollymotoole

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