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Ex-Treasury Secretary Larry Summers dismissed optimism sparked by a solid August jobs report, warning that a stronger labor market could actually make inflation worse.
Summers delivered his latest dire outlook for the US economy after federal data showed US employers added a robust 315,000 jobs last month. The report included a higher-than-expected 62.4% labor force participation rate, stoking optimism that tight labor conditions that contributed to inflation are easing.
“I think the increases in participation are good news, but I think there’s a tendency to exaggerate how much higher participation will reduce inflation,” Summers said during an appearance on “Bloomberg” Friday.
“People think of it as extra labor supply, but they forget that if the unemployment rate stays the same and participation goes up, more people are working, earning and therefore spending, and that in turn raises the labor demand.
