Yellen says no sign of economic downturn, warns of consequences from government shutdown

'There’s absolutely no reason for a shutdown,' said Yellen

Treasury Secretary Janet Yellen on Monday said that she doesn’t see indications that the U.S. economy is entering a downturn but warned that a government shutdown risks undercutting the economic momentum.

"I don’t see any signs that the economy is at risk of a downturn," Yellen said in an appearance on CNBC. She added that the labor market has remained strong despite the Federal Reserve’s interest rate hikes aimed at tamping down inflation, saying that the jobs market is "not quite as hot as it was," which will help bring inflation down to the Fed’s target rate of 2% from the 3.7% the economy registered in August.

With Congress and President Biden facing a Sept. 30 deadline to fund the government and avoid a partial shutdown, Yellen said, "There’s absolutely no reason for a shutdown," and added that "creating… a situation that could cause a loss of momentum is something we don’t need as a risk at this point."

UAW STRIKE AGAINST BIG THREE AUTOMAKERS ENTERS FOURTH DAY

Treasury Secretary Janet Yellen

Treasury Secretary Janet Yellen said Monday that she doesn't see any signs of an economic downturn but warned a government shutdown could cause the economy to lose steam. (BERLIN/WASHINGTON / Reuters Photos)

Yellen said it’s too early to tell what the impact of the United Auto Workers (UAW) strike against the Big Three automakers — Ford, General Motors and Stellantis — will be on the economy. She added that the repercussions will depend on the duration of the strike and who is affected by the shutdowns.

The UAW is carrying out what it calls a "stand up strike" in which select locals go on strike, which gives the union’s leadership flexibility in expanding the work stoppage incrementally up to a potential nationwide strike. 

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A United Auto Workers member on strike

Yellen said it's too early to tell what the economic impact of the UAW strike will be. (REUTERS/Bryan Woolston/File Photo / Getty Images)

Although the strike entered its fourth day on Monday, several facilities around the country have been forced to pause operations due to parts shortages, which has also led to temporary layoffs due to the lack of work.

Yellen emphasized that she and President Biden, who has expressed support for the UAW, are supportive of the collective bargaining process and want to ensure that workers "come out ahead as well," given the auto industry’s success.

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Biden dispatched Acting Labor Secretary Julie Su and White House economic adviser Gene Sperling to Detroit to support negotiations between the two sides without actively mediating or intervening in the process.

Reuters contributed to this report.