Summers: Recession Risks ‘Are Going Way Up’ – Greater Than 2/3s Chance It Happens in Next Two Years

During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” economist, Harvard Professor, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers said that recession risks “are going way up” and he would put the odds of a recession in the next two years at above two-thirds because there hasn’t been a time in American history where inflation was over 4% with an unemployment rate below 4% where there wasn’t a recession within two years.

Summers said, “I think the risks are going way up. 27.5% this year, because next year is riskier than this year, translates to something getting towards two-thirds for a two-year period. And I’d be a bit above that, in my judgment. Here’s the key fact: We have never had a moment in the United States when inflation was above 4 and unemployment was below 4 when we didn’t have a recession two years — within the next two years. So, we may pull it off. And certainly, it’s hugely important that we succeed in pulling it off. But the combination of overheating, followed by policy delay, followed by supply shocks means I think it’s a very difficult set of challenges, and recession in the next couple of years is clearly more likely than not. Some of the banks are starting to move in that direction. Your survey moved in that direction. And I suspect that’s how the consensus will evolve.”

Follow Ian Hanchett on Twitter @IanHanchett