US former treasury secretary sees risk of ‘sudden stop’ in economy after jobs surge

US Former Treasury Secretary Lawrence Summers highlighted the risk of a sudden downturn in the economy after a surge in jobs growth that dwarfed expectations.

“It’s as difficult an economy to read as I can remember,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin.

A key question after the jump in US payrolls is whether this is all “going to be income that’s going to be spent, that’s going to lift the economy up a bunch?” or do companies at some point conclude they have too many workers and too much inventory “and we’re going to see a fairly sudden stop.”

Summers spoke after the January US employment report showed a 517,000 increase in payrolls, well above the highest estimate in the Bloomberg survey of economists. The unemployment rate dipped to 3.4 per cent, the lowest level since 1969.

“I still do think there is the risk” of a kind of Wile E. Coyote moment, Summers said in reference to the cartoon character that falls off a cliff.