Ex-Treasury chief Larry Summers says it's still too early to declare victory on inflation

• Former Treasury Secretary Larry Summers said the jobs data suggests inflation could see a rebound.
• July's jobs report showed an unexpected drop in the unemployment rate and a gain in average hourly earnings.

Former Treasury Secretary Larry Summers still sees a path forward for the US to avoid a recession, but he said the July jobs report suggests the war with inflation isn't over yet.

"I don't think we can yet be confident that we're not going to see a real acceleration of inflation at some point down the road," Summers told Bloomberg TV on Friday, shortly after the labor market data published.

The economy added 187,000 jobs last month, lower than the forecasted 200,000, while the unemployment rate dipped to 3.5% and hourly earnings climbed more than expected with a 0.4% month-over-month increase.

The latest labor market numbers, in Summers' view, aren't fully in line with the Federal Reserve's 2% inflation goal.

On a year-over-year basis, wages grew 4.4%, and on an annualized rate versus June, wage growth neared 5%, he estimated.

And after accounting for productivity trends, he warned that the jobs data indicate "an underlying inflation rate in 3.5% range — and it may not be decelerating."

"If you look at wage inflation, it was faster for the month than for the quarter, faster for the quarter than for the year," Summers said. "And running for the quarter at about 4.9%. That's not consistent with 2% underlying inflation or close."

Meanwhile, the latest consumer price index reading was up 3% annually in June, and investors largely expect the Fed to be done with rate hikes for the rest of the year.

He noted that the economy remains strong and a soft-landing is still in the cards, but declining unemployment and increasing job vacancies suggest there's more work to be done.

"We still have a tight labor market, a very tight labor market," Summers said. "And with 187,000 jobs created, and population growing 50 to 100,000 a month, we have not just a tight labor market, but a tightening labor market."

Summers noted that he sees declarations of victory as too premature, according to Bloomberg.

"I'm glad that the Fed is not among those who are declaring victory," he said.