Larry Summers says a soft landing of the economy is possible, but keep an eye on 'labor restiveness'

• August's jobs report brings the US a step closer to a soft landing, Larry Summers said.
• But the former Treasury Secretary cautioned that union activity could be disruptive.

Former Treasury Secretary Larry Summers sees improving chances for a US soft landing, as the latest jobs report signals a labor market cool down.

"I still think the road to a soft landing is a very difficult one, but this was a step down that road," he told Bloomberg TV on Friday following the release of the non-farm payrolls report for August.

Specifically, he noted that the 187,000 new jobs added last month— paired with a rise in weekly working hours — were signs of continued economic strength.

Meanwhile, the month also saw wage growth slow, while unemployment rose to 3.8% from July's 3.5%. This alleviates the need for the Federal Reserve to keep raising interest rates, easing the risk of a forced downturn.

"These numbers are consistent with very optimistic scenarios," he said. "I don't think they determined that they're in a very optimistic scenario, but there are all sorts of things that could have been alarm bells in today's numbers that didn't ring."

Instead, Summers cited a pressure outside of the jobs report that could still hurt the chances of a soft landing.

"As I look to the wage picture though, I do see — and I think it's very hard for anybody to evaluate the significance of this — a degree of labor restiveness in our country, potential strike activity that we have not seen in a very long time," he said.

Summers pointed to a recent deal reached between UPS and its union that secured higher pay for its drivers, which he said is likely inconsistent with the Fed's 2% inflation target.

Besides aggravating price targets, union activity could also fuel strikes and economic disruption over the next month. For this, he cited the car industry, where unions are growing "very ambitions" as workers have not benefited from company expansions.

As an example, the four-month Hollywood strike of writers and actors has so far cost California's economy $5 billion. That's as small businesses that rely on a functioning movie industry, from truckers to caterers, have been bearing the cost of the dispute.