Richard Thaler says nothing in U.S. economy ‘resembles a recession’

Date:

Thaler, the winner of the Nobel Memorial Prize in Economic Sciences in 2017, is best known for his work in behavioral economics.

Scott Olson | Getty Images

Nobel Prize-winning economist Richard Thaler says the US may have recorded two consecutive quarters of economic contraction, but it’s “just funny” to describe it as a recession.

“I don’t see anything that looks like a recession. We have record low unemployment, record high job openings. That looks like a strong economy,” Thaler told CNBC’s Julianna Tatelbaum on Wednesday.

“The economy is growing, it’s just growing a little slower than prices. And that means real GDP has fallen a little bit, but I just think it’s funny to call that a recession,” he said. “It’s not like a recession that we’ve seen in my fairly long life.”

U.S. gross domestic product, or GDP, fell 0.9% year-on-year in the second quarter, after falling 1.6% in the first quarter. Two consecutive declines in GDP growth meet the traditional definition of a recession. Officially, the National Bureau of Economic Research reports recessions and expansions and probably won’t make a judgment on the period in question for months.

Thaler, the 2017 winner of the Nobel Memorial Prize in Economic Sciences, is best known for his work in behavioral economics — and for explaining the so-called “hot hand” fallacy alongside singer Selena Gomez in the film “The Big Short.” from 2015.

His work looks at how people make decisions that are seemingly irrational according to economic theory, and his co-authored book, “Nudge: Improving Decisions About Health, Wealth, and Happiness,” describes how this can be used to create better public policy solutions and ” nudge’ human behavior.

Inflation Outlook

Asked about US inflation, which rose 8.5% year-on-year in July, Thaler said: “There was a long discussion about whether inflation was transient or not, and the team seems to be permanently winning, although I think they may be proclaiming the victory… a little too soon.”

Inflation is the rate of change in prices as opposed to high prices, he noted.

“At least some of the high prices we are seeing are directly caused by the war in Ukraine or by supply chain problems from China. And we hope both factors are temporary,” he said.

“Maybe a year from now there will still be fighting in Ukraine and there will still be Covid in China, but we hope it won’t, and if one or both of these issues are fixed then I could see some prizes valleys. “

Thaler also spoke of US wages, which have stagnated relative to productivity since the 1970s but have seen sharp increases in the two most recent quarters amid a tight labor market, which has led the Federal Reserve to reportedly fear the potential for a wage-price spiral.

“If I were the head of a union, I would definitely ask for a big pay rise next year to compensate my workers for the higher prices they face,” Thaler said.

“I’d say if that ever happens, I personally would welcome that because people who get wages, what we call wages, are the people who fall behind the 1% in terms of how much money they make,” he continued.

“Certainly everywhere I go you see signs of a labor shortage, and supply and demand say wages need to go up. I can’t enter a restaurant in the US that doesn’t have a ‘help wanted’ sign on the door. wages are going up, and I think that’s a good thing.”

— Jeff Cox of CNBC contributed to this article.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Popular

More like this
Related