- Richard Thaler dismissed US recession concerns, citing low unemployment and lots of job vacancies.
- The Nobel Prize-winning economist suggested inflation could fade away over the next year.
- Thaler welcomed wage increases for low-income workers as a way to reduce US inequality.
Richard Thaler ridiculed the idea that the US economy is in a recession, downplayed the inflation threat, and championed higher wages for blue-collar workers in a CNBC interview this week.
Thaler, the author of “Nudge” and the winner of the Nobel Prize in Economics in 2017, underscored the disconnect between claims of a US recession based on two consecutive quarters of declining output this year, and economic reality.
“I don’t see anything that resembles a recession,” he told CNBC. “We have record low unemployment, record high vacancies. That looks like a strong economy.”
Thaler noted the US economy grew less quickly than prices rose, meaning real gross domestic product (GDP) shrunk slightly this year.
“It’s just funny to call that a recession,” he said. “It’s not like any recession we’ve seen in my rather long lifetime.”
The behavioral economist and principal at Fuller & Thaler Asset Management also addressed fears of stubborn inflation. He attributed some of the recent price increases to Russia’s invasion of Ukraine and virus outbreaks in China disrupting global supply chains. He suggested there could be pockets of price decreases once those problems fade.
“Let’s suppose that a year from now, the war in Ukraine is over and COVID-19 has left China, I could see deflation,” he said.
Thaler also asserted that given the widening US income gap in recent decades, it could be beneficial for lower-paid workers to earn higher wages — despite the risk of their employers hiking prices to offset their higher costs, fueling inflation.
“Everywhere I go, you see signs of a shortage of labor, and supply and demand says wages should go up,” he said, pointing to the ubiquitous “Help Wanted” signs in the windows of many US restaurants. “So wages are going to go up, and I think that’s good.”