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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Joining us now is

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Speaker 1: someone who's been much beligned and has been fearless in

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Speaker 1: her academics of saying, you know what, I'm associated with

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Speaker 1: the dread at our word recession, but I don't see

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Speaker 1: it out there. Claudia sam has nailed that call. She's

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Speaker 1: chief economist at New Century As Advisors, and she joins

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Speaker 1: us here this morning. Claudia, my distant memory is Jeffrey

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Speaker 1: Frankel at Harvard saying, Okay, there's a jobs mandate, there's

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Speaker 1: an interest rate inflation mandate, but real GDP and maybe

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Speaker 1: distant nominal GDP really matter. Can a dearth of GDP

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Speaker 1: shift the labor market and shift the Fed?

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Speaker 2: Well? Absolutely, I mean these are all growth and employment

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Speaker 2: are absolutely tied together, not necessarily quarter by quarter. And

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Speaker 2: I think you know, if you're referring to the first quarter,

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Speaker 2: the small decline in GDP, like there is a lesson

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Speaker 2: from that.

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Speaker 3: But it is not that we are falling into a recession.

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Speaker 2: It's that we are facing a major cost shock with

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Speaker 2: an increase in tariffs and businesses we're responding to that

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Speaker 2: in consumers that cause a lot of disruption in the numbers.

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Speaker 2: So that's one example where you know that first quarter

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Speaker 2: GDP decliinent is giving us a sense of where we're headed.

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Speaker 2: But it's more about where we're headed working through these tariffs,

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Speaker 2: which eventually will have some effects on employment even if

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Speaker 2: we're not seeing them today.

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Speaker 1: Okay, way from then the PM recession mania, are you

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Speaker 1: modeling out four percent year over year CPI? Is that

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Speaker 1: in the New Century Advisor's realm of thinking?

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Speaker 2: So I think that's absolutely in the realm of possibility,

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Speaker 2: and certainly I feel very that we are facing slow

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Speaker 2: in growth, rising on employment and faster inflation.

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Speaker 3: Now magnitudes are going.

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Speaker 2: To be absolutely crucial, and I think really big question

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Speaker 2: for the Fed in particulars they think about their policy

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Speaker 2: is the duration right If this is if we're just

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Speaker 2: seeing a kind of a blip a move up in inflation,

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Speaker 2: the recedes as that we adjust to the tariffs or

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Speaker 2: maybe the jobs go away.

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Speaker 3: But that that's like a key question that we are

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Speaker 3: far from having the answers to see this.

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Speaker 1: You see how she does this at the University of

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Speaker 1: Michigan and they get on the X axis. She's looking

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Speaker 1: at the duration. Yeah, she's looking at the lengthiness at

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Speaker 1: the lengthiness of the Magnetude Claudia.

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Speaker 4: Can this economy avoid recession? I mean again, I see

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Speaker 4: a jobs number today, I think about Tom's theory the

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Speaker 4: companies and people adapt and this economy avoid recession absolutely.

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Speaker 3: I mean, we have all the ingredients of a recession.

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Speaker 2: We have. We have the tariffs, we have the slid immigration,

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Speaker 2: we have the federal cuts and other factors.

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Speaker 3: We have massive uncertainty.

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Speaker 2: Like really, if I mean this, we are pointed towards

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Speaker 2: a recession, and yet we are in the very early stages.

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Speaker 2: And we see sometimes of businesses to build some buffers,

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Speaker 2: a big inventory built getting ahead of the tariffs.

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Speaker 3: I mean, we're nobody.

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Speaker 2: Wants to lay off workers, Nobody wants to cut back

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Speaker 2: on their spending, right like people are trying to make adjustments.

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Speaker 2: So but what needs to happen is these aggressive policies

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Speaker 2: a bit and put in place these cost shocks. They

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Speaker 2: have got to be dialed back and really quickly. I mean,

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Speaker 2: there's some damage done already that we're going to deal

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Speaker 2: with costs as this year goes on. But magnitudes matter,

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Speaker 2: and avoiding the recession, and particularly the recession dynamic is

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Speaker 2: when that shock it just spreads through the whole economy,

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Speaker 2: and we really have got to nip this in the bed,

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Speaker 2: in the bud before you have those feedback effects take cold.

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Speaker 4: When you see a lot of companies again, we're probably

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Speaker 4: seventy percent away through the earning cycle here, a lot

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Speaker 4: of companies are, as you said, either pulling their guidance,

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Speaker 4: or if they still have guidance, they're saying.

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Speaker 3: We're concerned here.

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Speaker 4: We've got a lot of variability around our businesses. What

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Speaker 4: do you take away from some what you heard from

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Speaker 4: corporate America so far.

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Speaker 3: So clearly are big shocks. There's a lot of uncertainty.

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Speaker 1: I think.

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Speaker 2: The other place I found pretty interesting reading this time

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Speaker 2: was going through the Fedspage book, which has a similar

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Speaker 2: kind of talking to business context, talking to nonprofits in

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Speaker 2: the communities, and you just you're over and over again

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Speaker 2: contingency planning, getting ready like potentially cutting ours potential but

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Speaker 2: not there yet. But it is so clear that a

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Speaker 2: massive amount of time and energy is being spent on this.

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Speaker 2: What do we do when it hits Claudia.

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Speaker 1: You've sat in the offices at the FED, folks. This

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Speaker 1: is not the romance of some big fancy table in

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Speaker 1: the Echos building. This is the meat and potatoes that

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Speaker 1: doing PhD work at the greatest central bank in the world.

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Speaker 1: And the answer is you guys like smooth curves, gradual change.

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Speaker 1: We just had Jeans Soroka in of the Port of

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Speaker 1: Los Angeles, flew in just to talk to John Tucker Claudia.

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Speaker 1: He sees a jump condition, a discontinuous event at his port.

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Speaker 1: How do what fancy people like you fold into reality?

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Speaker 1: Long shortman in truckers in Los Angeles.

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Speaker 2: Right, it's a moment where to some extent you have

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Speaker 2: to look at the models, but put them to the side. Right,

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Speaker 2: there's no macroeconomic model that's going to give you the

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Speaker 2: kind of discontinuities, the kind of very sharp turns that

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Speaker 2: you're seeing in the data.

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Speaker 3: I mean, that's why we should expect.

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Speaker 2: We had this massive surge in imports that had a

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Speaker 2: big effect on the composition of GDP in the first quarter.

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Speaker 2: We're going to probably see a snapback because I mean,

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Speaker 2: we from that shipping, those imports are going to the floor.

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Speaker 2: So don't come to me and say, oh, GDP is

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Speaker 2: three percent in the second quarter, all is great, like

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Speaker 2: that could be under the hood telling us.

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Speaker 3: We've got a big problem in.

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Speaker 2: The second half of this year, so you have to,

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Speaker 2: like you have to respond to those discontinuities, particularly when

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Speaker 2: you can tie them back to a store.

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Speaker 3: There's noise all the time that you want to look through.

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Speaker 2: This isn't noise, right, Like we're responding to something big,

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Speaker 2: and then that's why that outlook is important in the judgment.

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Speaker 1: Claudia, with great respect for your impact than American economics.

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Speaker 1: I think everybody wants to know this unfair question, but

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Speaker 1: I'm going there on this strange Friday. What is your

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Speaker 1: counsel to Hasset at Pennsylvania Vestent of Yale and Greer

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Speaker 1: our trade representative as they counsel the president. These guys

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Speaker 1: are legit academics. What should they do with this unique presidency?

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Speaker 2: They need to slow it down, right I you know,

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Speaker 2: I disagree with the policies they're pursuing, but I'm strong

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Speaker 2: I'm very concerned about the way in which they're being pursued.

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Speaker 2: This is very aggressive, this is very fast, and it

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Speaker 2: can potentially cause a lot of damage.

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Speaker 3: So even if you're in the spirit.

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Speaker 2: Of having more industrial policy, having higher tariffs, a smaller

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Speaker 2: government like there's a way.

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Speaker 3: To do this that doesn't cause.

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Speaker 2: Maximal damage, right, And I'm very concerned, and I think

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Speaker 2: the White House and you hear some messaging from them

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Speaker 2: that you know, tarifrates aren't sustainable with China and we're

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Speaker 2: doing negotiations, but like we need to see some action

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Speaker 2: that actually pulls back these costs before it's too late.

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Speaker 1: Doctor sum Thank you so much, Claudius. I'm joins us.

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Speaker 1: The New Century advised us here to summarize paul pretty

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Speaker 1: buoyant report.

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Speaker 4: Yeah, I think so. I'm just looking at it here,

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Speaker 4: and I'm looking at the wages Tom. Maybe not on

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Speaker 4: an annualized basis. Wage growth still pretty solid at three

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Speaker 4: point eight percent growth on an annualized basis