Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Joining us now is
Speaker 1: someone who's been much beligned and has been fearless in
Speaker 1: her academics of saying, you know what, I'm associated with
Speaker 1: the dread at our word recession, but I don't see
Speaker 1: it out there. Claudia sam has nailed that call. She's
Speaker 1: chief economist at New Century As Advisors, and she joins
Speaker 1: us here this morning. Claudia, my distant memory is Jeffrey
Speaker 1: Frankel at Harvard saying, Okay, there's a jobs mandate, there's
Speaker 1: an interest rate inflation mandate, but real GDP and maybe
Speaker 1: distant nominal GDP really matter. Can a dearth of GDP
Speaker 1: shift the labor market and shift the Fed?
Speaker 2: Well? Absolutely, I mean these are all growth and employment
Speaker 2: are absolutely tied together, not necessarily quarter by quarter. And
Speaker 2: I think you know, if you're referring to the first quarter,
Speaker 2: the small decline in GDP, like there is a lesson
Speaker 2: from that.
Speaker 3: But it is not that we are falling into a recession.
Speaker 2: It's that we are facing a major cost shock with
Speaker 2: an increase in tariffs and businesses we're responding to that
Speaker 2: in consumers that cause a lot of disruption in the numbers.
Speaker 2: So that's one example where you know that first quarter
Speaker 2: GDP decliinent is giving us a sense of where we're headed.
Speaker 2: But it's more about where we're headed working through these tariffs,
Speaker 2: which eventually will have some effects on employment even if
Speaker 2: we're not seeing them today.
Speaker 1: Okay, way from then the PM recession mania, are you
Speaker 1: modeling out four percent year over year CPI? Is that
Speaker 1: in the New Century Advisor's realm of thinking?
Speaker 2: So I think that's absolutely in the realm of possibility,
Speaker 2: and certainly I feel very that we are facing slow
Speaker 2: in growth, rising on employment and faster inflation.
Speaker 3: Now magnitudes are going.
Speaker 2: To be absolutely crucial, and I think really big question
Speaker 2: for the Fed in particulars they think about their policy
Speaker 2: is the duration right If this is if we're just
Speaker 2: seeing a kind of a blip a move up in inflation,
Speaker 2: the recedes as that we adjust to the tariffs or
Speaker 2: maybe the jobs go away.
Speaker 3: But that that's like a key question that we are
Speaker 3: far from having the answers to see this.
Speaker 1: You see how she does this at the University of
Speaker 1: Michigan and they get on the X axis. She's looking
Speaker 1: at the duration. Yeah, she's looking at the lengthiness at
Speaker 1: the lengthiness of the Magnetude Claudia.
Speaker 4: Can this economy avoid recession? I mean again, I see
Speaker 4: a jobs number today, I think about Tom's theory the
Speaker 4: companies and people adapt and this economy avoid recession absolutely.
Speaker 3: I mean, we have all the ingredients of a recession.
Speaker 2: We have. We have the tariffs, we have the slid immigration,
Speaker 2: we have the federal cuts and other factors.
Speaker 3: We have massive uncertainty.
Speaker 2: Like really, if I mean this, we are pointed towards
Speaker 2: a recession, and yet we are in the very early stages.
Speaker 2: And we see sometimes of businesses to build some buffers,
Speaker 2: a big inventory built getting ahead of the tariffs.
Speaker 3: I mean, we're nobody.
Speaker 2: Wants to lay off workers, Nobody wants to cut back
Speaker 2: on their spending, right like people are trying to make adjustments.
Speaker 2: So but what needs to happen is these aggressive policies
Speaker 2: a bit and put in place these cost shocks. They
Speaker 2: have got to be dialed back and really quickly. I mean,
Speaker 2: there's some damage done already that we're going to deal
Speaker 2: with costs as this year goes on. But magnitudes matter,
Speaker 2: and avoiding the recession, and particularly the recession dynamic is
Speaker 2: when that shock it just spreads through the whole economy,
Speaker 2: and we really have got to nip this in the bed,
Speaker 2: in the bud before you have those feedback effects take cold.
Speaker 4: When you see a lot of companies again, we're probably
Speaker 4: seventy percent away through the earning cycle here, a lot
Speaker 4: of companies are, as you said, either pulling their guidance,
Speaker 4: or if they still have guidance, they're saying.
Speaker 3: We're concerned here.
Speaker 4: We've got a lot of variability around our businesses. What
Speaker 4: do you take away from some what you heard from
Speaker 4: corporate America so far.
Speaker 3: So clearly are big shocks. There's a lot of uncertainty.
Speaker 1: I think.
Speaker 2: The other place I found pretty interesting reading this time
Speaker 2: was going through the Fedspage book, which has a similar
Speaker 2: kind of talking to business context, talking to nonprofits in
Speaker 2: the communities, and you just you're over and over again
Speaker 2: contingency planning, getting ready like potentially cutting ours potential but
Speaker 2: not there yet. But it is so clear that a
Speaker 2: massive amount of time and energy is being spent on this.
Speaker 2: What do we do when it hits Claudia.
Speaker 1: You've sat in the offices at the FED, folks. This
Speaker 1: is not the romance of some big fancy table in
Speaker 1: the Echos building. This is the meat and potatoes that
Speaker 1: doing PhD work at the greatest central bank in the world.
Speaker 1: And the answer is you guys like smooth curves, gradual change.
Speaker 1: We just had Jeans Soroka in of the Port of
Speaker 1: Los Angeles, flew in just to talk to John Tucker Claudia.
Speaker 1: He sees a jump condition, a discontinuous event at his port.
Speaker 1: How do what fancy people like you fold into reality?
Speaker 1: Long shortman in truckers in Los Angeles.
Speaker 2: Right, it's a moment where to some extent you have
Speaker 2: to look at the models, but put them to the side. Right,
Speaker 2: there's no macroeconomic model that's going to give you the
Speaker 2: kind of discontinuities, the kind of very sharp turns that
Speaker 2: you're seeing in the data.
Speaker 3: I mean, that's why we should expect.
Speaker 2: We had this massive surge in imports that had a
Speaker 2: big effect on the composition of GDP in the first quarter.
Speaker 2: We're going to probably see a snapback because I mean,
Speaker 2: we from that shipping, those imports are going to the floor.
Speaker 2: So don't come to me and say, oh, GDP is
Speaker 2: three percent in the second quarter, all is great, like
Speaker 2: that could be under the hood telling us.
Speaker 3: We've got a big problem in.
Speaker 2: The second half of this year, so you have to,
Speaker 2: like you have to respond to those discontinuities, particularly when
Speaker 2: you can tie them back to a store.
Speaker 3: There's noise all the time that you want to look through.
Speaker 2: This isn't noise, right, Like we're responding to something big,
Speaker 2: and then that's why that outlook is important in the judgment.
Speaker 1: Claudia, with great respect for your impact than American economics.
Speaker 1: I think everybody wants to know this unfair question, but
Speaker 1: I'm going there on this strange Friday. What is your
Speaker 1: counsel to Hasset at Pennsylvania Vestent of Yale and Greer
Speaker 1: our trade representative as they counsel the president. These guys
Speaker 1: are legit academics. What should they do with this unique presidency?
Speaker 2: They need to slow it down, right I you know,
Speaker 2: I disagree with the policies they're pursuing, but I'm strong
Speaker 2: I'm very concerned about the way in which they're being pursued.
Speaker 2: This is very aggressive, this is very fast, and it
Speaker 2: can potentially cause a lot of damage.
Speaker 3: So even if you're in the spirit.
Speaker 2: Of having more industrial policy, having higher tariffs, a smaller
Speaker 2: government like there's a way.
Speaker 3: To do this that doesn't cause.
Speaker 2: Maximal damage, right, And I'm very concerned, and I think
Speaker 2: the White House and you hear some messaging from them
Speaker 2: that you know, tarifrates aren't sustainable with China and we're
Speaker 2: doing negotiations, but like we need to see some action
Speaker 2: that actually pulls back these costs before it's too late.
Speaker 1: Doctor sum Thank you so much, Claudius. I'm joins us.
Speaker 1: The New Century advised us here to summarize paul pretty
Speaker 1: buoyant report.
Speaker 4: Yeah, I think so. I'm just looking at it here,
Speaker 4: and I'm looking at the wages Tom. Maybe not on
Speaker 4: an annualized basis. Wage growth still pretty solid at three
Speaker 4: point eight percent growth on an annualized basis