WEBVTT - Claudia Sahm Talks Inflation Duration, Investment and Consumer Spending

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. This is a joy

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<v Speaker 1>Claudia Sam with us. And it's not like the fed day.

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<v Speaker 1>We got to be adults. It's not the job's day boring, Claudia.

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<v Speaker 1>Is there a recession? What a joy to have Doctor

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<v Speaker 1>Sam with us here Chief Economists, News Century Advisors Today.

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<v Speaker 1>I just heard back from Torston Slack. One are the

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<v Speaker 1>magic things, folks, is we go back and forth with

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<v Speaker 1>our guests through the show. If I say something stupid,

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<v Speaker 1>Neil Dutt is the first one to email in and

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<v Speaker 1>you see Tom, you don't know what you're talking about.

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<v Speaker 1>Torson Slock comes back on the price of beef and

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<v Speaker 1>Doctor Sam, I did a log chart of beef back

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<v Speaker 1>to nineteen sixty six, and the thing that is striking

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<v Speaker 1>is the duration of the expensive cow that's out there.

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<v Speaker 1>What is the duration the X axis look like of

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<v Speaker 1>our inflation we're living now.

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<v Speaker 2>Right Well, I think you know what we've seen in

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<v Speaker 2>recent years, really going back to the pandemic, is we've

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<v Speaker 2>had a whole series of supply shocks of different kinds,

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<v Speaker 2>and some of them are very severe. In the pandemic,

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<v Speaker 2>it had like echoes and it took you know, several

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<v Speaker 2>years to work its way through. I think if you

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<v Speaker 2>look at beef prices, that's another one where the supply

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<v Speaker 2>chain for beef prices, it takes long time to make

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<v Speaker 2>more beef, right Like, so it just once you have

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<v Speaker 2>a disruption, it's a very long tail to it, say,

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<v Speaker 2>as opposed to chickens, which have a shorter production cycle. Like,

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<v Speaker 2>we're learning so much and reminding so much about the

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<v Speaker 2>physical nature of production, and so it's just one more

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<v Speaker 2>supply shock. And frankly, as kind of came up at

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<v Speaker 2>the press conference with Powell, you know, we've kind of

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<v Speaker 2>had to run a bad luck in terms of one

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<v Speaker 2>supply shock, cause shock after another, and that's kind of

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<v Speaker 2>become the norm. And that's what we've got to be

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<v Speaker 2>prepared for, these shocks that do have sometimes some pretty

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<v Speaker 2>long tails to them.

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<v Speaker 3>Claudia, you have posts on LinkedIn recently how you say

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<v Speaker 3>that the tip reception rules of thumb are no longer working.

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<v Speaker 3>What do you mean by that?

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<v Speaker 1>Right?

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<v Speaker 2>So there's we I think there's been a lot of

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<v Speaker 2>discussion recently about you know, what's a good payroll number,

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<v Speaker 2>right like, what's this break even rate? And discussions about well,

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<v Speaker 2>we've got a lot less labor supply out there. We

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<v Speaker 2>immigration really took a step down, We've got an aging population,

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<v Speaker 2>and so what we've seen since the beginning of twenty

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<v Speaker 2>twenty five, forty percent of the months we've had a

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<v Speaker 2>decline in payrolls. That kind of pattern is something of

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<v Speaker 2>a we're in a recession or the year after a recession,

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<v Speaker 2>that's when you see those kind of pace. But actually,

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<v Speaker 2>right now that's a labor market that's doing pretty okay

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<v Speaker 2>because the amount the number of jobs the economy needs

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<v Speaker 2>to create to keep up with the workers coming in

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<v Speaker 2>is really low. It's it's practically close to zero. So

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<v Speaker 2>that means in any month you've got weather, you've got

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<v Speaker 2>some kind of shock. We just have some noise in

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<v Speaker 2>the measurement of the data. We're going to have this

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<v Speaker 2>bumping around zero, some decline, some positives, and so I

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<v Speaker 2>think this is a normal we're in which normally should

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<v Speaker 2>send off like recession is coming. We're in a recession,

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<v Speaker 2>but that's not what this is. We are in a

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<v Speaker 2>low growth type of economy. A lot of discussion already

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<v Speaker 2>about in terms of payrolls. I think you know in

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<v Speaker 2>a moment today where we get GDP. We got to

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<v Speaker 2>understand that's going to start showing up those GDP numbers too. Right,

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<v Speaker 2>low is as good as it gets.

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<v Speaker 1>So the heart of the matter quickly here, doctor Salmon.

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<v Speaker 1>We're going to come back with you after we get

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<v Speaker 1>the market open. The key thing to me is the

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<v Speaker 1>real wage. Are you suggesting we get a literal negative

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<v Speaker 1>real wage?

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<v Speaker 2>What the real wage discussion is? There's a lot more

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<v Speaker 2>too that. What we've seen is the real wage is

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<v Speaker 2>not reflecting all the productivity gains that we've had and

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<v Speaker 2>wage growth, nominal wage growth is still slowing, so we're

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<v Speaker 2>not seeing the gains of this having fewer workers. So

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<v Speaker 2>we're not like in a shortage economy where the tables

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<v Speaker 2>are turning and workers are getting the upper hand. But

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<v Speaker 2>we're just in an economy that we've got fewer resource,

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<v Speaker 2>fewer workers, you know, kind of adding to it, and

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<v Speaker 2>that's going to show up in a lot of statistics.

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<v Speaker 2>We're used to being bigger.

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<v Speaker 1>Claudia, Sam, please stay with us as we get the

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<v Speaker 1>market opening. Thrilled, we have Claudia Slum of New Center

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<v Speaker 1>Advisors with this. What's the state Claudia that you see

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<v Speaker 1>of what I'm going to call private non government investment,

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<v Speaker 1>which is made up of any number of parts. What

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<v Speaker 1>do you see as a state of investment.

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<v Speaker 2>I have to say, we've you know, big picture, gotten

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<v Speaker 2>some pretty good news on that. So our most recent

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<v Speaker 2>reading on like core goods orders, really it was pretty

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<v Speaker 2>broad based in terms of being a solid reading. Like

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<v Speaker 2>if you look at the data, it's not all just AI,

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<v Speaker 2>it's not all just data centers, right, there is more

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<v Speaker 2>going on in terms of investment. Now, you know, more

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<v Speaker 2>is always better, but I think there's there's a little

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<v Speaker 2>more breadth than maybe the news gets in terms of

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<v Speaker 2>what's happening on the investment side. So investment and still

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<v Speaker 2>holding up, consumer spending still holding up, but it's you know,

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<v Speaker 2>the backdrop is difficult with inflation being hotter. That really

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<v Speaker 2>does you know, cut into the real gains.

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<v Speaker 3>Claudia Ken, the US economy or any economy for that matter,

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<v Speaker 3>grow consistently without population growth.

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<v Speaker 2>So you know, the two ingredients for growth are going

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<v Speaker 2>to be the growth of the labor force and then

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<v Speaker 2>the growth of labor productivity. And so if you get

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<v Speaker 2>down to a place where you're not growing the labor force,

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<v Speaker 2>it is all about productivity, you know, And again with

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<v Speaker 2>the immigration policy such as it is, like growth is

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<v Speaker 2>really going to be held up by labor productivity, Like

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<v Speaker 2>we need AI to really deliver if we're flatlining, if

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<v Speaker 2>we're flatlining labor force growth.

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<v Speaker 1>On Claudia, we got to run here. But we just

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<v Speaker 1>had a fancy guy from HBS and he was talking

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<v Speaker 1>about vibe coding. Does Claudia some vibe code?

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<v Speaker 2>I certainly use the the AI coding to try and

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<v Speaker 2>do some tasks. So frankly, I'm still learning how to

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<v Speaker 2>use the tools, so I'm still faster coding on my own,

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<v Speaker 2>but I think it's important to try it out and

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<v Speaker 2>get better at the at the tools that are out there.

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<v Speaker 1>It sounds like my to do list for April. Yeah,

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<v Speaker 1>Claudia Sam, thank you, thank you, thank you so much

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<v Speaker 1>for your commitment to what we're doing here at Bloomberg Surveillance.

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<v Speaker 1>Can't say enough about her out of Michigan. We didn't

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<v Speaker 1>have time there at Tark Michigan Basketball No, you know

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<v Speaker 1>how about that? Ye, But there it is. Claudia Sam,

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<v Speaker 1>thank you so much, and we really look forward to

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<v Speaker 1>a job's day and a fed day. Commitment from her.

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<v Speaker 1>Dector Samas with New Sentry advisors,