WEBVTT - Claudia Sahm Talks 2025 Economic Outlook

0:00:02.759 --> 0:00:07.240
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:07.640 --> 0:00:09.920
<v Speaker 2>So here's the latest this morning, investors looking ahead to

0:00:10.000 --> 0:00:12.720
<v Speaker 2>key dates this month, starting with next Friday's payrolls report,

0:00:13.000 --> 0:00:15.720
<v Speaker 2>followed by CPI at a federate decision at the end

0:00:15.800 --> 0:00:18.440
<v Speaker 2>of the month. Claudie Salm of New Century Advisors noting

0:00:18.680 --> 0:00:21.960
<v Speaker 2>the FED Summary of Economic projections isn't living up to promises,

0:00:22.000 --> 0:00:25.239
<v Speaker 2>writing tension has been building around the SEP at the

0:00:25.239 --> 0:00:27.680
<v Speaker 2>pal FED. The FED has long been data driven in

0:00:27.720 --> 0:00:30.680
<v Speaker 2>its decisions, but the complexities of the post pandemic economy

0:00:30.880 --> 0:00:33.320
<v Speaker 2>have led it seemingly to rely on data over forecast.

0:00:33.440 --> 0:00:36.680
<v Speaker 2>Powell even admitted as much at the press conference. Claudia

0:00:36.760 --> 0:00:39.159
<v Speaker 2>Joint just now for more, Claudia, welcome to the program

0:00:39.200 --> 0:00:40.800
<v Speaker 2>and a very happy new year to you. It's good

0:00:40.800 --> 0:00:43.400
<v Speaker 2>to see you once again. How is this complicating decision

0:00:43.440 --> 0:00:45.839
<v Speaker 2>making on the f WEBC Well, I think.

0:00:45.840 --> 0:00:48.360
<v Speaker 3>You know, a real theme of the last FMC meeting

0:00:48.479 --> 0:00:51.159
<v Speaker 3>was how much uncertainty there is about the outlook for

0:00:51.240 --> 0:00:53.440
<v Speaker 3>twenty twenty five, and a lot of that comes from

0:00:53.440 --> 0:00:55.640
<v Speaker 3>policy uncertainty out of fiscal policy.

0:00:55.960 --> 0:00:58.440
<v Speaker 4>But you know, the FED has.

0:00:58.040 --> 0:01:03.880
<v Speaker 3>Increasingly underpower become very, very data driven and it's hard

0:01:03.880 --> 0:01:05.320
<v Speaker 3>to believe it, but I think we're actually going to

0:01:05.360 --> 0:01:07.759
<v Speaker 3>see a year where the data plays an even bigger rule,

0:01:08.120 --> 0:01:10.560
<v Speaker 3>and we already know that that can create a lot

0:01:10.600 --> 0:01:14.480
<v Speaker 3>of unnecessary volatility because it's hard to measure a thirty

0:01:14.480 --> 0:01:17.560
<v Speaker 3>trillion dollar economy in real time with a lot of accuracy.

0:01:17.920 --> 0:01:19.600
<v Speaker 4>So they were going to continue to see this.

0:01:19.600 --> 0:01:22.760
<v Speaker 3>Real overreaction, and we saw this yesterday with the initial

0:01:22.760 --> 0:01:26.400
<v Speaker 3>claims for unemployment data to just you know, these little

0:01:26.400 --> 0:01:29.000
<v Speaker 3>scraps of data we get on how strong, how strong

0:01:29.080 --> 0:01:31.280
<v Speaker 3>labor market is, how hot inflation is.

0:01:31.640 --> 0:01:33.400
<v Speaker 4>You know, so buckle up, well, Claudie.

0:01:33.400 --> 0:01:35.840
<v Speaker 1>This is a reason why people can't liken the moment

0:01:35.840 --> 0:01:38.399
<v Speaker 1>that we're into a dark room with a blindfold on

0:01:38.640 --> 0:01:41.240
<v Speaker 1>with lots of furniture going around and trying not to

0:01:41.280 --> 0:01:44.039
<v Speaker 1>bump into anything because the data is messy. We keep

0:01:44.080 --> 0:01:47.280
<v Speaker 1>talking about distortions, but forecasts have been wrong, and the

0:01:47.280 --> 0:01:50.320
<v Speaker 1>whole concept of transitory is a huge scar over this fed.

0:01:50.440 --> 0:01:53.680
<v Speaker 1>So is there a forecast or an economic model that

0:01:53.720 --> 0:01:56.320
<v Speaker 1>they should be following. And I'm asking you of this

0:01:56.480 --> 0:01:58.520
<v Speaker 1>some rule who has come out and talked about how

0:01:58.600 --> 0:02:02.160
<v Speaker 1>every rule has its options and it's difficult to really

0:02:02.200 --> 0:02:03.280
<v Speaker 1>come up with these.

0:02:03.840 --> 0:02:06.520
<v Speaker 4>Right, Yeah, this is the past.

0:02:06.760 --> 0:02:08.640
<v Speaker 3>Forward and a half year have not been kind to

0:02:08.760 --> 0:02:11.160
<v Speaker 3>rules or rules of thumb or how it's usually in

0:02:11.200 --> 0:02:15.360
<v Speaker 3>the past. But we also can't become hamstrung by a

0:02:15.680 --> 0:02:17.920
<v Speaker 3>mistake or a misjudgment that was.

0:02:17.880 --> 0:02:20.200
<v Speaker 4>Made in twenty twenty one about inflation.

0:02:20.440 --> 0:02:23.079
<v Speaker 3>Right, we have moved forward and there are we've seen

0:02:23.120 --> 0:02:26.280
<v Speaker 3>the economy slowly overtime heal. We're seeing patterns that make

0:02:26.320 --> 0:02:27.919
<v Speaker 3>a lot more sense than they did in the early

0:02:28.000 --> 0:02:31.959
<v Speaker 3>days of the post pandemic recovery. So the FED, yes,

0:02:32.440 --> 0:02:34.519
<v Speaker 3>and that's exactly how it feels in a dark room

0:02:34.560 --> 0:02:36.960
<v Speaker 3>moving We know there's furniture, but part of the Fed's

0:02:37.040 --> 0:02:39.040
<v Speaker 3>job is to help turn the lights on and at

0:02:39.120 --> 0:02:41.760
<v Speaker 3>least chart a path. And yes, that could be redirecting,

0:02:42.400 --> 0:02:45.800
<v Speaker 3>but to just well, you know what we do this

0:02:45.880 --> 0:02:47.519
<v Speaker 3>next year is going to be all about the data

0:02:47.560 --> 0:02:49.600
<v Speaker 3>points we get. That really sets up I think a

0:02:49.639 --> 0:02:53.320
<v Speaker 3>lot of unnecessary volatility, Like the FED is injecting volatility

0:02:53.360 --> 0:02:56.680
<v Speaker 3>because it's saying, just follow those data points, and we

0:02:56.760 --> 0:02:59.440
<v Speaker 3>know we get bounced around by them. So you kind

0:02:59.440 --> 0:03:02.880
<v Speaker 3>of you need have a grand plan in terms of

0:03:02.919 --> 0:03:05.519
<v Speaker 3>how you're working your way through the year. It's it's tricky,

0:03:05.560 --> 0:03:08.400
<v Speaker 3>like the policy uncertainty is real for this year and

0:03:08.400 --> 0:03:10.000
<v Speaker 3>for the FED. So I'm not saying like I have

0:03:10.040 --> 0:03:12.280
<v Speaker 3>an easy solution for them, but now is not the

0:03:12.360 --> 0:03:17.079
<v Speaker 3>time to back away from some of.

0:03:15.400 --> 0:03:19.320
<v Speaker 4>The forward looking the heuristics that we have.

0:03:19.800 --> 0:03:21.520
<v Speaker 1>Mom and Alaria, I would agree with you, and he's

0:03:21.560 --> 0:03:25.080
<v Speaker 1>talked about this as much the whole over data point dependence.

0:03:25.280 --> 0:03:28.360
<v Speaker 1>What patterns are you observing that you think are going

0:03:28.400 --> 0:03:32.000
<v Speaker 1>to be important and prescriptive for what's to come in

0:03:32.040 --> 0:03:33.000
<v Speaker 1>the US economy?

0:03:33.680 --> 0:03:36.320
<v Speaker 3>Right, So I tend to I keep all eyes on

0:03:36.400 --> 0:03:38.760
<v Speaker 3>the labor market and that's such a linchpin to the

0:03:39.080 --> 0:03:42.120
<v Speaker 3>resilient economy we've had in the ongoing recovery. In addition

0:03:42.200 --> 0:03:44.840
<v Speaker 3>to you know, millions of Americans lives really depend on

0:03:44.840 --> 0:03:48.080
<v Speaker 3>their paychecks. And this is one where I worry that

0:03:48.080 --> 0:03:50.360
<v Speaker 3>the FED is somewhat come place. I think they're being

0:03:50.400 --> 0:03:53.280
<v Speaker 3>hyper visional mod inflation, as we know the FED often

0:03:53.360 --> 0:03:57.560
<v Speaker 3>is and should be. But their outlook that most of

0:03:57.560 --> 0:04:00.440
<v Speaker 3>the officials laid out in the last time of economic rejections,

0:04:00.480 --> 0:04:04.440
<v Speaker 3>there's a pretty optimistic one on the labor market and

0:04:04.560 --> 0:04:07.080
<v Speaker 3>basically saying, hey, we're back, We're back to normal. We're

0:04:07.120 --> 0:04:09.440
<v Speaker 3>back in I think Mary Daily even use the words

0:04:09.480 --> 0:04:12.240
<v Speaker 3>kind of an equilibrium. You got one vacancy for one

0:04:12.320 --> 0:04:14.640
<v Speaker 3>unemployed worker, and it's close to what the FED things

0:04:14.680 --> 0:04:17.680
<v Speaker 3>the long run unemployment rate is, and they project that

0:04:17.880 --> 0:04:20.400
<v Speaker 3>to stay with us, like, hey, we've got back to equilibrium.

0:04:20.440 --> 0:04:21.800
<v Speaker 3>We've got back to a good place. We're going to

0:04:21.839 --> 0:04:24.080
<v Speaker 3>stay there. And I think there's a lot of other dimensions.

0:04:24.080 --> 0:04:27.360
<v Speaker 3>You can look at the labor market, particularly the differences

0:04:27.440 --> 0:04:32.120
<v Speaker 3>between the hiring and the firing. When the hiring doesn't

0:04:32.160 --> 0:04:34.479
<v Speaker 3>look so good, the firing looks really pretty great, Like

0:04:34.520 --> 0:04:38.000
<v Speaker 3>that's not typical for a labor market. You know, that's

0:04:38.040 --> 0:04:41.480
<v Speaker 3>in balance, that's in equilibrium. And so I think there

0:04:41.480 --> 0:04:43.440
<v Speaker 3>are some signs and that's why we have to keep

0:04:43.440 --> 0:04:45.160
<v Speaker 3>an eye on it or the places where it doesn't

0:04:45.240 --> 0:04:48.200
<v Speaker 3>make sense. And in other big pieces, we've had a

0:04:48.240 --> 0:04:50.680
<v Speaker 3>big push from the increase in labor supply from the

0:04:50.680 --> 0:04:54.240
<v Speaker 3>immigration into this country, which has been extraordinarily high in

0:04:54.360 --> 0:04:55.400
<v Speaker 3>recent years.

0:04:55.480 --> 0:04:57.160
<v Speaker 4>And that that's turning.

0:04:57.480 --> 0:04:59.279
<v Speaker 3>Or even if we don't have mass deportations, we're not

0:04:59.320 --> 0:05:02.240
<v Speaker 3>going to have a big push from the outside immigration.

0:05:02.360 --> 0:05:04.760
<v Speaker 3>And that's an important that's been an important dynamic of

0:05:04.839 --> 0:05:06.760
<v Speaker 3>the labor market. We're gonna watch it on wine. So

0:05:06.839 --> 0:05:08.680
<v Speaker 3>I don't think things are as calm in the labor

0:05:08.720 --> 0:05:12.000
<v Speaker 3>market as the FED kind of in their latest projection.

0:05:11.720 --> 0:05:13.400
<v Speaker 4>Seems to view.

0:05:13.480 --> 0:05:15.000
<v Speaker 3>And I mean, you know, we're gonna get our first

0:05:15.640 --> 0:05:17.640
<v Speaker 3>taste of the data next week.

0:05:17.440 --> 0:05:20.760
<v Speaker 2>For the with the report IROs come on January tenth.

0:05:20.839 --> 0:05:23.520
<v Speaker 2>Just quickly, Claudia, how unusual would it be for unemployment

0:05:23.560 --> 0:05:26.440
<v Speaker 2>to stabilize at these levels after coming off the lows

0:05:26.440 --> 0:05:27.360
<v Speaker 2>to the extent that they have.

0:05:28.000 --> 0:05:31.240
<v Speaker 3>It would be very unusual to stabilize and hold in

0:05:31.279 --> 0:05:33.640
<v Speaker 3>this place for like the next three years, which is

0:05:33.720 --> 0:05:37.520
<v Speaker 3>essentially what the FED is projecting. But that's saying that

0:05:37.520 --> 0:05:39.600
<v Speaker 3>we're in a good place and we're going to stay there.

0:05:39.920 --> 0:05:43.200
<v Speaker 3>But we have there is a sense that, you know,

0:05:43.279 --> 0:05:45.880
<v Speaker 3>barring a lot of this policy uncertainty, this year twenty

0:05:45.920 --> 0:05:47.880
<v Speaker 3>twenty five really could could be.

0:05:48.040 --> 0:05:50.400
<v Speaker 4>It still could be, but it was don't have to be.

0:05:50.920 --> 0:05:53.200
<v Speaker 3>Like we get to the sustainable place, we work out

0:05:53.200 --> 0:05:56.880
<v Speaker 3>some of the last disruptions, So we'll see.

0:05:57.200 --> 0:05:59.400
<v Speaker 2>I hope you're right. Claudia samp of New Century Advice

0:05:59.480 --> 0:06:01.520
<v Speaker 2>is Claudia, share your time. Thank you a thing we

0:06:01.560 --> 0:06:03.120
<v Speaker 2>all hope Claudius right