Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So here's the latest this morning, investors looking ahead to
Speaker 2: key dates this month, starting with next Friday's payrolls report,
Speaker 2: followed by CPI at a federate decision at the end
Speaker 2: of the month. Claudie Salm of New Century Advisors noting
Speaker 2: the FED Summary of Economic projections isn't living up to promises,
Speaker 2: writing tension has been building around the SEP at the
Speaker 2: pal FED. The FED has long been data driven in
Speaker 2: its decisions, but the complexities of the post pandemic economy
Speaker 2: have led it seemingly to rely on data over forecast.
Speaker 2: Powell even admitted as much at the press conference. Claudia
Speaker 2: Joint just now for more, Claudia, welcome to the program
Speaker 2: and a very happy new year to you. It's good
Speaker 2: to see you once again. How is this complicating decision
Speaker 2: making on the f WEBC Well, I think.
Speaker 3: You know, a real theme of the last FMC meeting
Speaker 3: was how much uncertainty there is about the outlook for
Speaker 3: twenty twenty five, and a lot of that comes from
Speaker 3: policy uncertainty out of fiscal policy.
Speaker 4: But you know, the FED has.
Speaker 3: Increasingly underpower become very, very data driven and it's hard
Speaker 3: to believe it, but I think we're actually going to
Speaker 3: see a year where the data plays an even bigger rule,
Speaker 3: and we already know that that can create a lot
Speaker 3: of unnecessary volatility because it's hard to measure a thirty
Speaker 3: trillion dollar economy in real time with a lot of accuracy.
Speaker 4: So they were going to continue to see this.
Speaker 3: Real overreaction, and we saw this yesterday with the initial
Speaker 3: claims for unemployment data to just you know, these little
Speaker 3: scraps of data we get on how strong, how strong
Speaker 3: labor market is, how hot inflation is.
Speaker 4: You know, so buckle up, well, Claudie.
Speaker 1: This is a reason why people can't liken the moment
Speaker 1: that we're into a dark room with a blindfold on
Speaker 1: with lots of furniture going around and trying not to
Speaker 1: bump into anything because the data is messy. We keep
Speaker 1: talking about distortions, but forecasts have been wrong, and the
Speaker 1: whole concept of transitory is a huge scar over this fed.
Speaker 1: So is there a forecast or an economic model that
Speaker 1: they should be following. And I'm asking you of this
Speaker 1: some rule who has come out and talked about how
Speaker 1: every rule has its options and it's difficult to really
Speaker 1: come up with these.
Speaker 4: Right, Yeah, this is the past.
Speaker 3: Forward and a half year have not been kind to
Speaker 3: rules or rules of thumb or how it's usually in
Speaker 3: the past. But we also can't become hamstrung by a
Speaker 3: mistake or a misjudgment that was.
Speaker 4: Made in twenty twenty one about inflation.
Speaker 3: Right, we have moved forward and there are we've seen
Speaker 3: the economy slowly overtime heal. We're seeing patterns that make
Speaker 3: a lot more sense than they did in the early
Speaker 3: days of the post pandemic recovery. So the FED, yes,
Speaker 3: and that's exactly how it feels in a dark room
Speaker 3: moving We know there's furniture, but part of the Fed's
Speaker 3: job is to help turn the lights on and at
Speaker 3: least chart a path. And yes, that could be redirecting,
Speaker 3: but to just well, you know what we do this
Speaker 3: next year is going to be all about the data
Speaker 3: points we get. That really sets up I think a
Speaker 3: lot of unnecessary volatility, Like the FED is injecting volatility
Speaker 3: because it's saying, just follow those data points, and we
Speaker 3: know we get bounced around by them. So you kind
Speaker 3: of you need have a grand plan in terms of
Speaker 3: how you're working your way through the year. It's it's tricky,
Speaker 3: like the policy uncertainty is real for this year and
Speaker 3: for the FED. So I'm not saying like I have
Speaker 3: an easy solution for them, but now is not the
Speaker 3: time to back away from some of.
Speaker 4: The forward looking the heuristics that we have.
Speaker 1: Mom and Alaria, I would agree with you, and he's
Speaker 1: talked about this as much the whole over data point dependence.
Speaker 1: What patterns are you observing that you think are going
Speaker 1: to be important and prescriptive for what's to come in
Speaker 1: the US economy?
Speaker 3: Right, So I tend to I keep all eyes on
Speaker 3: the labor market and that's such a linchpin to the
Speaker 3: resilient economy we've had in the ongoing recovery. In addition
Speaker 3: to you know, millions of Americans lives really depend on
Speaker 3: their paychecks. And this is one where I worry that
Speaker 3: the FED is somewhat come place. I think they're being
Speaker 3: hyper visional mod inflation, as we know the FED often
Speaker 3: is and should be. But their outlook that most of
Speaker 3: the officials laid out in the last time of economic rejections,
Speaker 3: there's a pretty optimistic one on the labor market and
Speaker 3: basically saying, hey, we're back, We're back to normal. We're
Speaker 3: back in I think Mary Daily even use the words
Speaker 3: kind of an equilibrium. You got one vacancy for one
Speaker 3: unemployed worker, and it's close to what the FED things
Speaker 3: the long run unemployment rate is, and they project that
Speaker 3: to stay with us, like, hey, we've got back to equilibrium.
Speaker 3: We've got back to a good place. We're going to
Speaker 3: stay there. And I think there's a lot of other dimensions.
Speaker 3: You can look at the labor market, particularly the differences
Speaker 3: between the hiring and the firing. When the hiring doesn't
Speaker 3: look so good, the firing looks really pretty great, Like
Speaker 3: that's not typical for a labor market. You know, that's
Speaker 3: in balance, that's in equilibrium. And so I think there
Speaker 3: are some signs and that's why we have to keep
Speaker 3: an eye on it or the places where it doesn't
Speaker 3: make sense. And in other big pieces, we've had a
Speaker 3: big push from the increase in labor supply from the
Speaker 3: immigration into this country, which has been extraordinarily high in
Speaker 3: recent years.
Speaker 4: And that that's turning.
Speaker 3: Or even if we don't have mass deportations, we're not
Speaker 3: going to have a big push from the outside immigration.
Speaker 3: And that's an important that's been an important dynamic of
Speaker 3: the labor market. We're gonna watch it on wine. So
Speaker 3: I don't think things are as calm in the labor
Speaker 3: market as the FED kind of in their latest projection.
Speaker 4: Seems to view.
Speaker 3: And I mean, you know, we're gonna get our first
Speaker 3: taste of the data next week.
Speaker 2: For the with the report IROs come on January tenth.
Speaker 2: Just quickly, Claudia, how unusual would it be for unemployment
Speaker 2: to stabilize at these levels after coming off the lows
Speaker 2: to the extent that they have.
Speaker 3: It would be very unusual to stabilize and hold in
Speaker 3: this place for like the next three years, which is
Speaker 3: essentially what the FED is projecting. But that's saying that
Speaker 3: we're in a good place and we're going to stay there.
Speaker 3: But we have there is a sense that, you know,
Speaker 3: barring a lot of this policy uncertainty, this year twenty
Speaker 3: twenty five really could could be.
Speaker 4: It still could be, but it was don't have to be.
Speaker 3: Like we get to the sustainable place, we work out
Speaker 3: some of the last disruptions, So we'll see.
Speaker 2: I hope you're right. Claudia samp of New Century Advice
Speaker 2: is Claudia, share your time. Thank you a thing we
Speaker 2: all hope Claudius right