May 2, 2025 • 7 mins
New Century Advisors chief economist and former Federal Reserve economist Claudia Sahm discusses the latest jobs data and the likelihood trade tensions and the current state of the economy could lead to a recession. She speaks with hosts Tom Keene and Paul Sweeney
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. Joining us now is
someone who's been much beligned and has been fearless in
her academics of saying, you know what, I'm associated with
the dread at our word recession, but I don't see
it out there. Claudia sam has nailed that call. She's
(00:22):
chief economist at New Century As Advisors, and she joins
us here this morning. Claudia, my distant memory is Jeffrey
Frankel at Harvard saying, Okay, there's a jobs mandate, there's
an interest rate inflation mandate, but real GDP and maybe
distant nominal GDP really matter. Can a dearth of GDP
(00:47):
shift the labor market and shift the Fed?
Speaker 2 (00:50):
Well? Absolutely, I mean these are all growth and employment
are absolutely tied together, not necessarily quarter by quarter. And
I think you know, if you're referring to the first quarter,
the small decline in GDP, like there is a lesson
from that.
Speaker 3 (01:04):
But it is not that we are falling into a recession.
Speaker 2 (01:06):
It's that we are facing a major cost shock with
an increase in tariffs and businesses we're responding to that
in consumers that cause a lot of disruption in the numbers.
So that's one example where you know that first quarter
GDP decliinent is giving us a sense of where we're headed.
But it's more about where we're headed working through these tariffs,
which eventually will have some effects on employment even if
(01:29):
we're not seeing them today.
Speaker 1 (01:30):
Okay, way from then the PM recession mania, are you
modeling out four percent year over year CPI? Is that
in the New Century Advisor's realm of thinking?
Speaker 2 (01:44):
So I think that's absolutely in the realm of possibility,
and certainly I feel very that we are facing slow
in growth, rising on employment and faster inflation.
Speaker 3 (01:56):
Now magnitudes are going.
Speaker 2 (01:58):
To be absolutely crucial, and I think really big question
for the Fed in particulars they think about their policy
is the duration right If this is if we're just
seeing a kind of a blip a move up in inflation,
the recedes as that we adjust to the tariffs or
maybe the jobs go away.
Speaker 3 (02:14):
But that that's like a key question that we are
far from having the answers to see this.
Speaker 1 (02:18):
You see how she does this at the University of
Michigan and they get on the X axis. She's looking
at the duration. Yeah, she's looking at the lengthiness at
the lengthiness of the Magnetude Claudia.
Speaker 4 (02:28):
Can this economy avoid recession? I mean again, I see
a jobs number today, I think about Tom's theory the
companies and people adapt and this economy avoid recession absolutely.
Speaker 3 (02:40):
I mean, we have all the ingredients of a recession.
Speaker 2 (02:43):
We have. We have the tariffs, we have the slid immigration,
we have the federal cuts and other factors.
Speaker 3 (02:48):
We have massive uncertainty.
Speaker 2 (02:49):
Like really, if I mean this, we are pointed towards
a recession, and yet we are in the very early stages.
And we see sometimes of businesses to build some buffers,
a big inventory built getting ahead of the tariffs.
Speaker 3 (03:02):
I mean, we're nobody.
Speaker 2 (03:04):
Wants to lay off workers, Nobody wants to cut back
on their spending, right like people are trying to make adjustments.
So but what needs to happen is these aggressive policies
a bit and put in place these cost shocks. They
have got to be dialed back and really quickly. I mean,
there's some damage done already that we're going to deal
with costs as this year goes on. But magnitudes matter,
(03:25):
and avoiding the recession, and particularly the recession dynamic is
when that shock it just spreads through the whole economy,
and we really have got to nip this in the bed,
in the bud before you have those feedback effects take cold.
Speaker 4 (03:38):
When you see a lot of companies again, we're probably
seventy percent away through the earning cycle here, a lot
of companies are, as you said, either pulling their guidance,
or if they still have guidance, they're saying.
Speaker 3 (03:50):
We're concerned here.
Speaker 4 (03:51):
We've got a lot of variability around our businesses. What
do you take away from some what you heard from
corporate America so far.
Speaker 3 (03:58):
So clearly are big shocks. There's a lot of uncertainty.
Speaker 1 (04:02):
I think.
Speaker 2 (04:02):
The other place I found pretty interesting reading this time
was going through the Fedspage book, which has a similar
kind of talking to business context, talking to nonprofits in
the communities, and you just you're over and over again
contingency planning, getting ready like potentially cutting ours potential but
not there yet. But it is so clear that a
massive amount of time and energy is being spent on this.
(04:24):
What do we do when it hits Claudia.
Speaker 1 (04:26):
You've sat in the offices at the FED, folks. This
is not the romance of some big fancy table in
the Echos building. This is the meat and potatoes that
doing PhD work at the greatest central bank in the world.
And the answer is you guys like smooth curves, gradual change.
We just had Jeans Soroka in of the Port of
Los Angeles, flew in just to talk to John Tucker Claudia.
(04:49):
He sees a jump condition, a discontinuous event at his port.
How do what fancy people like you fold into reality?
Long shortman in truckers in Los Angeles.
Speaker 2 (05:03):
Right, it's a moment where to some extent you have
to look at the models, but put them to the side. Right,
there's no macroeconomic model that's going to give you the
kind of discontinuities, the kind of very sharp turns that
you're seeing in the data.
Speaker 3 (05:18):
I mean, that's why we should expect.
Speaker 2 (05:19):
We had this massive surge in imports that had a
big effect on the composition of GDP in the first quarter.
We're going to probably see a snapback because I mean,
we from that shipping, those imports are going to the floor.
So don't come to me and say, oh, GDP is
three percent in the second quarter, all is great, like
that could be under the hood telling us.
Speaker 3 (05:38):
We've got a big problem in.
Speaker 2 (05:39):
The second half of this year, so you have to,
like you have to respond to those discontinuities, particularly when
you can tie them back to a store.
Speaker 3 (05:47):
There's noise all the time that you want to look through.
Speaker 2 (05:50):
This isn't noise, right, Like we're responding to something big,
and then that's why that outlook is important in the judgment.
Speaker 1 (05:57):
Claudia, with great respect for your impact than American economics.
I think everybody wants to know this unfair question, but
I'm going there on this strange Friday. What is your
counsel to Hasset at Pennsylvania Vestent of Yale and Greer
our trade representative as they counsel the president. These guys
(06:19):
are legit academics. What should they do with this unique presidency?
Speaker 2 (06:24):
They need to slow it down, right I you know,
I disagree with the policies they're pursuing, but I'm strong
I'm very concerned about the way in which they're being pursued.
This is very aggressive, this is very fast, and it
can potentially cause a lot of damage.
Speaker 3 (06:39):
So even if you're in the spirit.
Speaker 2 (06:41):
Of having more industrial policy, having higher tariffs, a smaller
government like there's a way.
Speaker 3 (06:46):
To do this that doesn't cause.
Speaker 2 (06:48):
Maximal damage, right, And I'm very concerned, and I think
the White House and you hear some messaging from them
that you know, tarifrates aren't sustainable with China and we're
doing negotiations, but like we need to see some action
that actually pulls back these costs before it's too late.
Speaker 1 (07:04):
Doctor sum Thank you so much, Claudius. I'm joins us.
The New Century advised us here to summarize paul pretty
buoyant report.
Speaker 4 (07:11):
Yeah, I think so. I'm just looking at it here,
and I'm looking at the wages Tom. Maybe not on
an annualized basis. Wage growth still pretty solid at three
point eight percent growth on an annualized basis
Bloomberg Audio Studios, podcasts, radio news. Joining us now is
someone who's been much beligned and has been fearless in
her academics of saying, you know what, I'm associated with
the dread at our word recession, but I don't see
it out there. Claudia sam has nailed that call. She's
(00:22):
chief economist at New Century As Advisors, and she joins
us here this morning. Claudia, my distant memory is Jeffrey
Frankel at Harvard saying, Okay, there's a jobs mandate, there's
an interest rate inflation mandate, but real GDP and maybe
distant nominal GDP really matter. Can a dearth of GDP
(00:47):
shift the labor market and shift the Fed?
Speaker 2 (00:50):
Well? Absolutely, I mean these are all growth and employment
are absolutely tied together, not necessarily quarter by quarter. And
I think you know, if you're referring to the first quarter,
the small decline in GDP, like there is a lesson
from that.
Speaker 3 (01:04):
But it is not that we are falling into a recession.
Speaker 2 (01:06):
It's that we are facing a major cost shock with
an increase in tariffs and businesses we're responding to that
in consumers that cause a lot of disruption in the numbers.
So that's one example where you know that first quarter
GDP decliinent is giving us a sense of where we're headed.
But it's more about where we're headed working through these tariffs,
which eventually will have some effects on employment even if
(01:29):
we're not seeing them today.
Speaker 1 (01:30):
Okay, way from then the PM recession mania, are you
modeling out four percent year over year CPI? Is that
in the New Century Advisor's realm of thinking?
Speaker 2 (01:44):
So I think that's absolutely in the realm of possibility,
and certainly I feel very that we are facing slow
in growth, rising on employment and faster inflation.
Speaker 3 (01:56):
Now magnitudes are going.
Speaker 2 (01:58):
To be absolutely crucial, and I think really big question
for the Fed in particulars they think about their policy
is the duration right If this is if we're just
seeing a kind of a blip a move up in inflation,
the recedes as that we adjust to the tariffs or
maybe the jobs go away.
Speaker 3 (02:14):
But that that's like a key question that we are
far from having the answers to see this.
Speaker 1 (02:18):
You see how she does this at the University of
Michigan and they get on the X axis. She's looking
at the duration. Yeah, she's looking at the lengthiness at
the lengthiness of the Magnetude Claudia.
Speaker 4 (02:28):
Can this economy avoid recession? I mean again, I see
a jobs number today, I think about Tom's theory the
companies and people adapt and this economy avoid recession absolutely.
Speaker 3 (02:40):
I mean, we have all the ingredients of a recession.
Speaker 2 (02:43):
We have. We have the tariffs, we have the slid immigration,
we have the federal cuts and other factors.
Speaker 3 (02:48):
We have massive uncertainty.
Speaker 2 (02:49):
Like really, if I mean this, we are pointed towards
a recession, and yet we are in the very early stages.
And we see sometimes of businesses to build some buffers,
a big inventory built getting ahead of the tariffs.
Speaker 3 (03:02):
I mean, we're nobody.
Speaker 2 (03:04):
Wants to lay off workers, Nobody wants to cut back
on their spending, right like people are trying to make adjustments.
So but what needs to happen is these aggressive policies
a bit and put in place these cost shocks. They
have got to be dialed back and really quickly. I mean,
there's some damage done already that we're going to deal
with costs as this year goes on. But magnitudes matter,
(03:25):
and avoiding the recession, and particularly the recession dynamic is
when that shock it just spreads through the whole economy,
and we really have got to nip this in the bed,
in the bud before you have those feedback effects take cold.
Speaker 4 (03:38):
When you see a lot of companies again, we're probably
seventy percent away through the earning cycle here, a lot
of companies are, as you said, either pulling their guidance,
or if they still have guidance, they're saying.
Speaker 3 (03:50):
We're concerned here.
Speaker 4 (03:51):
We've got a lot of variability around our businesses. What
do you take away from some what you heard from
corporate America so far.
Speaker 3 (03:58):
So clearly are big shocks. There's a lot of uncertainty.
Speaker 1 (04:02):
I think.
Speaker 2 (04:02):
The other place I found pretty interesting reading this time
was going through the Fedspage book, which has a similar
kind of talking to business context, talking to nonprofits in
the communities, and you just you're over and over again
contingency planning, getting ready like potentially cutting ours potential but
not there yet. But it is so clear that a
massive amount of time and energy is being spent on this.
(04:24):
What do we do when it hits Claudia.
Speaker 1 (04:26):
You've sat in the offices at the FED, folks. This
is not the romance of some big fancy table in
the Echos building. This is the meat and potatoes that
doing PhD work at the greatest central bank in the world.
And the answer is you guys like smooth curves, gradual change.
We just had Jeans Soroka in of the Port of
Los Angeles, flew in just to talk to John Tucker Claudia.
(04:49):
He sees a jump condition, a discontinuous event at his port.
How do what fancy people like you fold into reality?
Long shortman in truckers in Los Angeles.
Speaker 2 (05:03):
Right, it's a moment where to some extent you have
to look at the models, but put them to the side. Right,
there's no macroeconomic model that's going to give you the
kind of discontinuities, the kind of very sharp turns that
you're seeing in the data.
Speaker 3 (05:18):
I mean, that's why we should expect.
Speaker 2 (05:19):
We had this massive surge in imports that had a
big effect on the composition of GDP in the first quarter.
We're going to probably see a snapback because I mean,
we from that shipping, those imports are going to the floor.
So don't come to me and say, oh, GDP is
three percent in the second quarter, all is great, like
that could be under the hood telling us.
Speaker 3 (05:38):
We've got a big problem in.
Speaker 2 (05:39):
The second half of this year, so you have to,
like you have to respond to those discontinuities, particularly when
you can tie them back to a store.
Speaker 3 (05:47):
There's noise all the time that you want to look through.
Speaker 2 (05:50):
This isn't noise, right, Like we're responding to something big,
and then that's why that outlook is important in the judgment.
Speaker 1 (05:57):
Claudia, with great respect for your impact than American economics.
I think everybody wants to know this unfair question, but
I'm going there on this strange Friday. What is your
counsel to Hasset at Pennsylvania Vestent of Yale and Greer
our trade representative as they counsel the president. These guys
(06:19):
are legit academics. What should they do with this unique presidency?
Speaker 2 (06:24):
They need to slow it down, right I you know,
I disagree with the policies they're pursuing, but I'm strong
I'm very concerned about the way in which they're being pursued.
This is very aggressive, this is very fast, and it
can potentially cause a lot of damage.
Speaker 3 (06:39):
So even if you're in the spirit.
Speaker 2 (06:41):
Of having more industrial policy, having higher tariffs, a smaller
government like there's a way.
Speaker 3 (06:46):
To do this that doesn't cause.
Speaker 2 (06:48):
Maximal damage, right, And I'm very concerned, and I think
the White House and you hear some messaging from them
that you know, tarifrates aren't sustainable with China and we're
doing negotiations, but like we need to see some action
that actually pulls back these costs before it's too late.
Speaker 1 (07:04):
Doctor sum Thank you so much, Claudius. I'm joins us.
The New Century advised us here to summarize paul pretty
buoyant report.
Speaker 4 (07:11):
Yeah, I think so. I'm just looking at it here,
and I'm looking at the wages Tom. Maybe not on
an annualized basis. Wage growth still pretty solid at three
point eight percent growth on an annualized basis
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