Episode summary
The Long View: Claudia Sahm - Thinking Through Scenarios in a Whiplash Economy
The Long View
· · 59 min · Hosts: Ben Johnson, Christine Benz, Amy Arnott · Guests: Claudia Sahm
Summary
Claudia Sahm argues that the U.S. economy is being buffeted by a series of supply shocks rather than a normal demand cycle. She points to pandemic-era disruptions, tariffs, wars abroad, immigration swings, and the early effects of AI as forces that can raise prices and slow growth at the same time. In that setting, she says investors and policymakers should think less in terms of a single base case and more in terms of scenario analysis and risk management.
On inflation and interest rates, Sahm says the Fed is likely to stay patient. Even with gas prices, tariff effects, and inflation still above target for years, she thinks the next move is more likely a cut than a hike, but only after the data show clearer progress. She argues that the Fed is unlikely to get ahead of AI-driven productivity gains because the transition could be noisy, with higher capital spending and uneven labor-market effects before any disinflationary payoff arrives.
She also revisits the Sahm Rule and says recent labor-market patterns have made recession signals harder to read. Labor-supply changes from immigration and participation shifts have distorted unemployment and payroll data, which is part of her broader warning that official statistics are becoming noisier just as they are most needed.
Key takeaways
- Sahm says the economy is in a "whiplash" phase where repeated supply shocks, not ordinary demand swings, are driving inflation and growth.
- Sahm thinks the Fed is more likely to hold rates steady or eventually cut than to hike, because inflation is still above target and shocks are unresolved.
- Sahm says AI is probably disinflationary over the long run, but near-term data may show higher electricity costs, capex, and labor-market disruption.
- Sahm says the Sahm Rule was designed as a simple recession trigger, but labor-supply shocks have recently made it less reliable as a standalone signal.
- Sahm warns that budget cuts and weaker survey quality are making U.S. economic data noisier, not more trustworthy.
Notable quotes
“It really is part of thinking about I said this whiplash economy, thinking about the supply shocks because what's happening is these supply shocks have the ability to rewire the fundamentals of the economy”
“I think it is going to be so hard for the Fed to move ahead of the data like because you could have the you know timing really matters”
“over a long time horizon I'm I'm pretty positive on the technology. Again, it ha it has all the makings of you know what we call a general purpose technology”
“If it's a half a percentage point increase or more, you're in the early months of a recession. That historically had been the case”
How the episode opens
Please stay tuned for important disclosure information at the conclusion of this episode. Hi and welcome to the long view. I'm Amy Arnot, portfolio strategist for Morning Star. And I'm Ben Johnson, head of client solutions for Morning Star.
Our guest on the podcast today is Claudia S. Claudia is chief economist at New Century Adviserss, the founder of SAM Consulting, and a regular contributor at Bloomberg Opinion. She has policy and research expertise in macroeconomics, consumer spending, and household finance.
She created the sound rule, an automatic trigger for stimulus payments in recessions. Previously, she was a section chief at the Federal Reserve where she oversaw the survey of household economics and decision-making. Before that, she worked for 10 years on the staff's macroeconomic forecast.
She was a senior economist at the Council of Economic Advisors. She holds a PhD in economics from the University of Michigan and a bachelor's degree in economics, political science, and German from Dennis University. Claudia, welcome to the Long View.
Oh, I'm so excited to be here today. Thank you. We wanted to start out by talking a little bit about your background.
You went to the University of Michigan for your PhD and I'm curious, how did you end up working at the Federal Reserve right after you finished your PhD in 2007? So Michigan has a very strong program in macroeconomics, but in particular in applied macroeconomics. So really, you know, research studying the Fed and kind of what's happening in the the economy.
Michigan, I also benefited from having a lot of training in how to run surveys. So this idea of you know economists we love to use data but I was also trained in how to go create data how to try and get some of the economic concepts that are hard to you know find in in the existing data.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- supply shocks
- sahm rule
- fed holding pattern
- whiplash economy
- tariffs
Companies and tickers mentioned
- New Century Advisors
- Sahm Consulting
- Bloomberg
Watch the episode
Watch “The Long View: Claudia Sahm - Thinking Through Scenarios in a Whiplash Economy” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Long View, this episode and its artwork belong to Morningstar, Christine Benz - Director of Personal Finance and Retirement Planning, Ben Johnson - Head of Client Solutions, Amy Arnott - Portfolio Strategist. Octagon is not affiliated with the show; this page is an independent summary.
