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