Latest news with #ClaudiaSahm
Boston Globe
3 days ago
- Business
- Boston Globe
U.S. hiring likely slowed to 130,000 new jobs last month amid uncertainty over Trump's policies
Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up For the most part, though, any damage has yet to show up in the government's economic data. Advertisement The U.S. economy and job market have proven surprisingly resilient in recent years. When the inflation fighters at the Federal Reserve raised their benchmark interest rate 11 times in 2022 and 2023, the higher borrowing costs were widely expected to tip the United States into a recession. Instead, the economy kept growing and employers kept hiring. But former Fed economist Claudia Sahm warns that the job market of 2025 isn't nearly as durable as the two or three years ago when immigrants were pouring into the U.S. job market and employers were posting record job openings. Advertisement 'Any signs of weakness in the data this week would stoke fears of a recession again,' Sahm, now chief economist at New Century Advisors, wrote in a Substack post this week. 'It's too soon to see the full effects of tariffs, DOGE, or other policies on the labor market; softening now would suggest less resilience to those later effects, raising the odds of a recession.'' Recent economic reports have sent mixed signals. The Labor Department reported Tuesday that U.S. job openings rose unexpectedly to 7.4 million in April — seemingly a good sign. But the same report showed that layoffs ticked up and the number of Americans quitting their jobs fell, a sign they were less confident they could find something better elsewhere. Surveys by the Institute for Supply Management, a trade group of purchasing managers, found that both American manufacturing and services businesses were contracting last month. And the number of Americans applying for unemployment benefits rose last week to the highest level in eight months. Jobless claims — a proxy for layoffs — still remain low by historical standards, suggesting that employers are reluctant to cut staff despite uncertainty over Trump's policies. They likely remember how hard it was to bring people back from the massive but short-lived layoffs of the 2020 COVID-19 recession as the U.S. economy bounced back with unexpected strength. Still, the job market has clearly decelerated. So far this year, American employers have added an average 144,000 jobs a month. That is down from 168,000 last year, 216,000 in 2023, 380,000 in 2022 and a record 603,000 in 2021 in the rebound from COVID-19 layoffs. Advertisement Trump's tariffs — and the erratic way he rolls them out, suspends them and conjures up new ones — have already buffeted the economy. America's gross domestic product — the nation's output of goods and services — fell at a 0.2 percent annual pace from January through March this year. A surge of imports shaved 5 percentage points off growth during the first quarter as companies rushed to bring in foreign products ahead of Trump's tariffs. Imports plunged by a record 16 percent in April as Trump's levies took effect. The drop in foreign goods could mean fewer jobs at the warehouses that store them and the trucking companies that haul them around, wrote Michael Madowitz, an economist at the left-leaning Roosevelt Institute.
Mint
16-05-2025
- Business
- Mint
The US-China trade truce doesn't solve the Fed's headache
The agreement between the US and China to roll back their respective tariffs for 90 days has led to renewed optimism that the worst of America's trade wars is over. I'm not seeing the 'breakthrough": There's still plenty of scope for economic damage that the Federal Reserve will struggle to contain. First, the rollback might not last and doesn't change the broad contours of the story. Tariffs will still be high, fueling inflation and stunting growth. The Yale Budget Lab estimates that the average effective tariff rate will be 17.8%, up from about 2.5% when President Trump started his second term. That's enough to increase the price level and the unemployment rate by about 1.7 and 0.35 percentage points, respectively. Also Read: Tariff whiplash: The US truce with China offers hollow relief Second, the 90-day pause merely extends the corrosive uncertainty surrounding the US administration's policies. This will lead businesses to delay purchase, investment and hiring decisions. Third, the Fed will still face the difficult choice between fighting inflation and supporting economic growth. In the near term, it'll have to be patient, holding interest rates steady and watching inflation expectations—even as this raises the president's ire. As a result, it will probably be slow in responding to weakening in the economy. The Fed has little choice. When it doesn't know which way the risks skew, it must wait for more information. Right now any major move would have only a 50/50 chance of a positive outcome. The central bank's predicament is particularly difficult given that inflation has overshot its 2% target since 2021. This makes any attempt to prioritize growth fraught, because it increases the probability that inflation expectations will become unanchored, triggering an upward price spiral that would be hard to contain. That's an asymmetric risk the Fed can't afford to take. When inflation expectations rose in the 1970s, it took punishingly high interest rates and a deep economic downturn to get them back under control. Also Read: Will a US-China trade agreement work? Don't count on it Being patient, though, also entails risks. As the economist Claudia Sahm has noted, weakness in the US labour market can also be self-reinforcing, as layoffs hit spending and engender more layoffs. Historically, the unemployment rate has tended to rise sharply after crossing the threshold of a 0.5 percentage point increase, leading to recession. Last year proved to be an exception, because the rise in unemployment resulted from labor force growth outpacing strong hiring. This time will be different: Hiring will slow, while deportations and a border crackdown have depressed labour force growth. What, then, will the Fed do? It probably won't get much clarity on inflation, growth and trade policy until September. If at that point it needs to reduce rates, it'll have to move aggressively to arrest the deterioration in the labor market—especially given that the tariff-induced supply shock will undermine the effectiveness of monetary policy. Also Read: Powell versus Trump: Why Fed independence matters in times of turmoil If the US enters a recession, I'd expect rate cuts of 200 to 300 basis points. The Fed shouldn't be faulted here. In contrast to the pandemic, when it was too slow in responding to inflationary pressures (thanks in part to a flawed monetary policy framework), this time around it's grappling with the fallout of trade policies that are beyond its control. One can only sympathize and hope that clarity about the proper course emerges soon enough that the Fed can keep the economy afloat. ©Bloomberg The author is a Bloomberg Opinion writer.
CNBC
07-05-2025
- Business
- CNBC
The Fed will have to get back in the business of forecasting, says New Century's Claudia Sahm
Claudia Sahm, New Century Advisors chief economist, joins 'Power Lunch' to discuss the hawkish tone of the Fed following its decision to leave rates unchanged.
CNBC
07-05-2025
- Business
- CNBC
Watch CNBC's full interview with The Exchange's Fed Panel
Harris Financial Group's Jamie Cox, New Century Advisors' Claudia Sahm, TD Cowen's Chris Krueger and WSJ's Greg Ip, joins 'The Exchange' to discuss the current macroeconomic picture before the Federal Reserve makes its May rate decision.
CNBC
07-05-2025
- Business
- CNBC
Inflation news should point Fed in more dovish direction, says WSJ's Greg Ip
Harris Financial Group's Jamie Cox, New Century Advisors' Claudia Sahm, TD Cowen's Chris Krueger and WSJ's Greg Ip, joins 'The Exchange' to discuss the current macroeconomic picture before the Federal Reserve makes its May rate decision.
