“Last Cut Under the Powell Fed” with Claudia Sahm

In the highly anticipated season 5 opener, the guys are joined by Claudia Sahm, Chief Economist at New Century Advisors and architect of the famous “Sahm Rule.” Claudia provides her thoughts on the resilience of the US economy, key elements to be aware of on the unemployment and inflation fronts, Fed rate expectations and whether we are at risk of a policy error, and why she remains cautiously optimistic for 2026.

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Transcript

On the Balance Sheet® S5 E_1 “Last Cut Under the Powell Fed” with Claudia Sahm

 [Vinny, 00:08]

Welcome to On the Balance Sheet, Season 5, Episode 1. What a way to kick off 2026, Zach. We have Claudia Sahm. 

[Zach, 00:26]

Vin, I couldn't think of a better way to start this year. Claudia Sahm, the chief economist from New Century Advisors, founder of Sahm Consulting. She's also known for the Sahm Rule, named after her, which is a very interesting kind of recession indicator, unemployment metric that we'll get into for those uninitiated. She also was a senior economist – for the Council of Economic Advisors to the White House. She spent 12 years as an economist at the Federal Reserve. So, she's got some pretty serious background here in the economic world with policy, with unemployment, inflation, GDP. So, we're going to get into a number of those things as we start the year and really just see what she has to say. And I'm really looking forward to her viewpoint on the world for 2026. 

[Vinny, 01:13]

Yeah, just a great lesson today. So, without further ado, Claudia Sahm. 

[Zach, 01:21]

Welcome to On the Balance Sheet. We are very, very pleased to have a special guest with us today. It's Claudia Sahm, Chief Economist from New Century Advisors. Claudia, how are you doing today?

[Claudia, 01:32]

 Great. So happy to be here. 

[Zach, 01:34]

It's our pleasure. And what we wanted to start out with for our listeners, as we sit here in early 2026, just at a very high level, get some of your thoughts on expectations for unemployment, inflation, GDP, especially in the wake of - we've had some recent releases with CPI, with jobs reports the last few weeks. Can you give us some of your high-level thoughts there before we start to drill down into some more of the details? 

[Claudia, 01:59]

I think at a high level, describing the U.S. economy as resilient – moving forward, but with some areas of concern, I think there's been a lot of questions, in particular, about the labor market. We've seen this very gradual cooling off in terms of unemployment rate rising that's hit people coming into the workforce harder. The problem right now has been very sluggish hiring. And what's a little unusual about this is what we seem to know about economic activities. You look at GDP, retail sales, they've been, really, pretty solid. And despite that, hiring has been pretty weak. Now, there's a lot, and I'm sure we'll talk about different details and different reasons this could be happening, but it is kind of an unusual situation in the economy. It certainly can be tough on some workers. It's not necessarily all bad in terms of big picture, but... But that's something that's been a big question. We went through a period a few months ago where we weren't getting a lot of data on the U.S. economy because the federal government had shut down. And so, we're starting to get that data. And it's a little messier, so it's a little harder to read. But in general, I think we're coming into this year in a relatively good position, one where we have growth that has looked fairly solid. Inflation has been elevated for some time now, but it does show some signs of cooling off, though it's going to be probably pretty gradual over the coming year. 

[Zach, 03:36]

Claudia, within that, I feel like you've mentioned the low hire, low fire market that we're currently in can't necessarily persist. What are your, kind of, thoughts on that? Could you kind of explain that rationale to our listeners? 

[Claudia, 03:50]

Right. Well, I think one thing that's really important to keep in mind, there's a lot of thinking that's like, oh, you know, layoffs are what are the problem in the economy. And truly, when businesses start laying off workers, we've got a real problem, right? Because that typically happens once a recession is frankly already started. So, what we're seeing in this labor market, the problem is not the layoffs. In fact, they're quite low historically. We haven't seen initial claims for unemployment really pick up in any meaningful way. But hiring is very low. And that is a problem because, and it can lead to unemployment rising. You don't have to have layoffs for the unemployment rate to go up. If we just don't have enough jobs being created to keep up with the workers who are coming into the labor force, coming back into the labor force, that over time can get the unemployment rate to rise. And that's what we've seen is a very gradual rise in unemployment rate. So I don't look out at the labor market and see a recessionary dynamic taking hold, but I do see a potential problem that is picking up steam because, again, that low hiring, it hits certain groups of workers harder, like young adults and maybe people who are more on the fringes of the labor market, and in particular, if someone is one of the unlucky that loses their job, long-term unemployment rates have been going up because it's just really hard to get a job. And that could have, you know, effects... on the economy, on our potential for quite some time. 

[Zach, 05:23]

It makes sense. It's a big deal. And I think one of the things we just saw recently was the employment report from December that came out early January. Unemployment – well, the U3 rate actually came down slightly. But over the last few months before that, it had been notching its way a little bit higher, I think up to 4.6. So, can you speak to that too a little bit, Claudia, in terms of does one month make a trend? Are we worried about – the rise and then the kind of the fallback here, like what are your thoughts there? And if you would like, you know, maybe integrate the Sahm rule into that and kind of how you might be viewing it from that perspective. 

[Claudia, 06:00]

Right. So, I think, you know, when we think about the labor market, it's really important to think about this cycle as a whole. I know the pandemic feels like it is far in the rearview mirror, and yet we went through a very disruptive period. And not surprisingly, a pandemic really has deep effects on workers, right? And we've seen those. And the labor market went through a period of mass layoffs early in the pandemic. Then we saw the economy snap back. People were, you know, we had some reluctance of workers to come back into the labor force. Then we ended up with labor shortages. The unemployment rate dove down, back to its pre-pandemic levels very quickly relative to past recessions. We had a job full recovery this time, which was unusual. But then something started to happen. We hit the cycle low for the unemployment rate around the middle of 2023. And since then, the unemployment rate is up a full percentage point. It's been very gradual, but you look back at all the recessions and recoveries in the post-World War II period, we've never seen this. When the unemployment rate is up a percentage point, we've already gone into the next recession, right? And that's the recession indicator that I developed that was named after me, the Sahm rule. It uses relatively small increases in the unemployment rate, so half a percentage point over the prior 12 months, three-month averages, smooth it out. And when the unemployment rate has increased by this half a percentage point, historically, we've been in the early phases of a recession. And then in a recession, the unemployment rate rises two percentage points, three percentage points or more, right? So, it's this idea of early on, small increases in unemployment rate are bad news. Well, that rule... triggered last year because we did have a half a percentage point increase in the unemployment rate. But, you know, you look around, and I said at the time, too, the unemployment rate has risen in a way that's typical of a recession. But the economy is still expanding. We're still adding jobs. GDP is like this is not a recession. And, you know, so but, you know, any any empirical relationship, it can break down like it's not really a rule and like a law of nature or something. But it - but in the past, that unemployment rate, it stabilized. It didn't go down. And then this year, we saw a further gradual increase in the unemployment rate. So again, this is really unusual. I developed this Sahm rule not because I wanted to get into the business of calling a recession, though I am actually pretty active in that now. But it was, it was developed as a call to action for policymakers. My starting place was what are the kinds of policies we should use to fight recessions? They do a lot of damage to families and workers. What could the government just have ready to go as soon as we have clear signs of a recession? And then they just start sending out stimulus checks, enhancing jobless benefits. You know, whatever your, you know, the tools we often use in recessions that Congress has to meet, craft the exact details, and then pass them. So why don't we just be ready to go? Well, then you need a trigger to say, It's a recession. Let's go. And that was the genesis. That's the reason the Sahm rule existed. It was about trying to get policy ready to go when we went into a recession. Okay, so we're not in a recession. I don't see one as imminent, despite the fact that the unemployment rate has risen. But it does cause some questions like, what is, is there a policy that's necessary? What is it that's behind this cooling off? And, you know, I am cautiously optimistic about that hiring rate starting to pick up this year because we've seen the Federal Reserve cut interest rates. Again, at the end of last year, we know that there are tax cuts for households and for businesses that are coming online early this year. I mean, they weren't designed to kind of fight a real recession, but like these are the kinds of things you do when there's a weak labor market, like with a recession, to kind of boost it, get it going again. This isn't a recession that's behind the unemployment rate we're going to kind of quote unquote treat it with the typical, you know, support demand. I'm optimistic this will turn around the hiring rate, but again demand has not been the problem because consumers are outspending, businesses are investing. So, I'm a little concerned that the potential response that policymakers might have to this could be different. You know, anytime we're in a situation where things just look a little different, it's uncomfortable because you're trying to figure out what is going on. What's the solution here? Because that's what we really, at the end of the day, care about. We want the people, if you're out there looking for a job, we want you to have a job. 

[Vinny, 11:00]

Claudia, this is Vinnie here, and thanks again for joining us also so eloquently, kind of explaining the background behind the Sahm rule. I'm sure you've had to do that virtually a million times, but thank you for doing it once again for us. I guess, you know, one of the things I've kind of in my research talking about that low hire, low fire scenario. I think the idea, the notion that, well, if the economy kind of slipped and went the wrong way, that could really create some downside pressure on unemployment rates because if we're not really hiring, you could see firings pick up. What are your thoughts on that? Like is there like true downside risk to that unemployment figure? I mean at four – four, I think now. Right. Is that what the number was for December? 

[Claudia, 11:44]

Mmm-hmmm. Yeah. 

[Vinny, 11:45]

Could we see it move from four, four to five, four over the next period of time? Like we just saw a percent. Do you see that at all? I've seen some economic forecasts of it moving higher. I'm just kind of curious what your outlook is personally for it moving forward. 

[Claudia, 11:59]

So, it's a risk and it's one we should be taking very seriously. I think what's missing for me to to see that as like a likely path, we’d need some event, some disruption, whether it's a correction in the stock market, it's some geopolitical instability, something that, some really bad policy idea that gets pushed through. I mean, there's just, and things, bad things happen all the time, right? But you would need to be an event. But the thing is, we're not, like the labor market has, it's more fragile right now because the hiring rate is really low. So, if for some reason you had an event that started pushing up layoffs a lot, well, then the number of unemployed workers is just going to really start to pile up because you don't have the hiring happening. I mean, it was a concern that I had last year when President Trump came into office. One of his priorities had been to downsize the federal government. I mean, that was something he campaigned on. That was, I mean, like this was not a surprise that this was going to be a priority of the White House. Now, they chose, unlike some federal government downsizing in history, like Senator President Clinton, this White House decided to do it quickly. Right. And so, we had almost federal government payrolls are down almost 300,000 positions this year. OK, so to me, it was pretty risky. I mean, it wasn't necessarily that those were layoffs. And a lot of that was like people doing retirement early. So, they weren't out there looking for work. But it did put some people out into the, well, I need to go find a job. And you did it in a period where hiring was already pretty low. Now, that contributed to the rise in unemployment rate this year. It doesn't cover it all. And we pushed through it. So that kind of an event wasn't big enough to really, like, create a spiral, right? Because in a recession, it's like you get that unemployment rate rising. People are losing their jobs. People start getting worried about losing their jobs. They pull back on their spending. They don't get their wage increases. They don't get their... and then you have a shortfall in demand and it feeds on itself, right? And that's how you go from a half a percentage point increase in unemployment rate to a full three percentage point increase in a short period of time. And so, I don't like minus that event, right? Some bad event that's big enough to really shake confidence of businesses and consumers. Like I don't see the percentage point rise in the unemployment rate this year, but until hiring picks up, we're gonna keep seeing it drift up, right? It is, the hiring is low enough right now that you really have to see it stabilize and get, and I just, like I said, it's my base case that things stabilize. I think there's enough support and particularly, you know, some of the business tax cuts could be enough to get things going. But one thing that often comes up in this discussion about low hire, low fire is, oh, is it all artificial intelligence?

[Vinny, 15:07]

Yeah, that was my next question. 

[Claudia, 15:08]

It’s these new technologies? Because we get that all the time. Yeah. And I mean, I have, it's really, it's, you know, anytime you have something new, it's hard to go find it in the data, right? And make the comparisons. But you, there are government surveys, or private sector surveys, really trying to understand how many businesses are using AI, how are they using it, is it replacing workers? There's a lot more anecdotes out there right now than there are really systematic patterns because the usage, the adoption just isn't as widespread anymore. in terms of thinking about the whole economy. So, when I look at the data, it is very clear that overall in the economy, the hiring rate is very low and you see it across industry. I mean, this is a really big pattern and AI adoption is just not at the place that it's going to be able to explain that big pattern. Now, that could make one worried, right? 

[Vinny, 16:08]

Sure.

[Claudia, 16:09]

Because it's potentially going to, we've heard a lot of companies talk about how they're going to do cost savings because they're going to use AI. And it is a technology that could potentially be, you know, quote unquote, labor saving. So even if it's not the explanation of low hiring right now, it could be a force that... keeps hiring from recovering. And you could have just broadly businesses being uncertain. There's a lot to be uncertain about right now. But one thing you could be uncertain about as a business, like, well, that new technology, maybe I don't need to hire. Maybe I don't need to create these relationships with workers. And so, I'll just hold off. So, it could be in that like holding off. It could be, mean that we're going to be, I mean, maybe we're transitioning into a low hire economy. Maybe we're transitioning into an economy. And then that's a whole new discussion, right? So, but I guess my point is, is I don't think that's what's gotten us to the place we are right now. It could, and it almost certainly is going to have some effect going forward, but it's probably more this has been a really wild ride in the labor market. There's automation that's happened. We did a lot of hiring and firing earlier in the pandemic. And I do think this broader uncertainty that could be coming from lots of things right now may be holding businesses back from hiring. 

[Vinny, 17:32]

Yeah, Claudia, I really appreciate that. There's obviously that narrative out there when you saw a bunch of the headlines with the big layoffs, really in Q4, it was like, well, did companies just really kind of over hire, and they're sort of trimming the fat a little bit? But hiding behind AI, there was sort of that narrative. I just have one last follow-up on the employment stuff. I don't want to give – I hope not to give you a headache here. But really, just all the political stuff aside, on the immigration front, how does that flow through and how should we be thinking about that – in regards to unemployment, because as I understand it, clearly that's inhibiting job creation, as well. And I just, a lot of times we're out speaking with the leaders, CEOs of banks, and they're asking about, how is that influencing the unemployment numbers we're looking at? 

[Claudia, 18:21]

Right. So, we talked about the unemployment rate has been gradually rising this year, recent years. If we look at job creation, gradual is not the adjective that you would want to attach. Job creation had been quite strong for some time during the recovery, and it shifted down this year and probably after we get all the revisions, we'll see it, actually. There was a big downshift last year as well. So that, I mean, job creation is really low. Right. And it's pretty dramatic. And you look at it and you're like, now it's like you look at the job numbers and if you didn't know anything else about the world, you'd be like, whoa, the recession is... here, right? I mean, we have, we have months of like declining payrolls, and and I, and again after all the dust settles and it takes a long time with all the revisions. We could see 2025 that we actually lost jobs in the economy. Now again, we were not in a recession even though the unemployment rate rose gradually, it was gradual and TDP growth solid looks good. At least, you know, what we know right now, it looks pretty good. So, we're not in a recession. So the way that what, and this is where it becomes so important, you know, despite developing an empirical rule based on one data series, unemployment rate, like I am, this is very much a time where you want to look at lots of different pieces of information and kind of triangulate what it's telling you. So, job creation is, the jobs numbers paint a pretty dire picture. But if we understand that, well, okay, immigration, which has swung, I mean, there were big swings in immigration, big, very low in the pandemic. Then it rose quite a lot in the recovery. And then in the past year, it has fallen back. And in fact, some of the latest estimates are that we... These aren't government estimates, but from researchers that we could have like net negative immigration in the United States this year, which would be pretty striking. So, you just had these big movements. Well, if you don't have as many people coming into the workforce, you don't need to, and frankly can't, comfortably be creating as many jobs. Right. We don't have very good measures. The government statistics on immigration take quite a while to get pieced together. But we know the policy and we have a big sense that things have changed. So, some of that dramatic downshift in job creation is almost certainly coming from less immigration. We also have a population that's aging - aging out of the workforce. So that adds on to it as well. And so, then the way it's like, when you look at the jobs number, you're like, how worried should I be about this? Well, then looking at the unemployment rate is a good, is one way to kind of gauge that worry because in the unemployment rate, that's moving up when you have more people looking for work than there are jobs to take, right? And so that's jobs being created. So, it is telling us that that really sharp downshift in job creation, that is a problem. The unemployment rate is rising. So that means the demand for workers is falling faster than the supply of workers, but the supply of workers is part of the story. Gotcha. Right. 

[Zach, 21:56]

Claudia, do you think from the Fed perspective, because I know with our banking clients, they're very interested in unemployment because that usually correlates to some degree with credit losses if those things pick up. But also, when there are those types of credit loss events or higher unemployment, usually the Fed's cutting rates to some degree too. So, do you think in this year or going into this year, is the Fed more concerned about unemployment taking higher or are they more concerned about inflation maybe not cooling as much as they might have liked? 

[Claudia, 22:26]

So the Fed remains – in this place where it's dual mandates in conflict; the unemployment rate has been rising, rising gradually, but it's rising and inflation remains above its two percent target not dramatically above it, but, but above it and it has been since 2021, like it adds up if you miss on inflation it adds up over time on on the level of prices. So i mean, the fed is always of a worried institution. Like they're always concerned about what might be lurking around the corner. We need them to, because they need to be as much ahead of the curve as they can be. But right now, they see inflation as a problem. They see employment as a problem. And, in particular, with both of them, they're really worried about the risks. They're worried about the risk of inflation getting stuck closer to 3% than 2%. And they are worried about the labor market unraveling. And going into, they often talk about a deterioration of the labor market. What that means is a recession. And they want to avoid that. There's no reason to throw us into a recession to squeeze out this last bit of inflation. That's not their goal. But they have two problems and they have one tool. interest rates. And so, this has been a very robust discussion. You hear a lot of disagreement among Fed officials, and I think that's very healthy given the economic situation, in trying to figure out which of the problems is what they should be reacting to. Because if the bigger problem is employment, you should be cutting rates. If the bigger problem is inflation, you should be holding rates or maybe even raising rates. So, two problems, one tool. But what we saw last year is the Fed - There was some disagreement, but they came down on the side of we're more concerned about or we see the risks are greater to the downside in the labor market. And the federal funds rate has been higher. I mean, they raised the federal funds rate quite a bit in 2022, 23, because inflation was very high. So, they're looking at the labor market. They see some risks that it could weaken further. Deteriorate, could even be a possibility and they still had the federal funds rate a little bit high so what the fed has been doing or what they did uh at the end of last year is they were taking restriction out of the economy, they had the fed funds rate high because they were trying to push down on demand, cool off the labor market, get inflation down, and they're looking at the situation last year. They said, you know we we're just not comfortable with putting that pressure. That gradual increase in unemployment rate, that could also be because of the Fed, right? They were trying to cool things off, right? So now they're saying, okay, you know, the they felt the risks to employment were greater. They cut 75 basis points in the funds rate. I think it's pretty clear from messaging from Fed Chair Powell and from other individuals, this was really pushed through as kind of an insurance. And it was more front-loaded. They did 75 basis points, 25 at three meetings in a row. And that sets them up right now to... wait and see, right? It's like they did their work. They pulled your restriction out. They lowered rates. They know there's some fiscal support coming in terms of these tax cuts. The labor market has been slowing, but gradually. I think they're really in a place where they feel like they've gone in, they've done the work to try to stabilize the labor market, help keep us away from those really bad outcomes. But they want to see the progress on inflation. Now, you know, that is going to be a real focus. And frankly, I think it's going to take a little bit of time, probably towards the middle of this year. But I suspect what the Fed will want to do, and it looks like the data may line up in this direction, is they're going to want to be patient, see some real progress on inflation. And then the next rate cut they do, it's a good news cut. Because inflation is coming down, and they can step away even further and bring rates down. But I think they're in their pause right now because they did the work last year. 

[Zach, 26:56]

Okay. And so, Claudia, do you think, as of this morning I think the markets have a cut priced in around June and maybe one more in October or December timeframe? Does that kind of, given what you're seeing, seem like a reasonable expectation, knowing it's always wrong, generally speaking? Yeah. 

[Claudia, 27:12]

Yeah, no, I mean, I had said even at the December meeting, I said that's likely the last rate cut under the Powell Fed. And I think the information we've gotten about the labor market in December and the consumer prices, it reinforces that. There's not this acute... need to cut rates because things are really starting to spiral out. I mean, who knows what happens between now and June, right? Like things can, you know, the the landscape can change pretty rapidly and they'll adjust, but i think what they would like to do is have the next cut be a good news cut and have it be where confident inflation is moving to two percent and it's just the fed tends to when, when they, when they aren't being pushed by some real concerns, you know, like the late, you know, something is really going, uh, potentially going south. They want, they want to build confidence. They want to see, um, multiple months of progress. And so, I think it just, the timeline is something in the middle of the year is when cuts begin again, I think makes sense. But the Fed right now, I mean, they are watching the data. They're going to be very responsive. And, you know, the last two, I mean, there was a cutting cycle at the end of 2024, at the end of 2025. And in both cases, developments in the labor market really got them in motion, right? So, they're going to be watching very carefully to see what happens. So, there might be cuts sooner. 

[Zach, 28:47]

Gotcha.

[Vinny, 28:48]

 Claudia, one question I have for you is regarding affordability. Like, so much has been made about affordability politically and so forth. And I'm not asking to go down a rabbit hole. One thing I'm very curious about is some comments, I think, that were in the wake of the last Fed meeting Chairman Powell made about, well, look, it's going to take some time. For me, somebody who doesn't follow this as closely as you, is this as simple as wage growth and excess of inflation for a long period of time? And I guess more specifically, when he says time, is that three years, five years, 10 years, 12 years? When did, when do we reach a point whereby my purchasing power I had in 2019 is restored? Like, you know, I'm just curious because I know that was something that came out of last Fed meeting and I'm sure you have some thoughts on that. 

[Claudia, 29:37]

Yeah, no, and it's the, I don't have a precise answer for you, but I do, I think there's really something to what Powell said. And in fact, like for some time, I've been really puzzling over a lot of the sentiment surveys of consumers. Yeah. You know, how they view their own finances relative to, say, a year ago. They've just been awful. Yeah. I mean, they've been awful since 2022, right? And then, like, inflation was really high. And it's like, well, that makes sense. And as time went on and inflation has come down and wage growth has still been pretty solid. I mean, we've... turn to real wages. And even making up the list, like, why are people still so downbeat? I mean, there's many things, there's many reasons why sentiment could be downbeat. But I do, you know, and kind of like looking through it, there's been a lot of discussion, kind of the economists versus the people and how we talk about inflation, because, because the Fed's target is inflation. It's the year-over-year change in prices. That's what they're kind of targeting, 2%. Well, you know, so the Fed, that means they kind of let bygones be bygones. Like if they had a whole string of inflation misses, which they have, they don't necessarily say, oh, we're going to make it up, right? We've had many years above 2%, so now we're going to do below 2% because they're just like, that's not a good idea. That's like the way they think about monetary policy. They want to stabilize inflation rates. We get just 2%. Well, but people don't pay in inflation. They pay prices. People do not let bygones be bygones. Like those inflation, the higher inflation it adds up over time, the higher wages add up over time. And I think when I went and looked at the data, one way to kind of square this, is it inflation or is it price level, is, well, look at the change in prices over a longer period of time. Inflation is just a change in prices. We use one year as a convention, but okay, three years, five years, right? Like it's not, but it's so, and in fact, what I found looking at the history of these sentiment measures, how people judge their finance, even though they're asked about the last year, it's much more responsive to what's your real wage growth. So, your wages adjusted for inflation. What's it been over the past five years? Like that seems to be much more like kind of it moves more with the assessment measures than just what's happened in the last year. And I think there's, to me, you know, and having talked with a lot of people, you know, at various times kind of thinking about this sentiment. I mean, I had one woman who I thought really summed it up well. She's like, yeah, you know, I might look better on paper. This was a couple of years ago. So, it's, you know, real wages have turned around. She's like, my family might be better off, but we don't feel better off. It just feels like it could all fall apart. Yeah. Know in in the coming months as things have been so uncertain and so, I think well I mean part of that, seeing something happen over time, is just after a very volatile period which is exactly what the pandemic recession recovery was like, people need to see it like they need to see that they're getting ahead and not just one year but multiple years, and and frankly, over the last five years real wages, real wage growth is up for the median, the typical household is pretty low. So, after I actually went and kind of tried to play with the data and look at it the way Powell was talking about, like a longer period of time, I was like, yeah, no, that actually makes a lot of sense. Like one year is not enough to get people comfortable again. 

[Zach, 33:25]

Claudia, I just have one last question, and then Vin can wrap up, but we're very gracious for your time. I heard earlier in our discussion, heard the word resilient in terms of the economy, perhaps no recession imminent with what we know right now. Are there, outside of like an exogenous event – you know, a shock. Are there a couple of different risks you're looking at saying like, hey, if a couple of these things happen that could happen, that would throw maybe my forecast off? Are there things that you're looking at that you're tracking that might throw this off, I guess is probably a better way to say it. 

[Claudia, 33:59]

So, one of my biggest concerns going into this year is actually a concern I had last year that didn't end up being that big of a problem. So, I'm trying to not, you know, get head faked again. But I do think we're in a period where there's just a lot of policy uncertainty, you know, and the administration has rolled out lots of ideas. We're starting again. I mean, it's early January, and we have a long list of capping credit card rates, buying mortgage-backed securities, keeping institutional investors out of houses. There's a long list. And these are in the spirit of the affordability. Get prices down. But it's coming. The style of this administration has been very... you know, kind of, they even used last year, the adage, the move fast and break things, right? Like flood the zone, get lots of ideas out there. And you could have, you can make an argument for that. Like the change happens when you really, you know, push hard for it, but it also creates a lot of uncertainty, And that was something with, say, the tariffs last year that had gotten a lot of attention is the tariffs changed a lot from day to day and what was happening. Now, I will say businesses, households, markets, financial markets even, weathered the storm pretty well. So, but I do worry about that. It feels to me like a potential risk because it could just be destabilizing. And I do worry that, you know, this is an election year, and politicians want to get reelected. That makes sense. That's part of what they do. And so, I'm a little concerned that some of these policies could move faster than what makes sense for the economics and more on the politics. And I continue to be keeping a watchful eye on the Federal Reserve and its ability to do its job. And when, in setting interest rates, its job is to pay attention to what's the evidence, what's economic conditions, how should we set interest rates? And that's been, there's been a lot of tension between the white house and the fed. 

[Vinny, 36:29]

I hadn’t noticed.

[Claudia, 36:31]

Yeah. And it's, and it's not, you know, it seems to continue to be escalating. So, I'm worried about that. I'm worried about our institutions are one of the reasons we have such a great economy. They can be better, but we've got to be careful in the spirit of improving our institutions, that we don't destroy our institutions. And that's maybe not a this-year story. That kind of damage, it shows up over a long horizon. So that's the kind of stuff, you know, it's not going to be a dull year. We're going to have plenty to try and sift through. And there may be, like I said last year, there was a lot of drama and a lot of concern and we pushed through it. Right. So, it's also important to not just think about what's happening in D.C., but what's happening on the technology front, what's happening on the geopolitics, like it's just, it's a lot to keep an eye on. But I am cautiously optimistic for this year. 

[Vinny, 37:31]

Claudia, no, I mean, you're talking about some of the uncertainty in early last year. We saw it firsthand. So many of the banks that we work with, demand was off and folks were not looking to make, CapEx, it just wasn't going on. And then it started to pick up as the story sort of cleared up a little bit. But no, this has been absolutely great. We are so privileged to have this discussion with you. I know we spent so much time on unemployment, but who better to talk about it with than you? And we would just like, on behalf of DCG, thank you very much for your time today. 

[Claudia, 38:06]

Yeah, thank you so much for having me. I appreciate it. 

[Dana, 38:13]

On the Balance Sheet is a podcast produced by Darling Consulting Group. All views and opinions expressed by the host and guests are solely their own and may not represent those of DCG or the affiliated business. Qualifying any financial or investment references made during the recordings is highly recommended as they may not be reflective of the current markets. More information about Darling Consulting Group can be found by visiting our website at www.darlingconsulting.com or emailing us at info@darlingconsulting.com. Today's music is provided by Michael Ramir and can be found on Mixkit.

The text of this transcript was generated by an artificial intelligence (AI) model, and its organization, grammar, and presentation enhanced by AI, and as such may contain errors or inaccuracies. DCG is not liable for any damages, however caused, that may result from any use of this content.