Claudia Sahm: Thinking Through Scenarios in a Whiplash Economy

In this episode of The Long View, host Amy Arnott interviews Claudia Somm, Chief Economist at New Century Advisors and creator of the SOM Rule, about the current 'whiplash economy' marked by a relentless series of supply shocks—from pandemic disruptions and tariffs to the war in the Middle East and AI-driven productivity shifts. Somm emphasizes that these shocks are not only frequent and severe but also fundamentally rewiring economic fundamentals, making traditional recession indicators less reliable. She explains how declining immigration and an aging population have flattened labor market dynamics, rendering monthly payroll fluctuations less indicative of economic distress. The discussion also delves into the Fed’s challenge in navigating inflation expectations amid consumer pain at the pump, while maintaining a patient stance due to stable long-term inflation expectations. Somm raises urgent concerns about underfunded statistical agencies, warning that declining survey quality and staff cuts are eroding the reliability of key economic data like CPI and employment figures. She advocates for increased investment in public statistics and greater diversity in economic thought, reflecting on her 2020 blog post 'Economics is a Disgrace' to highlight the field’s exclusionary culture. Finally, she urges listeners to actively seek out opposing viewpoints to improve scenario planning and decision-making in an increasingly complex world.