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Claudia Sahm: latest market views
New Century Advisors
Summary
Claudia Sahm is chief economist at New Century Advisors, founder of Sahm Consulting, a Bloomberg Opinion contributor and former Federal Reserve economist, best known as the creator of the Sahm rule recession indicator.
Chorus has 11 views from Claudia Sahm across 3 episodes on Bloomberg Surveillance and Bloomberg Talks since November 6, 2026.
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Wages aren't outpacing inflation, as rising employer health-insurance costs absorb benefit spending.
Inflation has picked back up since the Middle East conflict began, and wage gains have slowed, especially in what reaches workers' paychecks. The employment cost index, unlike average hourly earnings, also counts employer benefit costs, which include health insurance and are rising considerably. Employers that pay higher benefit costs won't pass the same amount on in wages, so take-home pay improvement is limited. Given inflation has risen while wages aren't, she says this is not a recipe for workers getting ahead. Weak hiring also leaves workers little bargaining power, as the quit rate remains low.
“Not in an inflation adjusted sense... the ECI also brings in the cost employers pay for benefits, including health insurance, and those are rising pretty considerably... you just don't see the wage improvements. So I think given the backdrop of inflation has picked back up and wages just aren't rising... is not a recipe of getting ahead here.”at 2:11
Payroll growth stays sub-100k, averaging about 70k this year as labor force growth slows.
Since the start of the year, payrolls have averaged a little under 70,000, with stable monthly readings around that level. Upside surprises have faded each time, so she has been head-faked several times this year and wants to see several months of strength before believing the labor market is accelerating. Structural drivers are behind the lower average: big shifts in immigration policy have changed labor force growth, and an aging workforce is pulling the average down. Demographics mean a few good months would not be enough to lift the average back to the 200,000 levels seen in prior years. Although the improvement over last year is notable, low hiring and low firing leave job seekers with a difficult market.
“So, yes, I think so, at least for now, and it's true. Since the beginning of the year, payrolls have averaged a little under 70,000.”at 3:31
Sustained strong GDP growth needs labor force growth; AI productivity alone can't deliver it.
Asked whether a sustained 6% nominal GDP growth is achievable under current politics, she argues that without a growing labor force it will be hard to consistently deliver those GDP gains. Immigration and labor-force policy are the key structural concerns, more than the cyclical labor downturn. She is optimistic about technology improvements on the horizon, but says stringing together quarter after quarter and year after year of productivity growth is very tough. Policy therefore needs a multipronged approach, and relying on AI to carry strong growth is not the way to go.
“I am optimistic about some of our technology improvements on the horizon, but that is really tough to string together quarter after quarter, year after year improvements in productivity growth... Hanging our hats on AI is not the way to go in terms of really, like, wanting to keep those strong growth numbers.”at 7:26
Wages are not outpacing inflation; rising benefit costs leave little for take-home pay gains.
Inflation picked back up after the Middle East conflict began, while wage growth has slowed, especially in what reaches paychecks. The employment cost index also includes employer benefit costs such as health insurance, which are rising considerably. Employers that absorb those costs do not pass them on in wages, so workers are not getting ahead in an inflation-adjusted sense.
“Not not in an inflation adjusted sense, particularly this year... and we've seen on the the wages side some slowing, particularly in what goes home to people's paychecks.”at 2:34
Sub-100,000 monthly payroll growth is the new normal, driven by labor supply shifts.
Payrolls have averaged a little under 70,000 since the start of the year. Upside surprises in the hundreds of thousands did not hold, and the latest month was under 30,000, but monthly figures have stayed stable around that average. That is a big improvement over the scary numbers at the end of last year. The earlier 100,000-200,000 averages reflected larger labor force growth. Big shifts in immigration policy and an aging workforce now pull the average down, so a single good month would not pull it back up to those levels.
“So, yes, I think so, at least for now. And it's true, since the beginning of the year, payrolls have averaged a little under 70,000.”at 3:58
Labor market has head-faked on acceleration several times; needs more strong months to confirm.
Strong payroll surprises have appeared earlier this year and then faded. The unemployment rate ticked down with participation rising, which is good news, and layoffs are low, but she needs several months of this strength before she is convinced the labor market is accelerating.
“we've seen some big surprises like this earlier in the year and then they ebb away. So I've got to see some months of this before I'm really convinced we're seeing an acceleration of the labor market.”at 9:37
AI productivity gains are too hard to sustain to carry long-run US growth; labor force matters more.
She is optimistic about upcoming technology improvements, but it is hard to string together quarter after quarter and year after year of productivity growth. Without a growing labor force it will be hard to sustain strong GDP gains, so policy needs a multi-pronged approach rather than relying on AI.
“I am optimistic about some of our technology improvements on the horizon, but that is really tough to string together quarter after quarter, year after year improvements in productivity growth... Hanging our hats on AI is not the way to go.”at 11:35
Labor market is low-hire, low-fire; past payroll surprises faded, so more months are needed to confirm acceleration.
Sahm says the labor market has an uncomfortable balance of low hiring and low firing, so job seekers still face a difficult environment, though people holding onto jobs is good. She notes that payroll surprises to the upside have appeared earlier this year and then faded, so she needs several more months of strong data before she is convinced the labor market is accelerating.
“we've seen some big surprises like this earlier in the year, and then they ebb away. So I've got to see some months of this before I'm really convinced we're seeing an acceleration of the labor market.”at 4:25
Bloomberg Surveillance: Instant Reaction: US Adds 165,000 Jobs, Topping All Forecasts ·
Low quit rate means workers lack bargaining power, which keeps wage growth subdued.
Asked why wage growth isn't higher given a tight labor market, Sahm points to the quit rate, which ticked up in JOLTS but remains low. Quitting is how workers gain leverage to demand higher wages, so with few quits, workers lack the bargaining power needed to push wages up.
“it's still pretty low, and that's that's a good sign of the bargaining power. If workers are out there quitting to get better jobs, that's when they have the leverage for the higher wages.”at 5:20
Bloomberg Surveillance: Instant Reaction: US Adds 165,000 Jobs, Topping All Forecasts ·
Without labor force growth, sustaining strong US GDP gains will be hard; the structural labor issue needs policy attention.
Sahm is less focused on the cyclical downturn in the labor market and more worried about structural problems. She argues that without a growing labor force, it will be hard to consistently generate GDP gains, and she links this to immigration and labor force policy, which she thinks may get attention after the election.
“I'm less looking at, you know, the downturn in the labor market, but I am worried about some of the structural pieces of the labor market. And I think without a growing labor force, it's gonna be hard to really consistently have those GDP gains.”at 6:18
Bloomberg Surveillance: Instant Reaction: US Adds 165,000 Jobs, Topping All Forecasts ·
Relying on AI productivity gains to sustain strong growth is not a sound strategy; such gains are hard to string together.
Sahm is optimistic about technology improvements on the horizon, but she argues that sustaining productivity growth quarter after quarter and year after year is very tough. She concludes that policymakers should not hang their hopes on AI to keep growth strong and should pursue a multipronged approach.
“I am optimistic about some of our technology improvements on the horizon, but that is really tough to string together quarter after quarter, year after year improvements in productivity growth... Hanging our hats on AI is not the way to go”at 6:38
Bloomberg Surveillance: Instant Reaction: US Adds 165,000 Jobs, Topping All Forecasts ·
Shows
- Bloomberg Surveillance · 2 episodes
- Bloomberg Talks · 1 episode
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