Hillcrest Conversations: Claudia Sahm, Chief Economist, New Century Advisors

**Marlon Weems** (0:02)
Good afternoon on a Friday. Hopefully, everybody is on the other side of their soon-to-be weekend, and maybe having a little bit of lunch. And I am Marlon Weems. I'm the publisher of The Journeyman, and also the founder of the relaunched Hillcrest Strategy. And that's my old research business that I had before, in the before times, before the pandemic. And so what we're trying to do today is take things up a notch. I am really excited and pleased to have a very special guest. And I'm just really looking forward to the conversation. My guest today is Claudia Sahm. And she is an economist. She is the creator of what we know as the SOM Rule. And I'm sure we'll be talking about that a little bit later. Formerly of the Federal Reserve. And I guess currently, she is the chief economist for...
She is the chief economist at SOM Consulting and New Century Advisors. And I am looking forward to a spirited conversation and getting a lot of questions answered in a way that we can all sort of, you know, sort of put it into our daily lives and make use of the information. And with that, I am going to bring on Ms. Claudia Sahm.
Welcome, Claudia. How are you?

**Claudia Sahm** (1:49)
Great. How are you doing today?

**Marlon Weems** (1:52)
I am trying my best to stay cool. I don't know about you, but my air conditioner hasn't turned off all week, so...
So we're just making the best of it here. Thanks so much for coming on. And I really, again, appreciate it. I know you have a busy schedule. So I guess with that, maybe, you know, let's get rolling. I think this week is probably a good place to start. And, you know, I'm like the guy on Morning Joe, I always bring charts.
You know, we got the Consumer Price Index, and we all got the Producer Price Index. And, you know, from what I can tell, it appears that people really got what I think is some sort of positivity in terms of inflation. And, you know, these numbers make it look like maybe inflation is kind of taming a little bit. But I'd really be interested to know what your thoughts are in terms of, you know, what does this week mean? Does it mean we're out of the woods or not?

**Claudia Sahm** (3:09)
So this week does not mean that we are out of the woods. The woods being inflation has been too high, right? And that's not just a this year thing. That's been the case now for five years and counting, inflation has been higher than what we're used to before the pandemic.
And, you know, but we did get some good news this week. There was some relief. It doesn't go far enough. We need to have several months of good news. And I would agree with you that there are probably reasons not to expect quite the headlines we got this week in the coming months. Right there, you know, often in the data, there can be some cats and dogs and some outliers. So I wouldn't I wouldn't project this forward. But it was really important after months of really kind of brutal inflation reports to see thin silver lining. And it wasn't just about energy prices having come down in June. There were also a lot of service sector prices that have been pretty sticky that we saw some improvement on.

**Marlon Weems** (4:11)
So when you say service sector, what kind of jobs are we talking about there? Or what kind of business is?

**Claudia Sahm** (4:18)
Right, so the services, and again, we're putting energy to the side. And for a moment, I think we can put housing to the side. But then you're left with a really big group of what people spend money on, everything from health care, to travel, to financial services, restaurants. I mean, there's really a lot under the hood there.
They are spending where the costs that go into them are often pretty heavy on labor. I mean, that's service providers, it's about the workers providing the service. So it's been the case that we just, in that kind of broad category of goods,