Claudia Sahm

Sahm notes the -900k/-1M revisions were "not a surprise to the Fed" as preliminary data was known in September. She characterizes the recent January data as "the best possible outcome" with payrolls lifting and unemployment ticking down. The market's fear was that the massive downward revisions indicated the Fed was "behind the curve" on a crashing economy. Sahm clarifies that this is old news and the current data shows stabilization. If the economy is cooling (slowing wages) but not collapsing (positive payrolls), the "Soft Landing" narrative holds. This removes the immediate recession tail-risk, favoring broad equity exposure. LONG. The data supports a Goldilocks scenario where the Fed can cut rates gradually into a stable economy. If the "gradual drift up" in unemployment accelerates into a nonlinear spike (triggering the Sahm Rule for real).

Sahm states, "We still see wage growth slowing, unemployment rate drifting up... labor demand for workers is not keeping up with the supply of workers." A labor market where supply exceeds demand is disinflationary. Slowing wage growth removes the primary sticky inflation threat. This gives the Fed the green light to cut rates to prevent the "gradual problem" from becoming a recession. Bond yields should fall (prices rise) as the market prices in these cuts and the cooling growth outlook. LONG (Buy Bonds / Bet on Lower Rates). If immigration or supply shocks re-ignite inflation, forcing the Fed to hold rates higher for longer.