Renowned economist Claudia Sahm, the brain behind Sahm’s Rule, is sounding the alarm about potential complications in interpreting upcoming economic data. The Federal Reserve is navigating a potential easing cycle, but ongoing labor strikes and natural disasters like Hurricane Helene are adding layers of complexity to the already intricate economic landscape.
In a recent interview with CNBC Overtime, Sahm highlighted the impact of strikes on labor market data, stating, “If the strike would go on, that can be relatively easy to see in the data.” She also acknowledged the challenges of separating the impact of Hurricane Helene from labor market statistics, drawing parallels to other recent hurricane events. “We’ve been dealing with [hurricanes] the last couple months, trying to parse those in and out of the labor market data,” Sahm noted.
Despite these potential disruptions, Sahm suggests that the current month’s data might be relatively clean, free from major events that could skew interpretation. However, she emphasizes the importance of upcoming reports, as they will reflect conditions after the Federal Reserve began its easing cycle. “The data we’re getting comes to us… We measured before the Fed began their easing cycle,” Sahm explained. She added, “We had seen those 50 basis points, so you throw that in the next two [reports], it’s going to be very interesting to get any kind of sign on how their interest rates are affecting the labor market.”
The coming weeks are crucial for economic analysis. With one more job report expected before the next Federal Open Market Committee meeting, analysts will be closely watching for signs of how recent events might impact the data. Sahm issued a stark warning, mentioning the “devastating Hurricane Helene” and ongoing labor disputes. “We have a big port strike finishing its third day,” she added, highlighting the diverse factors that could influence economic indicators. Sahm succinctly put it as, “It’s going to be messy.”
The recent end of a port strike on the East and Gulf coasts, following a tentative agreement, resolved a labor dispute that threatened supply chains. The deal included a significant wage increase and improved conditions, which may influence labor market dynamics. Meanwhile, Hurricane Helene caused extensive damage, affecting utility services and leaving many without power. The upcoming September jobs report is crucial as it may influence the Federal Reserve’s interest rate decisions. Economists predict a slight decline in nonfarm payrolls, which could impact the Fed’s strategy.
