Renowned economist Claudia Sahm, the inventor of Sahm’s Rule, offered her perspective on the complex economic landscape facing the Federal Reserve. As the central bank navigates through a potential easing cycle, various factors including labor strikes and natural disasters are complicating the interpretation of economic data.

What Happened: Sahm highlighted the potential impact of ongoing strikes on labor market data. “If the strike would go on, that can be relatively easy to see in the data,” she explained in a recent interview with CNBC Overtime.

The economist drew parallels to recent hurricane events, noting the challenges in isolating their effects on labor market statistics. “We’ve been dealing with [hurricanes] the last couple months, trying to parse those in and out of the labor market data,” Sahm stated.

Despite these potential disruptions, Sahm suggested that the current month’s data might be relatively “clean,” free from major events that could skew interpretation. However, she emphasized 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 noted. 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 poised to be 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 warned of potential complications, 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.”

Why It Matters: 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.

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Image via Dall-E 3

This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote