Former Federal Reserve Economist: Economic Data May Be Distorted, Fed Could Misjudge Situation
BlockBeats News, August 3rd - Former Federal Reserve economist and creator of the Sahm Rule, Claudia Sahm, stated that if the Federal Reserve continues to overlook signals from the grassroots economy in the long term, it may misjudge the economic situation due to distorted macro data.
Sahm pointed out that the current resilience shown in U.S. consumer data is not mainly due to household wealth growth, but more so because families are taking on more debt and reducing their consumption standards to maintain their livelihoods. The latest Federal Reserve Beige Book shows that nearly half of the regional Fed banks have observed consumers using credit cards, small loans, and other means to cover daily expenses.
At the same time, grassroots consumer pressure continues to rise, with some consumers in certain regions reducing their consumption of high-priced food due to high inflation. The demand for food assistance faced by charities even exceeds levels seen during the financial crisis and the pandemic.
Regarding the job market, Sahm mentioned that there is a disconnect between official low unemployment rate data and the actual experience of workers. Federal Reserve interviews have shown that some workers describe the current job environment as more about "survival" than "stability." Due to concerns about economic uncertainty, employees are less willing to change jobs and choose to stay even in the face of stagnant wages.
Sahm warned that although there is increasing economic pressure at the grassroots level, some companies have begun proactively raising wages due to the rising cost of employee livelihoods, which could reintroduce inflation risks. She believes that as a data-driven institution, the Federal Reserve should not rely solely on macroeconomic statistics but needs to pay attention to the real sentiments of ordinary families regarding prices and employment. Otherwise, the Fed may miss crucial signals of economic changes.
