The American Economy in the Shadow of Black Swans: Hurricanes, Strikes, and an Uncertain Future

"A once-in-a-century economic shock"—phrases like these seem to be increasingly common in today's media. This time, the catalyst is two hurricanes, Helene and Milton, which have struck Florida in succession, forcing the state to initiate its largest evacuation operation since Hurricane Irma in 2017. It's hard not to think of a domino effect, where the fall of the first tile leads to unpredictable consequences.

The direct impact of the hurricanes is apparent: the paralysis of the labor market, rising commodity costs, and climbing prices for food and energy. But this is just the tip of the iceberg. The original text mentioned the sluggishness of the US labor market this year, as well as Powell's unprecedented first reduction of 50 basis points, and repeatedly emphasized that subsequent interest rate cuts will depend on employment conditions. It's like a patient who, under a seemingly healthy exterior, hides severe internal injuries. Employment is the "internal injury" of the American economy.

The non-farm data for September seemed to show a recovery, with the unemployment rate dropping to 4.1% and employment growth reaching the highest increase in six months. However, this is more like a "last gasp." Just a few days before the data was released, a major strike broke out at US ports, involving 45,000 workers and affecting about a quarter of the country's international trade and about 60% of port shipping volumes. If we consider the upstream and downstream industrial chains, the total number of affected workers could reach 100,000. Imagine, the economic lifeline of a country is actually being strangled by a strike— isn't that a dangerous signal?

The strike, combined with the hurricanes, has exacerbated the impact on employment. It's like a person who is already weak and then suffers a double blow; the consequences are predictable. Morgan Stanley predicts that the hurricanes will lead to an increase in unemployment benefit claims, and this impact will be a long process. What's more worrying is that the employment statistics standards of the US Bureau of Labor Statistics are very low, considering anyone who has worked at least one hour during the reference period as employed. Even with such a low threshold, the job market still shows no significant improvement, which is enough to illustrate how bad the real situation of the US labor market is.

Hurricanes not only reduce job positions and increase the number of unemployed, but also have a huge impact on consumption. Who can afford to consume when they can't even keep their jobs? It's like a vicious cycle: sluggish employment leads to low consumption, and low consumption further drags down the economy.

These figures will become important considerations for the Federal Reserve's subsequent interest rate cuts. With insufficient employment and increasing unemployment benefit claims, if the Federal Reserve continues to control the pace of interest rate cuts, life for the common people will become even more difficult. If consumption doesn't pick up and inflation doesn't go down, with the labor market remaining sluggish, the American economy will face greater challenges.

The resilience of the American economy has been overestimated:The superficial prosperity masks deep-seated structural issues, such as the widening wealth gap, the hollowing out of the manufacturing industry, and an over-reliance on the financial sector. Hurricanes and strikes have only revealed the tip of the iceberg of these problems, and the U.S. economy may face greater challenges in the future.

The Federal Reserve's monetary policy options are limited:

Consecutive interest rate cuts can stimulate the economy in the short term, but in the long run, they may lead to inflation and asset bubbles. The Federal Reserve needs to find more effective policy tools to cope with downward economic pressure.

The interconnectivity of the global economy exacerbates the fragility of the U.S. economy:

In the context of globalization, economic fluctuations in any country can have an impact on others. The difficulties of the U.S. economy may increase the uncertainty of the global economy.