An ongoing US dockworkers strike could cost the economy up to $4.5 billion daily and shave a half percentage point off of US GDP for the fourth quarter, analysts say.
Some 45,000 members of the International Longshoremen’s Association went on strike Tuesday, temporarily shuttering 36 ports from Maine to Texas. Dockworkers are looking to secure a labor deal with port companies that protects their jobs from automation and raises pay 77% over six years. Negotiations between the union and the US Maritime Alliance, which represents port companies, stalled this summer.
The 14 largest ports affected by the strike handle 25% of US goods imports and 27% of exports, worth 2.8% and 1.9% of US GDP, respectively, according to Goldman Sachs. The most impacted US imports are building materials, European wines, and fruits from Latin America — most of which come through East Coast ports, according to data compiled by Jason Miller, a professor of supply chain management at Michigan State University. For example, more than 80% of fruits imported to the US are shipped through those docks. Meanwhile, cars and auto parts, as well as frozen meats, are among the most affected US exports.
Using base estimates from the 2015 West Coast port strikes calculated by the National Retail Federation and the National Association of Manufacturers, JPMorgan analysts said in a recent note that the shutdown could cost the US economy between $3.8 billion and $4.5 billion daily. And even when the strike ends and ports reopen, it could take the economy a while to recoup those costs.
“It takes three to five days to recover from a one-day shutdown,” Jonathan Gold, National Retail Federation vice president of supply chain and customs policy, told Yahoo Finance earlier this week. “If that goes for a week or two weeks, that compounds, and you’re looking at months for a potential recovery.”
However, most Wall Street analysts and economists are in agreement that the strike will have a modest effect on the national economy in the grand scheme of things.
“The worry is that a major port strike will disrupt supply chains and put upward pressure on goods prices, just as the Fed has finally declared victory against inflation,” wrote Capital Economics analysts Tuesday. “Nevertheless, we think fears around the potential economic impacts are overdone.” Morgan Stanley analysts said in a note this week that the strike would only hit economic growth and boost inflation if it is long-lasting.
RSM chief economist Joe Brusuelas told Yahoo Finance, “There are voices making extreme claims around the labor action that don’t ring true with the condition of the US economy.”
After pandemic-era disruptions, US manufacturers and retailers have also become adept at handling supply chain issues.
“Frequent shocks to supply chains in recent years have left producers more attuned to the risks of running low inventories,” Capital Economics analysts said.
And experts see a low likelihood of the strike stretching beyond a week or two. While the Biden administration has said it does not plan to invoke the Taft-Hartley Act — which would break the strike and force a resolution — observers say the US president will likely step in if the shutdown continues for long.
“[W]e believe the economic impact of a disruption would be too big to ignore for much more than a week given the economy and inflation are key issues in the heavily contested election,” wrote JPMorgan analysts.
Laura Bratton is a reporter for Yahoo Finance.
Click here for the latest economic news and indicators to help inform your investing decisions
Read the latest financial and business news from Yahoo Finance