Port strike could reignite inflation, with larger economic impact dependent
Port of Miami dockworkers strike near the port entrance and demand a new labor contract, on October 1, 2024 in Miami, Florida.
Giorgio Viera | Afp | Getty Images
A strike hitting ports along the East and Gulf coasts could stoke prices for food, autos and a host of other consumer goods but is expected to cause only modest broader impacts — so long as it doesn’t drag on for too long.
Manufacturers of everything from trucks to toys to artificial Christmas trees face obstacles now that the International Longshoreman’s Association has called a stoppage at major Eastern container and cargo ports.
From a macro perspective, the impact will depend on duration. President Joe Biden, under powers granted by the Taft-Hartley Act, could step in and order an 80-day cooling off period that would at least temporarily halt the stoppage, though there’s little indication he will do so.
That will leave hopes in the hands of negotiators for the union and the U.S. Maritime Alliance that the strike won’t drag on and cause greater hardship for a U.S. economy heading into the critical holiday shipping season.
“Labor action by port workers along the East and Gulf coast of the United States will provide a modest hit to GDP,” said RSM chief economist Joseph Brusuelas, who put the weekly impact at bit more than 0.1 percentage point of gross domestic product and $4.3 billion in lost imports and exports.
“Given that the American economy is on a 3% growth path at this time we do not expect the strike to derail the trajectory of the domestic economy or present a risk to an early and unnecessary end to the current economic expansion,” he added.
Indeed, the $29 trillion U.S. economy has dodged multiple landmines and has been in growth mode for the past two years. The Atlanta Federal Reserve is tracking third-quarter growth of 2.5%, boosted by an acceleration in net exports.
A prolonged work stoppage, though, could threaten that.
Impacted areas
Some of the main industries facing challenges include coal, energy and agricultural products. One rule of thumb is that for each strike day, it takes nearly a week to get ports operating at normal levels.
“The costs of the strike would escalate over time as backlogs of exports and imports grow,” Citigroup economist Andrew Hollenhorst said in a client note. “Perishable products like imported fresh fruit might be first to come into short supply. If the strike extends beyond a few days, shortages of certain production inputs could eventually slow production and raise prices for manufactured goods like autos.”
There are potential buffers, though, to the damage a strike could cause.
For one, West Coast ports are expected to take on some of the freight business that would normally go to the eastern ports. Also, some companies have been anticipating the stoppage and stockpiled ahead of time.
Moreover, pressure on supply chains, exacerbated sharply during the pandemic, has largely eased and is in fact below pre-Covid levels, according to a New York Fed…
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