Will Another Dock Workers Strike Affect the Economy and Your Wallet?

Another workers strike is looming at U.S. ports and the results could be higher prices and slower economic growth. 

Last year, striking workers forced a brief stoppage in operations at East and Gulf Coast ports that had some analysts worried would have an impact on the U.S. economy.  Now, as negotiations on a labor contract are set to continue, economists are again bracing for a potential port strike that could slow supply chains for everything from cars to coffee.

The United States Maritime Alliance and the International Longshoremen’s Association labor union will reportedly resume contract negotiations on Tuesday, Jan. 7. The dock workers and operators agreed to a pay increase in October that temporarily suspended the short-lived strike. 

Issues remain ahead of a Jan. 15 deadline for a new contract. The negotiations now center on the use of semi-automated cranes at ports, and failure to reach an agreement could result in another port workers’ strike as soon as next week.

Extended Strike Could Add Drag to Economic Growth

While the U.S. economy skirted any serious disruptions from the three-day October strike, a longer stoppage would have a bigger impact, especially on the prices that people pay at stores, wrote BMO senior economist Sal Guatieri.

“A longer walkout would more severely disrupt trade and throw a wrench into the supply chains of American manufacturers and retailers,” wrote Guatieri. “Some ships could be rerouted to the West Coast ports, but at added expense. Delayed shipments and higher freight costs would largely be passed on to consumers, fanning inflation, including food costs.”

Besides just aggravating inflation, another workers’ strike could also hit U.S. gross domestic product.

A workers’ stoppage at East and Gulf Coast ports could potentially cost anywhere from $0.5 billion to $5 billion per day day, according to various economic estimates.

Using the median estimate, Guatieri calculated that a one-week strike could shave 0.1 percentage point off first-quarter U.S. GDP. Extend the strike out for the whole quarter and it could undercut GDP by a full percentage point, halving BMO’s estimate of 2% growth for the quarter, Guatieri wrote.