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The auto workers’ strike is the latest in a series of labor-management conflicts that economists say could have significant implications for growth if they continue.
So far, the United Auto Workers shutdown has affected only a small portion of the workforce, with limited impact on the broader economy.
But it is part of a pattern in labor-management conflict that has resulted in the most missed work hours in about 23 years, according to Department of Labor statistics.
“The immediate impact of the auto workers strike will be limited, but that will change if the strike broadens and persists,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a client note on Monday.
Members of the United Auto Workers (UAW) on a picket line outside the Stellantis NV Toledo Assembly Complex in Toldeo, Ohio, on Monday, September 18, 2023.
Emily Elconin | Bloomberg | Getty Images
The UAW has taken a somewhat novel approach to this strike, targeting just three factories and involving less than a tenth of the employees of the Big Three automakers. However, if things flare up and it turns into an all-out strike involving the 146,000 union members of Ford, GM and Stellantis, that could change things.
In that case, Shepherdson expects a potential impact on GDP of 1.7 percentage points quarterly, at a time when many economists still fear that the US could enter a recession in the coming months. Auto production is 2.9% of GDP.
A broader strike would also complicate policymaking for the Federal Reserve, which is trying to reduce inflation without sending the economy into contraction.
“The problem for the Fed is that it would be impossible to know in real time how much of any slowdown in economic growth could with certainty be due to the strike, and how much could be due to other factors, particularly the blow to consumption by the American economy. restart student loan payments,” Shepherdson said.
Lost working hours
American workplaces have taken a significant hit from strikes this year.
In August alone, some 4.1 million working hours were lost this year, the highest number in a single month since August 2000, according to the Ministry of Labor. Combined with July, nearly 6.4 million hours were lost due to 20 outages. So far, 7.4 million hours have been lost, compared to just 636 hours total for the same period in 2022.
Doris Dear joins SAG-AFTRA members as they maintain picket lines in front of HBO/Amazon during National Union Solidarity Day on August 22, 2023 in New York City.
John Nation | Getty Images
Those large numbers are the result of 20 major strikes, including the Writers Guild of America and Screen Actors Guild, state workers at the University of Michigan and hotel workers in Los Angeles. About 60,000 health care workers in California, Oregon and Washington are at risk of leaving next.
After years of relative quiet, unions have found a louder voice in the era of high inflation in recent years.
“If you’re a CEO of a company and you’re not anticipating labor demand, you’re not tied to reality,” Joseph Brusuelas, chief economist at RSM, said in an interview. ‘After the inflation shock we have experienced, workers will demand more money, given the likelihood that they have lost ground during this period of inflation. They’re going to ask for more money, and they’re going to ask for more money. We are going to ask for flexibility in the workplace.”
Recent data from the New York Fed has shown that workers are asking for an average salary of almost $80,000 per year when they change jobs.
In the case of the UAW, the union has asked for a 36% pay increase spread over four years, similar to the pay increases seen by automaker CEOs.
Inflation effects
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But Brusuelas said an expected 9% annual increase in the UAW should not have a major impact on macroeconomic conditions, including inflation.
Unions make up an increasingly smaller share of the workforce, falling to a record low of 10.1% in 2022, about half the level of four decades ago, the Labor Department said. Only 6% of private sector workers are unionized, while 33% of government workers are organized.
“The labor disputes will have a relatively small effect on the overall macroeconomy,” Brusuelas said. “This isn’t that big of a deal and it shouldn’t come as a shock after such a sharp rise in inflation.”
Biden administration officials are also not yet sounding the alarm about the potential economic impact.
In the short term, the stagnation will not be reflected in the September jobs figures, at a time when wage growth is slowing.
“I think it’s premature to make any predictions about what this means for the economy,” Treasury Secretary Janet Yellen told CNBC’s Sara Eisen in an interview that aired Monday. “It would depend greatly on how long the strike lasts and who exactly is affected. But the important point, I think, is that the two sides should reduce their differences and work towards a win-win situation.”
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