The auto workers’ strike is the latest in a series of conflicts between workers and employers that economists say could have a significant impact on growth if they continue.
So far, the United Auto Workers walkout has only affected a small portion of the workforce and has had a limited impact on the broader economy.
But it’s part of a pattern of conflict between workers and employers that has led to the most absenteeism in about 23 years, according to Labor Department statistics.
“The immediate impact of the autoworker strike will be limited, but that will change as the strike expands and extends,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients on Monday.
Members of the United Auto Workers (UAW) in a strike line in front of 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 only three factories and involving less than a tenth of the workers at the three major automakers. However, if the situation worsens and there is a general strike involving the 146,000 union members at Ford, GM and Stellantis, that could change.
In this case, Shepherdson sees a potential quarterly decline in GDP of 1.7 percentage points, while many economists still fear that the U.S. could slip into recession in the coming months. Automobile production is 2.9% of GDP.
A broader strike would also complicate policymaking by the Federal Reserve, which is trying to reduce inflation without plunging the economy into a downturn.
“The problem for the Fed is that it would be impossible to know in real time how much of any slowdown in economic growth is certainly due to the strike and how much might be due to other factors, particularly the impact of consumption “Consumerism.” Resuming student loan payments,” Shepherdson said.
Hours of work lost
American workplaces have been hit significantly by strikes this year.
According to the Labor Department, about 4.1 million work hours were lost in August alone this year, the most in a single month since August 2000. Combined with July, nearly 6.4 million hours were lost due to 20 disruptions. Year to date, 7.4 million hours have been lost, compared to a total of just 636 hours during the same period in 2022.
These high numbers were the result of 20 major disruptions involving the Writers Guild of America and the Screen Actors Guild, state employees at the University of Michigan and hotel workers in Los Angeles. About 60,000 health care workers in California, Oregon and Washington are next at risk of leaving.
After years of relative calm, unions have found a louder voice in the high inflation era of recent years.
“If you’re a CEO of a company and you don’t anticipate workforce needs, you’re not bound by reality,” Joseph Brusuelas, chief economist at RSM, said in an interview. “After the inflationary shock that we have experienced, workers will demand more money because… there is a likelihood that they have lost ground in this period of inflation. They will ask for more money, and they will ask for flexibility in the workplace.
In fact, recent data from the New York Fed has shown that, on average, workers demand salaries near $80,000 per year when changing jobs.
In the UAW’s case, the union has demanded a 36% pay increase over four years, similar to pay increases experienced by automaker CEOs.
Impact on inflation
But Brusuelas said the UAW’s expected 9% annual increase is not expected to have a major impact on macroeconomic conditions, including inflation.
Unions’ share of the workforce has been shrinking, according to the Labor Department, falling to a record low of 10.1% in 2022, about half of what it was 40 years ago. Only 6% of private sector workers are unionized, while 33% of public sector workers are unionized.
“Labor disputes will have a relatively small impact on the overall macroeconomy,” Brusuelas said. “It’s not that big of a deal and shouldn’t be a shock after such a sharp rise in inflation.”
Biden administration officials aren’t yet worried about the potential economic impact either.
In the short term, the standstill will not be reflected in September’s labor market numbers, at a time when wage growth is slowing.
“I think it’s premature to make predictions about what this means for the economy,” Treasury Secretary Janet Yellen told CNBC’s Sara Eisen in an interview broadcast Monday. “It would depend a lot on how long the strike lasts and who exactly is affected. But the important point, in my opinion, is that the two sides need to reduce their differences and work towards a win-win situation.”
Source : www.cnbc.com