The recent auto workers' strike is part of a series of labor-management disputes that economists believe could have significant economic repercussions if they persist.
Up to now, the United Auto Workers' strike has primarily affected a small segment of the workforce, with limited implications for the broader economy. However, it is indicative of a broader trend in labor-management conflicts, resulting in the most missed work hours in approximately 23 years, according to statistics from the Department of Labor.
"The immediate impact of the auto workers' strike is currently contained, but the situation could change if the strike expands and drags on," noted Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, in a client update on Monday.
The UAW has adopted a somewhat unique strategy for this strike, focusing on just three factories and involving fewer than one-tenth of the workers affiliated with the Big Three automakers. Nevertheless, if tensions escalate and transform into a full-blown strike, which would include the 146,000 union members at Ford, GM, and Stellantis, the dynamics could shift.
In such a scenario, Shepherdson envisions a potential 1.7-percentage-point quarterly blow to GDP, coming at a time when many economists are still concerned about the possibility of a U.S. recession in the near future. Auto production accounts for 2.9% of GDP.
A broader strike would also pose a challenge for the Federal Reserve, which is endeavoring to curb inflation without pushing the economy into contraction.
"The issue for the Fed lies in its difficulty in ascertaining, in real-time, how much of the slowdown in economic growth can be attributed definitively to the strike and how much may be due to other factors, notably the impact on consumption from the resumption of student loan payments," Shepherdson explained.
American workplaces have been significantly affected by strikes this year. In August alone, there were approximately 4.1 million days of work lost, marking the highest number for a single month since August 2000, according to the Department of Labor. When combined with July, there were nearly 6.4 million days lost due to 20 separate work stoppages. Year-to-date, there have been 7.4 million days lost, in stark contrast to just 636 days for the same period in 2022.
These substantial figures have resulted from 20 major stoppages, including those involving the Writers Guild of America and Screen Actors Guild, state workers at the University of Michigan, and hotel employees in Los Angeles. Moreover, approximately 60,000 healthcare workers in California, Oregon, and Washington are contemplating a walkout in the near future."
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