Port of Miami dockworkers initiated a strike near the port entrance on October 1, 2024, demanding a new labor contract. The strike, affecting ports along the East and Gulf coasts, has the potential to increase prices for various consumer goods, including food and automobiles. However, its broader economic impacts are expected to be limited, provided the strike does not prolong extensively.
Manufacturers of a wide range of products, from trucks to toys to artificial Christmas trees, are encountering disruptions due to the stoppage called by the International Longshoremen’s Association at major Eastern container and cargo ports.
The overall economic impact hinges on the strike’s duration. President Joe Biden, empowered by the Taft-Hartley Act, could impose an 80-day cooling-off period to temporarily halt the strike, though such an action appears unlikely at this time. The resolution largely depends on successful negotiations between the union and the U.S. Maritime Alliance, especially with the critical holiday shipping season approaching.
Joseph Brusuelas, chief economist at RSM, estimated the strike’s weekly economic impact at slightly more than 0.1 percentage point of GDP, equating to $4.3 billion in lost imports and exports. Despite this, he believes the strike will not derail the U.S. economy, which is currently on a 3% growth path.
In recent years, the U.S. economy, valued at $29 trillion, has navigated several challenges and maintained growth. The Atlanta Federal Reserve anticipates third-quarter growth of 2.5%, supported by increased net exports. However, a prolonged strike could pose a threat to this growth trajectory.
Industries such as coal, energy, and agriculture are among those most affected by the strike. Typically, for each day of the strike, nearly a week is required for ports to return to normal operations. Citigroup economist Andrew Hollenhorst noted that the costs of the strike would rise over time due to backlogs in exports and imports. Perishable goods, like imported fresh fruit, could be the first to face shortages, potentially followed by production slowdowns and increased prices for manufactured goods, including vehicles, if the strike extends.
Nonetheless, there are mitigating factors that could lessen the strike’s impact. West Coast ports are expected to absorb some of the freight business from the eastern ports, and some companies had anticipated the strike and stockpiled inventory accordingly. Additionally, supply chain pressures have eased significantly from their pandemic peak, and are currently below pre-COVID levels, according to a measure by the New York Federal Reserve.
Bradley Saunders, an economist at Capital Economics, suggested that concerns about the potential economic impacts might be overstated. Producers have become more adept at managing low inventories due to frequent supply chain shocks in recent years. Saunders also highlighted the possibility of the White House intervening to enforce a cooling-off period, despite its pro-union stance, especially with a closely contested election looming.
The strike could exacerbate inflationary pressures just as price increases have shown signs of cooling from their 2022 peak. The maritime association’s proposal for raises of nearly 50% could contribute to renewed inflation, compounded by the union’s demands for larger wage increases and guarantees against automation.
Economics professor Christopher Ball from Quinnipiac University emphasized that the strike, if prolonged beyond a few days, could lead to significant short-term price spikes for certain goods, particularly food and vehicles. Small businesses near the ports could also experience adverse effects.
The timing of the strike poses additional challenges for the Federal Reserve, which recently cut its benchmark borrowing rate by half a percentage point and signaled further easing as inflation shows signs of receding. The strike could complicate upcoming economic reports, including the October jobs report, which will influence the Fed’s policy decisions at its November meeting.
Fed Chair Jerome Powell indicated that further rate cuts, totaling another half percentage point by the year’s end, are anticipated, although at a slower pace than markets expected.
