The Strike Is On: How The Port Work Stoppage Could Impact The Economy, Supply Chain And Inflation

Dockworkers are officially on strike at ports up and down the East Coast of the U.S. after their contract ended at midnight Sept. 30.

The strike at 36 East and Gulf Coast ports could have wide-ranging economic effects if it stretches beyond a few days, with billions of dollars in the balance for each day the strike wears on.

Warehousing will be one of the first sectors impacted along with transportation, The New York Times reported. Furloughs associated with the reduced flow of goods could push the number of affected workers to 100,000, more than double the number of striking port workers.

Members of the International Longshoremen’s Association walked off the job at midnight Oct. 1 after months of failed negotiations with the U.S. Maritime Association, an industry of shipping companies, to raise wages. The strike was widely anticipated, leading some shippers to preemptively divert cargo to West Coast ports, but strain on the supply chain is still expected if the strike drags on.

The strike could result in a hit to the U.S. gross domestic product of roughly $5B daily, according to analysts at JPMorgan Chase. Once the strike ends, JPMorgan analysts estimated that catching up on the backlog could take six days for every day of the strike.

The U.S. supply chain has largely returned to historical norms since the massive disruption caused by the pandemic, according to the New York Federal Reserve’s supply chain pressure index. Many retailers and vendors have been able to rebuild their supply of goods, creating a small cushion before the strike really impacts American consumers and businesses.

Inflation, a key metric watched by commercial real estate amid ongoing interest rate conversations at the Federal Reserve, is not a likely side effect of the strike, at least at first. The strike could begin to have an impact on inflation if it lasts until the end of October, Michigan State University Professor of Supply Chain  Management Jason Miller told the Times. 

Inflationary concerns are one factor that could trigger the Taft-Hartley Act, a federal law that allows the president to order employees back to work in the event of a strike. 

Unabashedly pro-union President Joe Biden seems disinclined to make use of the act at this stage of the strike. His administration released a statement Tuesday in support of pay increases for the port workers.

“Ocean carriers have made record profits since the pandemic and in some cases, profits grew in excess of 800 percent compared to their profits prior to the pandemic,” the statement says. “Executive compensation has grown in line with those profits and profits have been returned to shareholders at record rates. It’s only fair that workers, who put themselves at risk during the pandemic to keep ports open, see a meaningful increase in their wages as well.”

Any decision by Biden on the strike will have political ripple effects as the Nov. 5 presidential election nears. A Sept. 27 research report by The Conference Board estimated that federal intervention could occur if the strike extends longer than one week as the threat of higher prices hangs over an uneasy economy.