Topline
The massive dock worker strike beginning Tuesday comes at an inopportune time for the U.S. economy, as the potential uptick in shipping prices comes ahead of the holiday season and as policy makers look to turn the page on inflation, though experts are split on whether the strike will have a major impact on inflation and the economy more broadly.
A man fishes from a pier in Bayonne, NJ near Port Newark Shipping Terminal ahead of the ILA strike.
Key Facts
The strike by 45,000 members of the International Longshoremen’s Association along the East Coast could cost the U.S. economy $3 billion to $4.5 billion daily, according to estimates from Jefferies and JPMorgan.
Though that headline number is certainly a concern, experts largely think significant fallout would only come if the strike lasts more than the “base case” of a “few days,” noted Bank of America analysts led by Nathan Gee, who simultaneously warned a “prolonged strike lasting a few weeks could drive global congestion levels to all-time highs.”
Austan Goolsbee, the president of the Federal Reserve’s Chicago branch, told Fox Business he’s concerned if the strike “drags on” it could “raise the cost of doing business” and the impacts of such events “are never good.”
Others aren’t so convinced the strike will work its way through the economy as much as feared: Michigan State University professor Jason Miller told the New York Times he’s “not concerned from an inflationary standpoint,” while Sevens Report analyst Tom Essaye wrote Tuesday to clients any strike-related inflation uptick is ultimately just a “temporary disruption” and shouldn’t impact the view of the broader inflation picture.
Crucial Quote
“The port strike could disrupt the data, essentially creating a smoke screen for the Fed when trying to stick the soft landing,” wrote Essaye. The strike crucially comes two weeks after the U.S. central bank initiated the first interest rate cuts since March 2020, essentially declaring victory over inflation. The Fed has signaled it intends to continue cutting, meaning its toolkit is far more limited to stifle another inflation outbreak.
What To Watch For
How an extended strike impacts retailers as the holiday quarter kicks off. UBS analyst Arpine Kocharyan wrote Monday retailers had already adjusted import activity in “anticipation of supply chain disruption” from the strike.
Key Background
The East Coast accounts for 40% of U.S. shipping container volumes and about 5% of global volumes, according to Bank of America. The port-related inflation concerns evoke bad memories of the late 2021 supply chain snarls which came as ports globally dealt with significant backlogs due in part to COVID-19 outbreaks among workers. That contributed to the global inflation crisis, and inflation peaked in 2022 at a 41-year high of more than 9% in the U.S.