Executive summary
Two high-profile strikes began recently with another looming in the transportation industry; together these three strikes could directly impact more than a half million workers. Two more transportation strikes and scores more workers are indirectly impacted by these work stoppages, mushrooming the number of workers affected if all of these strikes occur to perhaps as many as 1.5 million.
While the magnitude of the broader economic damage should be minimal, prolonged strikes would inflict more pain. On a personal level, these strikes will cause a permanent loss of income for most of the affected workers, particularly those who are indirectly dinged. Most large businesses should be able to navigate the potential operational turbulence fairly well, though we are concerned about the fallout for smaller firms, especially from the transportation strikes.
These work stoppages will have a marked negative impact on the U.S. economy in the short term as these industries support billons of dollars in economic activity. Zooming out, we don’t see the likelihood of long-lasting economic damage; most notably, all of the parties involved have vested interests in resolving their differences sooner rather than later.
What happened
Two high-profile strikes began recently with another one looming in transportation; together there are more than a half million workers potentially impacted directly. However, there are many more workers that are indirectly impacted.
Strike one: The Writers Guild of America (WGA, aka writers) – covering roughly 11,500 writers for film, television, radio, and online media – are striking against the Alliance of Motion Picture and Television Producers (aka studios), which started on May 2. It’s the first writers strike since the 100-day walkout that lasted from November 2007 to February 2008.
Some high-profile shows chose to pay folks for a few weeks of the work stoppage. For instance, the staff and crew for NBC’s The Tonight Show and Late Night received three weeks of pay — with the show hosts covering the third week themselves. Otherwise, WGA members aren’t being paid and have presumably resorted to filing for unemployment benefits.
The writers strike effectively shuttered 80% of film and TV productions in early May, while the remainder had continued to work using already-finished scripts or were unscripted shows, such as reality and game shows. That threw thousands of other industry workers, including catering crews, hair and makeup teams, and support staff, out of work.
Strike two: On July 14, the Screen Actors Guild—American Federation of Television and Radio Artists (SAG-AFTRA), the union representing 160,000 film and television actors, also went on strike after contract negotiations with the studios collapsed. This virtually shutdown the remaining film and TV productions, including most commercials.
Strike three – Transportation: The International Brotherhood of Teamsters (Teamsters) members in mid-June authorized a strike against United Parcel Service (UPS), covering 340,000 workers. The current Teamsters-UPS contract expires on July 31. Additionally, the 3,300 UPS pilots represented by the Independent Pilots Association (IPA), a separate union from the Teamsters, will not cross the picket lines. That means UPS can’t move freight in any way.
UPS is one of the largest cross-border and small parcel shippers (along with FedEx). In 2022, the company handled 24 million packages per day, or more than 6.2 billion packages globally for the year, and generates 80% of its revenue in the U.S., according to company filings. UPS is second only to the U.S. Postal Service in market share at 24% and works closely with the postal service. It is also the largest third-party shipper for Amazon, which accounts for 10% of its revenue.
Additionally, Yellow Corp., which operates on the largest less-than-truckload (LTL) networks in North America primarily under the Holland, YRC Freight, and Yellow brands. Yellow, which is teetering on bankruptcy, has about 10% share of the LTL market. In the past week, the company announced that it would defer its required June and July contributions for health, welfare and pension funds for 22,000 workers, who are also members of the Teamsters. Accordingly, the Teamsters filed a strike notice authorizing a strike on or after July 24 for Yellow’s failure to fulfill their financial obligations.
Our take
The economic impact to these workers is worse in the near term due to the immediate loss of wages. In most cases, these union workers will either make up the work (especially in the case of the film/TV production) and/or receive increased pay and benefits going forward. Some may even receive “catch up” pay as part of the contract settlement. Yet, the workers indirectly impacted – think of the restaurent worker down the road – will likely never make up the lost income.
Aside from workers’ lost wages, the biggest short-term impact to the U.S. economy is that it aggravates inflationary pressures as supply chains are disrupted. Given that UPS transports roughly 6% of U.S. gross domestic product (GDP) – from online consumer purchases to handling parts of companies’ internal logistics – a Teamsters strike against UPS would be potentially devastating for the economy in the short term. On top of the impending Yellow strike, companies are reportedly already scrambling to divert packages, which means scarce capacity and likely higher shipping costs.
Longer term, we anticipate that businesses will essentially treat the transportation strikes like a weather event, such as a hurricane – preparing ahead, such as front-loading orders and arranging alternate transportation for critical components (and perhaps even some “just in case” padding of inventories). We saw evidence of overordering and hoarding by companies during the pandemic and again last year after the Russia-Ukraine invasion as they tried to maintain supply chains and work flows. Looking ahead, such overordering and hoarding will likely artificially boost July activity – and could lead to a bit of a drop off at some point beyond this (most likely in August/September as volumes normalize) – even if the UPS and Yellow strikes don’t occur.
However, with the Teamsters President publicly telling the White House to “butt out” of negotiations, we are treating the UPS like a low probability/high impact event (i.e., it sounds like they’ll get something done). News reports are that talks will restart on July 25.
As we approach the July 31 UPS contract expiration, the political pressure on the White House to intervene increases dramatically. Also, union membership authorized a strike – but the union could choose to extend beyond the deadline if sufficient progress is being made. It should also be noted that – unlike the writers and actors – the Teamsters have a so-called strike fund, which will pay benefits to striking UPS workers.
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