A West Coast Port Strike Would Cost US Economy $500 Million a Day

Date: Tuesday, April 18, 2023
Source: Bloomberg

A slow-motion train wreck.

That’s the image shipping analyst Lars Jensen conjured over the long weekend as talks between dockworkers on the US West Coast and their employers drag on, boosting concern of another nationwide supply-chain mess.

“Ever since the old contract failed to get renewed in the middle of 2022, the specter of labor disruptions on the US West Coast has been a constant risk factor,” Jensen, the head of Vespucci Maritime, wrote in a LinkedIn post. “As the labor disruptions in 2014-15 showed, it does not take long for a substantial queue of container vessels be built up outside California.”

For now, that’s not happening, although one arriving container ship didn’t go to a berth as scheduled late last week because of labor issues.

Accusations arose Thursday about whether an work slowdown was under way, temporarily closing some terminals, normal operations resumed at the ports of Los Angeles and Long Beach heading into the holiday weekend, Bloomberg’s Laura Curtis reported late Friday.

At the same time, the National Retail Federation renewed calls for the White House to engage with the stakeholders, saying it’s “it is essential that the ongoing labor negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association are resolved immediately.”

Economic Fallout

Among the reasons for the urgency: the gut punch the economy might have to absorb if the nation’s largest port complex shuts down for a labor disruption.

The National Association of Manufacturers released a report last year estimating the potential fallout at $500 million a day, with a hypothetical 15-day strike leading to 41,000 job losses.

Those figures were released last June — a moment of peak leverage for the longshoremen as ships queued up to enter LA-Long Beach and import volumes and the overall economy were still relatively solid.

Now, the vessels aren’t coming as fast as they were a year ago, the backlog has been cleared, and many ships are bypassing Southern California and heading to the Gulf or East coasts to avoid exactly the kind of uncertainty unfolding around LA-Long Beach.

Given the fragile state of the economy, it’s unlikely that the Biden administration would allow a labor battle around the ports to last very long. Here’s a quick recap of some recent history compiled by the Conference Board:

  • 2014-2015: Ten months of stalled negotiations led to work slowdowns, port gridlock and a US government intervention
  • 2008: Three weeks of work disruptions started in LA-Long Beach and then spread to the Pacific Northwest
  • 2002: Employers locked out workers for 10 days after a labor slowdown, and the federal government used its authority to reopen the ports

According to research posted in October from Erin McLaughlin, a senior economist at the Conference Board, something similar might happen again.

“If there is a stalemate in negotiations and a strike or lockout occurs, the US administration would likely intervene very quickly to limit the stoppage to just a few days,” she wrote. “The president could seek a court injunction triggering a back-to-work order under an 80-day cooling-off period using the Taft-Hartley Act.”


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