The recent auto workers' strike, led by the United Auto Workers (UAW), has raised concerns among economists about its potential impact on the economy. While the strike has currently only affected a small portion of the workforce, it is part of a larger pattern of labor-management conflicts that have resulted in the highest number of missed work hours in 23 years, according to Labor Department statistics.
Economists warn that if the strike were to escalate and become more widespread, it could have a significant impact on GDP growth. Ian Shepherdson, chief economist at Pantheon Macroeconomics, estimates that a broader strike involving the 146,000 union members at Ford, GM, and Stellantis could result in a 1.7 percentage point quarterly hit to GDP. Auto production accounts for 2.9% of GDP.
A more extensive strike would also complicate policymaking for the Federal Reserve, which is already grappling with the challenge of bringing down inflation without causing a recession. Shepherdson points out that it would be difficult for the Fed to determine how much of any economic slowdown could be attributed to the strike versus other factors, such as the restart of student loan payments.
This year has seen a significant increase in labor strikes across various industries, including the Writers Guild of America, Screen Actors Guild, and state workers at the University of Michigan. Unions, which have been relatively quiet in recent years, now have a stronger voice in demanding higher wages and workplace flexibility in the face of rising inflation.
However, experts believe that the impact of labor strife on the overall macro economy will be relatively small. Unions make up a decreasing share of the workforce, reaching a record low of 10.1% in 2022. Only 6% of private sector workers are unionized, compared to 33% of government workers.
While the immediate economic impact of the auto workers' strike is uncertain, Treasury Secretary Janet Yellen emphasizes the need for the two sides to find common ground and work towards a win-win agreement. Yellen believes it is premature to make forecasts about the strike's impact on the economy and emphasizes the importance of narrowing disagreements for the benefit of both parties.
In conclusion, the auto workers' strike has the potential to impact the economy if it escalates and becomes more widespread. However, the overall macroeconomic effect of labor strife is expected to be relatively small, given the declining influence of unions in the workforce. It remains to be seen how the strike will unfold and whether the two sides can reach a mutually beneficial resolution.