What an impending rail strike could mean for the US economy

U.S. consumers and nearly every industry would be hurt if railroad unions and railroads fail to agree a new contract soon, an outcome that will see freight trains come to a screeching halt next month .

One of the biggest railway unions rejected its agreement on Monday, joining three others who have not approved the contracts due to concerns about demanding schedules and a lack of paid sick leave. This increases the risk of a strike, which could start as early as December 5, just before the busy Christmas holidays. The 12 railway unions must approve the contracts to prevent a strike.

President Biden helped close the deal which has been accepted by seven of the unions but rejected by four so far. White House press secretary Karine Jean-Pierre said Monday the president believes a shutdown is “unacceptable” because of “the damage it would cause to jobs, families, farms, businesses and communities across the country.”

“A majority of unions voted to ratify the tentative agreement, and the best option is for the parties to settle this themselves,” she told reporters Monday on Air Force One. “And that’s what we’re going to keep asking for.”

Congress should step in and impose contract clauses on railroad workers if an agreement cannot be reached. The last time the US railroads went on strike was in 1992. That strike lasted two days before Congress intervened. The nation hasn’t seen a prolonged rail shutdown for about a century, in part because a law passed in 1926 that governs rail negotiations made it much more difficult for workers to strike.

It wouldn’t take long for the effects of a railroad strike to ripple through the economy. Many companies only have a few days of raw materials and space for finished products. Manufacturers of food, fuel, cars and chemicals would all feel the pressure, as would their customers.

Commuters would be stranded as many passenger railways use tracks owned by freight railways.

Transport Secretary Pete Buttigieg said a rail strike “wouldn’t be good”.

“Our goal right now is to make sure that doesn’t happen,” Buttigieg said in an interview with NewsNation. “And we urge the parties to come to the table and do whatever it takes to prevent a shutdown.

Tuesday. U.S. Chamber of Commerce President and CEO Suzanne Clark urged Congress to intervene.

“Congress must now push through the deal that President Biden brokered and the railroads and labor leaders agreed to,” Clark said. “If Congress fails to do so, a railroad strike would dramatically exacerbate inflation and the economic challenges Americans face today.”

Here are some of the expected impacts of a rail strike:

2 billion dollars a day

The railways transport about 40% of the national freight each year. The railroads estimated in a report released earlier this fall that a railroad strike would cost the economy $2 billion a day. Another recent report by a chemical industry trade group predicted that if a strike drags on for a month, some 700,000 jobs will be lost as railway-dependent manufacturers close, prices of almost everything will rise even further. and the economy could be plunged into a recession.

And although some companies are trying to shift shipments to trucks, there aren’t enough available. The Association of American Railroads trade group estimated that an additional 467,000 trucks a day would be needed to handle everything the railroads deliver.

Chemicals dry up

Chemical makers and refineries will be among the first businesses hit, as the railroads will stop shipping dangerous chemicals about a week before the strike deadline to ensure no tank cars full of liquids dangerous does not get stuck.

Jeff Sloan of the American Chemistry Council trade group said chemical plants could be on the verge of closing by the time a railroad strike begins over it.

This means that the chlorine that water treatment plants rely on to purify water, of which they may only have about a week’s supply, would become difficult to obtain. It would be difficult for manufacturers to make anything out of plastic without the chemicals that are part of the formula. Consumers will also pay more for gasoline if refineries close, either because they cannot get the ingredients they need to make fuel or because railroads are unavailable to transport sub- products such as sulphur.

Chemical plants also produce carbon dioxide as a by-product, so the supply of carbon dioxide that beverage makers use to carbonate soda and beer would also be limited, although the gas generally travels through pipelines.

Passenger issues

About half of all commuter rail systems rely at least in part on tracks owned by freight railroads, and almost all of Amtrak’s long-distance trains run on the freight network.

In September, Amtrak canceled all of its long-distance train days before the strike deadline to ensure passengers would not be stranded in remote parts of the country while still en route to their destination.

And major commuter rail services in Chicago, Minneapolis, Maryland and Washington state all warned at the time that some of their operations would be suspended in the event of a rail strike.

Food fears

It would take customers about a week to notice shortages of products like cereal, peanut butter and beer at the grocery store, said Tom Madrecki, vice president of supply chain for the Consumer Brands Association.

About 30% of all packaged food in the United States is transported by rail, he said. This percentage is much higher for denser, heavier items like soup cans.

Some products, like grains, cooking oils, and beer, have entire operations built around rail deliveries of raw ingredients like grains, barley, and peanuts, as well as shipments of finished goods.

These companies typically only keep two to four days worth of raw ingredients on hand because storing them is expensive, Madrecki said, and grocers also keep a limited amount of produce.

Madrecki said big food companies don’t like to discuss the threat of a railroad strike because worries about product shortages can lead to panic buying.

Hungry herds

Any disruption to train service could threaten the health of chickens and pigs, which rely on trains to deliver their food, and contribute to higher meat prices.

“Our members rely on approximately 27 million bushels of corn and 11 million bushels of soybean meal each week to feed their chickens. Much of it comes in by rail,” said Tom Super, spokesman for National Chicken. Council, a trade group for the chicken-for-meat industry.

The National Grain and Feed Association said a railroad strike would hit pork and chicken farmers in the southern United States the hardest, as their local supply of corn and soybeans from this year’s crop is likely to be exhausted and they would have to ship food by truck, in a dramatic way. increased costs.

“They only have a limited amount of storage. They can’t go without rail service for too long before they have to shut down feed mills and they run into problems,” said Max Fisher, chief economist. of the NGFA.

Retail risk

Jess Dankert, vice president of supply chain at the Retail Industry Leaders Association, said retailers’ inventory was largely in place for the holidays. But the industry is developing contingency plans.

“We don’t see, you know, undoing Christmas and that kind of narrative,” Dankert said. “But I think we’ll see the widespread disruption of really anything that travels by rail.”

David Garfield, chief executive of consultancy AlixPartners, said a railway strike could still impact holiday items being shipped to stores later in December and would certainly hamper the stockpiling of next season’s goods .

Retailers are also concerned about online orders. Shippers like FedEx and UPS use railcars that hold approximately 2,000 packages in each railcar.

Automotive angst

The pilots are already pay record prices and often waiting months for new vehicles due to production issues in the auto industry related to the shortage of computer chips during the last years.

This would only get worse in the event of a railroad strike, as around 75% of all new vehicles begin their journey from factories to dealerships on the railroad. The trains deliver approximately 2,000 carloads of vehicles per day.

And automakers can struggle to keep their factories running during a strike because some larger parts and raw materials are transported by rail.

Leave a Reply

Your email address will not be published. Required fields are marked *