Good morning TAG Talk faithful!
As the days have gotten shorter in 2024, current events have also gotten more relevant for our newsletters. The flavor of the week is a burgeoning dockworker strike that has shut down 14 east coast and gulf coast ports. This standoff pits U.S. Maritime Alliance (known as USMX) against the International Longshoremen’s Association (known as ILA) which represents roughly 25,000 striking workers at the ports that are currently closed. At issue is the expiry of the last 6-year master agreement between the operators and the union, causing a labor strike that began at 12:01 AM on Tuesday October 1st. By the time you read this newsletter, a deal may have been agreed and we will hopefully be back to smooth sailing (see what I did there?). It is possible the U.S. will experience some degree of short-term pain for consumers with product availability, but we anticipate that it will not lead to long term economic issues should it last for just a few weeks.
There’s often an unholy marriage of politics and rhetoric that flow out of union strikes, and below I have listed some of the more salient points about the situation. By the end of this newsletter, you should be able to make sense of the various parties in this fight, and what the impact may be to the economy in the interim.
Who Are the Workers, Ports, and Companies?
- Port Employers’ representation: U.S. Maritime Alliance (known as USMX) is the centralized non-profit that collectively bargains on behalf of the port owners/operators along the east and gulf coasts.
- Dockworkers representation: International Longshoremen’s Association which is a union that represents between 45,000 and 50,000 workers that load/unload ships at ports along the east and gulf coasts.
- Ports closed as of 10/2/2024 (25,000 workers on strike): Baltimore, Boston, Charleston, Houston, Jacksonville, Miami, Mobile, New Orleans, New York/New Jersey, Norfolk, Philadelphia, Savannah, Tampa, and Wilmington
- Companies impacted by ships not getting unloaded: Quite a few, and in the interest of not exhausting a few thousand words of space, this article provides a good visualization of the companies.
Potential Economic Impacts
- Depending on whose estimate you go with, it could cost the U.S. $3.5 billion a week, or on other extremes as reported by J.P. Morgan analysts, $5 billion a day.
- Resuming high inflation – if the port closures last too long, certain consumer products and food items may see elevated prices for months while the supply chain logistics catch back up to demand.
- Nearly half of the oceangoing trade in and out of the U.S. is at a standstill. However, many companies saw this strike coming when negotiations broke down in June, and accelerated shipments over the summer in preparation for port closures.
- Perishable food items may become unavailable because they do not store well, with bananas being mentioned as a prime example of a high-volume fruit that comes through ports.
What Does the International Longshoremen’s Association (ILA) Want?
- In light of the record profits of port operators since the pandemic, the union has demanded that workers receive $5 hourly wage bumps over each of the next 6 years, as well as 100% of container royalty payments.
- Protection from automation. Globally, ports have begun implementing systems and high-tech solutions that reduce the number of people needed to operate ports. Simply, the union wants an outright ban on solutions that would cost union members their livelihoods. It’s going to be hard to imagine the negotiators on either side abandoning this issue.
- Talks broke down in June after the ILA discovered automated technology was being used in the Port of Mobile, which in their view was a violation of the contract that just expired.
What Has U.S. Maritime Alliance Offered (USMX)?
- USMX wants to keep language that existed in the last master agreement which allowed for use of semi-autonomous equipment and technology. This is the biggest sticking point, as stated above.
- On Monday, USMX finally submitted an offer late in the game after 3+ months of no negotiations. The press release stated a “50%” rise in wages over the 6-year contract. However, this wage raise structure only amounts to increases of $2.50 hourly per year, well shy of what ILA wants.
What Can Joe Biden & Politicians Do?
- The Taft-Hartley Act of 1947 gives the President of the United States the power to enforce an 80-day “cooling off” period where striking workers are required to get back on the job while negotiations continue. The act was passed by congress to fight against a plethora of post WW2 union strikes and is hated by unions to this day. Even though the Taft-Hartley Act has been invoked 37 times before, do not expect Biden to make it the 38th time with the election so close. The Democrats really need to keep union voters in their camp and are loathe to harm this group of people. Ultimately, Biden may be forced to invoke Taft-Hartley if the strike lasts multiple weeks and threatens stability of the economy.
- Other politicians across the spectrum have been cajoling both USMX and ILA to get back to the table and hammer out a deal. The pressure will have some degree of impact, but it seems muted as there are no teeth to the public statements.
- With the election close at hand, this strike and any economic fallout will become prime rhetoric for front page news. Politicians will make their case to the American people before November 5th in both fear mongering and supportive language depending on jurisdiction.
?Summarizing the Strike and Closing Comments
The timing of any strike never really feels ideal because people and businesses are caught in the crosshairs of the disagreements between employers and laborers. Far be it from me to pick a side among them as the messenger, I stand for the TAG talk readers!
In the grocery store and big box store chaos that has begun to take hold, my simple advice would be to remain calm and keep your eye on the ball while stocking your shelves. We as a society seem to have begun hoarding toilet paper again, and I’ll remind y’all that toilet paper is made from American pulpwood mere hours from your front door. Have no fear, this consumer staple will keep getting restocked!
Disclosures:
All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
Securities offered through Concourse Financial Group Securities, Inc. (CFGS), Member FINRA/SIPC. Advisory services offered through Concourse Financial Group Advisors, a DBA for CFGS, a Registered Investment Advisor. The Ansardi Group is independent of Concourse Financial Group Securities, Inc.