Gridlock On The Ocean

The Real Estate Espresso Podcast

Gridlock On The Ocean

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Gridlock On The Ocean: Unforeseen Repercussions for Global Economy

Welcome to our discussion today. Today’s blog explores the potential consequences of the labor strike looming at the US Longshoremen Association. The strike expected to commence on October 1 if the wage negotiations are not settled before the end of the current month, that is September 30, is causing a stir in the mainstream media with exclusive coverage by leading industry authorities like Reuters, Bloomberg, CNBC, and many others.

The Imminent Strikes & Their Impact

The Longshoremen Association, after its two-day congregation on September 4 and 5, anticipates a whopping 77% increase in its workers’ wages throughout the tenure of the contract. In addition, it expects assurance of job security against automation. As the west coast counterpart of the association received a 32% wage increase in their previous contract negotiations, the current demand can be perceived as highly optimistic. Since the date of this meet, no productive discussion occurred between the Ports and the Union, indicating a possible full-on strike soon.

The International Longshore & Warehouse Union assures its support to the International Longshoremen’s Association if a strike takes place. This could potentially halt the West Coast ports’ operations. The impact on the US economy, as well as the global economy, in the event of such a strike would be immediate and significant. A considerable number of companies have already taken measures to withstand the anticipated loss by preparing their inventory in advance for the fourth quarter, however, not every corporation has had the luxury or foresight to do so.

Shipping Industry Repercussions & Recommendations

The recent trends in shipping costs show a steep fall. Due to the apparent strike threat, rates have been climbing steadily since May. Moreover, the current abnormal upsurge in inventory could infect the economy with unforeseen ramifications by the end of the third quarter. We forecast a sharp decline in the US Gross Domestic Product (GDP) in the fourth quarter as Q3 was significantly inflated due to this inventory buildup.

The AMA predicts widespread disturbances in global supply chain resonations, deriving from this standoff. We conclude that Canadian shipping terminals may have to manage extra containers, and if the strike materializes, it might take weeks, more likely months to normalize. As even a week-long strike could escalate to a six-week recovery period, our BOM recommends planning sufficiently and accounting for delays in the face of unanticipated logistical problems.

Summing Up

From the heaps of information available, we understand that the implications of this possible labor strike could ripple across the global supply chains and deeply impact the global economy. The recommendations made in the BOM suggest that businesses seriously consider these disruptions when planning long-term strategies, anticipating potential delays, and calculating the cost increases associated with these problems.