What an impending rail strike could mean for the US economy

If rail unions and the railroads fail to agree on a new contract soon, American consumers and nearly every industry will be affected, an outcome that will bring freight trains to a grinding halt next month.

One of the largest rail unions rejected its deal on Monday, joining three others who have failed to approve contracts over concerns about the demanding schedule and lack of paid sick time. This raises the risk of a strike, which could start on December 5, just before the busy Christmas holiday. To prevent a strike, all 12 rail unions must ratify the contracts.

President Biden helped negotiate It has been accepted by seven unions but rejected by four of them so far. White House press secretary Karine Jean-Pierre said Monday the president believes the shutdown is “unacceptable” because “it will hurt jobs, families, farms, businesses and communities across the country.”

“The majority of unions have voted to ratify the tentative agreement, and the best option for the parties is still to resolve this on their own,” he told reporters on Air Force One on Monday. “And that’s what we’re going to continue to call for.”

If no agreement is reached, Congress is expected to intervene and enforce the terms of the contract on the railway workers. The last time American railroads went on strike was in 1992. The strike went on for two days before the Congress intervened. The nation hasn’t seen an extended rail strike in nearly a century, partly because a law passed in 1926 governing railroad negotiations made it very difficult for workers to strike.

It will not take long to see the impact of the rail strike in the economy. Many businesses only have a few days’ worth of raw materials and finished goods on hand. Manufacturers of food, fuel, cars and chemicals will all feel the pressure, as will their customers.

Passengers would be stranded because many passenger railroads use tracks owned by freight railroads.

Transportation Secretary Pete Buttigieg said a rail strike “would not go well.”

“Our goal right now is to make sure that doesn’t happen,” Buttigieg said in a NewsNation interview. “And we’re urging the parties to come to the table and do whatever they can to prevent the shutdown.

on Tuesday. Suzanne Clark, president and CEO of the US Chamber of Commerce, urged Congress to intervene.

“Congress must now implement the deal that President Biden negotiated, and the railroad and union leadership agreed to,” Clark said. “If Congress fails to do so, a railroad strike would substantially increase inflation and the economic challenges Americans face today.”

Some of the possible effects of the rail strike are as follows:

$2 billion a day

Railroads carry about 40% of the nation’s freight each year. In a report released earlier this fall, the railroads estimated that a rail strike would cost the economy $2 billion a day. A more recent report put together by a chemical industry trade group estimated that if the strike lasted a month, some 700,000 jobs would be lost, as manufacturers dependent on the railways would shut down, almost everything else. Prices will go up even further, and the economy may suffer. be pushed into recession.

And although some businesses will attempt to move shipments onto trucks, there are not nearly enough of them 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 could provide.

chemicals dry

Chemical manufacturers and refineries will be some of the first businesses to be affected, as the railways will stop shipping hazardous chemicals a week before the strike deadline to ensure no tank cars full of hazardous liquids are stranded Are.

Jeff Sloan with the American Chemistry Council trade group said chemical plants may be close to closing by the time the rail strike actually begins.

This means chlorine, which water treatment plants rely on to purify water, which they may only have a week’s supply of, will be harder to obtain. It would be difficult for manufacturers to make anything out of plastic without the chemicals being part of the formula. If refineries are closed, consumers will pay more for gasoline because they cannot find the materials needed to make the fuel or because railroads are not available to haul away byproducts such as sulfur.

Chemical plants also generate carbon dioxide as a byproduct, so the supply of carbon dioxide that beverage manufacturers use to carbonate soda and beer would also be restricted, even though the gas usually moves through pipelines.

Passenger trouble

Nearly all commuter rail systems rely on at least some of the tracks that are owned by freight railroads, and nearly all of Amtrak’s long-distance trains run on the freight network.

Back in September, Amtrak canceled all of its long-distance trains ahead of the strike deadline to ensure that passengers would not be left stranded in remote parts of the country while still en route to their destinations. Huh.

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

fear of food

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

He noted that about 30% of all packaged food in the US is transported by rail. This percentage is much higher for denser, heavier items like soup cans.

Some products, such as grain, cooking oil and beer, constitute entire operations for the shipment of finished products as well as rail delivery of raw materials such as grain, barley and peanuts.

Those companies typically only keep two to four days’ worth of raw materials on hand, Madrecki said, because they’re expensive to store, and grocers also have limited supplies of the products.

Madrecki said large food companies do not like to discuss the threat of a rail strike because of concerns about product shortages that could lead to panic buying.

hungry herd

Any disruption to rail service could jeopardize the health of chickens and pigs, which depend on trains to deliver their feed, and contribute to a rise in meat prices.

“Our members rely on about 27 million bushels of corn and 11 million bushels of soybeans each week to feed their chickens,” said Tom Super, a spokesman for the National Chicken Council, which is responsible for raising chickens for meat.

Now a rail strike will hit pork and chicken producers in the southern US the hardest, the National Grain and Feed Association said, as their local supplies of corn and soybeans from this year’s crop are likely to be exhausted and cost them dramatically. Fodder will have to be sent by truck. rising cost.

NGFA chief economist Max Fischer said, “They only have so much storage. They can’t be without rail service for too long before they have to close feed mills and they run into problems.”

retail exposure

Jess Denkert, vice president of supply chain at the Retail Industry Leaders Association, said retailers’ inventory is largely on hold for the holidays. But the industry is developing contingency plans.

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

David Garfield, managing director of the consulting firm AlixPartners, said the rail strike could still affect holiday items shipped to stores later in December, and would certainly hinder stocking of next season’s goods.

Retailers are also worried about online orders. Shippers such as FedEx and UPS use rail cars that hold approximately 2,000 packages in each car.

fear of automobiles

drivers are already there paying record prices And due to production problems related to the auto industry, new vehicles often have to wait months. shortage of computer chips In recent years.

This would be worse if a rail strike were to occur, as about 75% of all new vehicles begin their journey from factories to dealerships on railroads. There are about 2,000 car loads per day filled with vehicles.

And automakers may have difficulty keeping their plants operating during the strike because some large parts and raw materials are transported by rail.

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