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UAW strike could throw US into recession

Sep 14

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General Motors, Ford, and Stellantis in Detroit are facing a potential strike by the United Auto Workers (UAW) union. If an agreement is not reached by 11:59 p.m. on Thursday, Sept. 14, it could result in the largest U.S. strike by active employees in 25 years.

A Cornell study and NPR reporting indicate union strikes are becoming more common. In July, UPS and their union workers narrowly avoided a strike that would have triggered a nationwide shipping crisis, costing the U.S. economy billions of dollars.

Straight Arrow News contributor Peter Zeihan argues that unions are becoming more pivotal in the American economy and politics. He warns that if UAW does go on strike, it could push the U.S. into a recession.

An excerpt from Peter Zeihan’s Sept. 14 “Zeihan on Geopolitics” newsletter:

If your kids need poster boards for an upcoming school project, you may want to visit the supply store before the autoworkers hit the picket lines. With a strike looming, let’s break down the economic and political consequences.

An autoworker strike – even if it’s short – could disrupt the largest manufacturing sector in the US and potentially send us into a recession. If the economic threat wasn’t significant enough, the unions are also gaining political influence and acting more like swing voters as the availability of labor decreases.

These ongoing negotiations and potential strikes are all part of the evolving political and economic American landscape. Whichever political party can gain the union’s favor will reap the benefits of a boost in overall influence.

Hey everybody, Peter Zion here coming to you from above Spanish Square in New Orleans, and it is the 13th of September. And the big news. That is not a 747. That’s kind of fun. The big news is when you see this tomorrow, we will be within hours of potential auto workers strike the first one of significance in decades, and potentially a very economically and especially politically consequential one. Let’s start with the economics. Manufacturing is not one of the huge sectors, the United States were much more of a services country. But manufacturing of automobiles is the single largest sub component. So the auto workers are threatening to strike if they don’t get their way, which could take the largest section of manufacturing offline, which would have massive economic ramifications. If they were to strike for as little as three weeks, it would be more than enough to throw the United States into a recession from the quarter. And considering that this quarter, we’re probably going to see economic growth north of 5%, which is almost unheard of for an advanced country, the economic impact obviously, would be huge. The impact on specific types of automotive could be particularly bad, a lot of American automakers are attempting to launch new Evie lines. And this was supposed to be the year that all of it hit the market. And this would just stop it in its tracks. So I can’t tell you whether the strike is going to happen. They’re asking for more than a 1/3 increase in pay. But the damage they could do the economy would be immense. So kind of even odds there. But in terms of while it’s there’s some sort of party going over there, because of course, it’s New Orleans, and it doesn’t matter that it’s only Wednesday. Anyway, let’s talk politics. Now. For the last several decades, unions have been part of the democratic coalition. And they’ve kind of been the economic core of that coalition, the people within the coalition who can do math if that’s an easier way to think of it. However, they feel fairly put upon. under Clinton, the Democrats shifting to the right on economic issues, especially especially on issues such as globalization, which led to a steady decline in union membership. And as NAFTA took hold, a lot of union jobs vanished into Mexico. And as manufacturing then expanded in value added terms in the United States, most of the new jobs in manufacturing and auto went to places that were not Union states, most notably Kentucky, Tennessee, Alabama, and especially Texas. So when you’re looking at what’s been happening with trade, and with the reshoring, of Trade Unions really haven’t benefited from that at all. And that’s part of the reason why unions are no longer really functionally part of the democratic coalition. Donald Trump was very effective at bringing them over to his side during his term, Joe Biden has been partially successful in bringing them back, but it’s best to think of them as swing voters right now. And this is something we’re just going to have to get used to the fact that the unions are becoming more of a linchpin in the American political process. And not just because they’re in the wind right now. But it’s a lot of votes in the world we’re evolving into in the country, the United States evolving into, there are not enough workers. The Boomers are the largest generation we’ve ever had. The x’s that are replacing them at the top of the pyramid of worker skills to have a lower worker participation rate. And the new generation coming in are the Zoomers, and they’re the smallest generation we’ve ever had. So we’re looking at a significant reduction in the availability of labor writ large in the system. And in that sort of environment, you would expect organized labor or just labor in general to have more and more pricing power and more and more political power. And that’s before you consider that the problems in East Asia and the problems in Western Europe suggest that if the Americans still want stuff, autos or otherwise, we’re gonna have to double the size of the industrial plant, that’s going to take a lot of workers, that’s going to take a lot of blue collar workers, exactly the sort of workers that are more likely to unionize than not. So what we’re going through today, what we’re likely to be going through the next few weeks as these negotiations drag on, don’t think of it as aberration. This is now part and parcel of the American economic and political experience. And whichever party the unions ultimately fall in, are going to have a significant increase in their overall hold on American life. The end

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