Chemical transporters warn a rail strike could hasten recession

A potential rail strike could be the catalyst that pushes the US economy into a full-blown recession, the American Chemistry Council warned when it released an economic analysis of the impact on its and other industries on Wednesday.

“[If a strike lasts one month, it] would likely cool off sharply in several leading economic indicators in the first half of 2023,” ACC said in a press release about the report.

The group, which represents chemical transporters, found that a strike could result in the loss of 700,000 jobs in several industries and cause a 4% rise in the producer price index (PPI) and a 1% fall in US gross domestic product (GDP) and pull nearly $160 billion out of the economy.

According to the US Bureau of Labor Statistics, the PPI measures the average change over time in the selling prices that domestic producers receive for their production.

If a strike lasts another month, the two months combined could result in PPI rising by 12% and GDP contracting by 2%.

“A rail strike could throw the economy out of recovery mode and into recession,” ACC chief economist Martha Moore said in a press release. “A prolonged strike would have an exponential effect for each additional month and would drag the country into a potential recession much faster.”

A rail strike could limit production at ACC member plants, which typically don’t have more than four to five days’ worth of empty wagons or raw materials in stock, according to the report. If facilities are unable to get the supplies they need after a week or so, they could be forced to close.

ACC and other shippers have urged Congress to prevent a rail strike and recently sent a letter to majority and minority leaders in the US Senate and House of Representatives.

If a strike is imminent, Congress should pass legislation enacting the labor contract terms agreed by unions and the railroads in September, the ACC said.

Shippers’ unions fear there could be a strike if members of the two largest railway unions – those representing locomotive engineers and train crew – decide not to ratify their collective agreements with the railways. The results of their votes on whether to approve a new deal will be announced on Monday.

Three other rail unions have already voted against ratifying their collective agreements and have returned to the negotiating table.

Sick leave policy could be one of the sticking points for these unions, although the railroads have publicly indicated their reluctance to back down, opting instead to have this discussion outside of contract negotiations, in line with recommendations from the US President-appointed board that met on the Sommer to help resolve the impasse of multi-year negotiations.

If members of the train drivers’ and conductors’ unions vote against ratification, members could choose to strike, but only after a cooling-off period under federal law. That stretch ends on December 4 for some of the five remaining unions, although that schedule could be extended to December 9 if they align their end dates for the periods.

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