Strikes (work stoppages), inflation & interest rates

 Recent strikes in the USA

From the screenshot above (dated 24 Nov 2023), we noticed that there have been a series of notable strikes in the USA. The latest one was staged by Macy’s workers in response to work conditions and compensation.

This is a news extract from AP’s post in October 2023:

NEW YORK (AP) — It’s been a big year for labor organizing in the U.S. And from auto production lines to Hollywood, all eyes are on strikes taking the world of work by storm.

The boiling point we’re seeing today comes amid soaring costs of living and rising inequality, including growing pay gaps between workers and top executives. Now, thousands of workers who were asked to make sacrifices during the pandemic even as corporate profits soared are asking for better pay and protections — and walking off the job if progress isn’t made in heated contract negotiations.

At least 453,000 workers have participated in 312 strikes in the U.S. this year, according to Johnnie Kallas, a Ph.D. candidate and the project director of Cornell University’s Labor Action Tracker. This year’s work stoppages have spread across multiple industries — including transportation, entertainment, and hospitality.

USA Tracking of (Major) Strikes

In the USA, the Bureau of Labor Statistics tracks major work stoppages also known as strikes. This is BLS’s definition of Major Work Stoppages:

A major work stoppage involves 1,000 or more workers and lasts at least one shift during the work week, Monday through Friday excluding federal holidays

Work Stoppages Summary (from BLS)

For release 10:00 a.m. (ET) Wednesday, February 22, 2023	                            USDL-23-0350

Technical information:	(202) 691-6199     workstoppagesinfo@bls.gov     www.bls.gov/wsp
Media contact:	        (202) 691-5902     pressoffice@bls.gov


MAJOR WORK STOPPAGES IN 2022

In 2022, there were 23 major work stoppages beginning in the year, the U.S. Bureau of Labor Statistics reported today. The lowest annual total of major work stoppages was 5 in 2009 and the highest was 470 in 1952. Between the years 2002-2022, there have been an average of 16 work stoppages beginning in the 
year. A major work stoppage involves 1,000 or more workers and lasts at least one shift during the work week, Monday through Friday excluding federal holidays.  

There were 120,600 workers involved in major work stoppages that began in 2022. Service-providing industries accounted for 118,400 workers, or 98 percent of idled workers over the year. Within service-providing industries, the education and health services sector accounted for the idling of 106,300 workers, the educational services sector for 69,500 workers, and the health care and social 
assistance sector for 36,800 workers. 

In 2022, work stoppages in goods-producing industries accounted for 2,200 workers, or a little under 2 percent of idled workers over the year. Within goods-producing industries, the manufacturing sector accounted for 1,000 workers idled and forestry and logging accounted for 1,200 workers idled.

In 2022, seven local government and two state government work stoppages began, idling 68,800 workers and resulting in 1,429,100 cumulative days of idleness. In private industry, 51,800 workers were idled beginning in the year, resulting in 549,000 cumulative days of idleness. 

More details of these strikes can be found on BLS’s website.

Here is a summary of strikes by year:

The above data tracks major work stoppages involving over 1000 people. Thus, there would be many that were not unreported in the data due to a smaller number of people involved. Thus, the impact could be much more. From the AP news article above, at least 453,000 workers have participated in 312 strikes in the U.S. this year, according to Johnnie Kallas, a Ph.D. candidate and the project director of Cornell University’s Labor Action Tracker.

Income equality (USA)

U.S. Household Income Gini Index 1990-2022

Published by Statista Research Department, Nov 3, 2023

In 2022, according to the Gini coefficient, household income distribution in the United States was 0.47. This figure was at 0.43 in 1990, which indicates an increase in income inequality in the U.S. over the past 30 years.

What is the Gini coefficient?

The Gini coefficient, or Gini index, is a statistical measure of economic inequality and wealth distribution among a population. A value of zero represents perfect economic equality, and a value of one represents perfect economic inequality. The Gini coefficient helps to visualize income inequality in a more digestible way. For example, according to the Gini coefficient, the District of Columbia and the state of New York have the greatest amount of income inequality in the U.S. with a score of 0.51, and Utah has the greatest income equality with a score of 0.43.

My investing muse

From the recent UAW strikes at the automakers to the one involving 340,000 UPS workers (under Teamsters), here are some of the reasons cited for the strikes:

• Cost of living - the income is not catching up with an increase in the cost of living.
• Unfair compensation (income inequality) - this can be seen in the gaps in compensation between workers and the company’s executives.
• Other reasons cited include low compensation, job safety & security concerns, and concerns about technological disruptions.

Strikes bring about disruptions to work and often, the collaterals spill over to other supporting sectors. For every one UAW worker on strike, there would be six other workers who are affected. The strike would cause disruptions in other parts of the auto industry from parts suppliers and the supply chain ecosystem.

Some of these are smaller businesses that are operating with tighter cash flow, operational capacity, and stocking space. When the work was halted, they could not stop the shipments that were en route to the company. They may need to take on additional storage, face cash flow challenges, and face other operational challenges. Thus, they may have to turn to credit (with high interest rates) that eats into their margin. Truckers who were booked to transport these cargo would be left without work. The collaterals would ripple across the supporting industries.

While we are hopeful that resolutions can be worked out, there are also some cases where businesses fold up when faced with potential financial losses and price sensitivity from customers. When adjustments are made to the compensation, it usually improves the income of the workers. To the economy, this can be inflationary. More strikes imply more inflationary pressures and thus, let us continue to monitor the situation as this would impact the Fed’s decision on interest rates.