Economic Headwinds Coming: Possible UPS Strike, Student Loan Repayments
Author: Greg Valliere
June 29, 2023
THE MOST DRAMATIC HEADWINDS may come on the labor front, as Teamsters walked away from the bargaining table yesterday, demanding that UPS must deliver its “last, best and final offer” to the union by Friday. ““The largest single-employer strike in American history now appears inevitable,” Teamsters General President Sean O’Brien said in a statement.
A STRIKE WOULD IDLE MORE THAN 340,000 workers in warehousing, transportation and delivery, covering workers bound by the largest private-sector bargaining agreement in the country. The UPS Teamsters say that UPS risks “causing devastating disruptions to the supply chain in the U.S. and other parts of the world” if it doesn’t make a new offer by tomorrow.
THE UNUSUALLY STRIDENT RHETORIC directed at UPS management has convinced many observers that at the least, a brief strike is likely in August. A longer walkout would have a devastating impact on the U.S. supply chain at the beginning of the holiday season.
ANOTHER HEADWIND — STUDENT LOANS: Biden’s plan would wipe away up to $10,000 in federal student loan debt for those who earn less than $125,000 a year individually or $250,000 as a family. But that plan could get shot down by the Supreme Court, which is expected to issue a ruling on Biden’s plan, possibly today.
REGARDLESS OF THE RULING, LOAN PAYMENTS are set to resume in October, after a pandemic pause of three years. Loan payments covering 44 million students will have to resume — obviously a headwind, taking approximately $70 billion annually out of the economy, potentially a negative for discretionary spending.
GOVERNMENT SHUTDOWN: Adding to the economic uncertainty this fall will be the Oct. 1 deadline for a budget deal and the accompanying threat of a shutdown. Congress probably will have to extend that deadline until late December; if there’s no deal by then, an across-the-board 1% spending cut is mandated under terms of the debt ceiling deal.
DESPITE THESE HEADWINDS, the Federal Reserve seems determined to smother inflation; a rate hike is likely at the July 25-26 FOMC meeting, with another move possible at the September or October meetings, depending on inflation and employmenet data.
FOR PRESIDENT BIDEN, who has begun to campaign on the theme of “Bidenomics,” the timing will be crucial. He’s correct that the economy is in fairly good shape now, but with slower growth looming in the second half and in 2024,
it’s unlikely that the economy will give Biden much of a boost next year as the campaign heats up.
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