No Progress as UPS Strike Looms
Author: Greg Valliere
July 12, 2023
IF NEGOTIATORS FAIL TO AGREE, there would be three enormous implications:
1. The U.S. supply chain, which has rebounded from the pandemic gridlock of three years ago, could be crippled again heading into the holiday season. The impact of a UPS strike could be so negative for the macro economy that President Biden might be tempted to invoke the Taft-Hartley Act this fall, forcing an 80-day cooling off period.
2. A strike would contribute to a growing militance of unions around the country. Analysts expect the United Auto Workers will strike at least one of the Detroit automakers later this year; their contract expires on Sept. 15. Wall Street analysts expect the union to secure wage and benefit improvements that result in 25% to 30% higher labor costs for auto industry in the four years of the contract.
This comes as California continues to grapple with strikes by hotel workers in the Los Angeles area and a snowballing strike in the entertainment industry, with much of Hollywood shut down.
3. Sticky inflation may persist: Eventually there will be settlements — with much higher wages locked in. Hotel housekeepers, who make roughly $20 per hour, want an immediate $5 per hour increase with $3 per hour hikes for the next three years. With an exceptionally tight labor market, the question is not whether there will be major salary hikes; the issue is how much.
OUR BEST GUESS is that the Teamsters will maintain a steady drumbeat of unusually harsh invective against UPS management until late this month, when the talks will intensify. Even if there’s a settlement, it probably would take into August for a final ratification, so a brief walkout is a real threat — and some manufacturers, anticipating a strike, are reaching out FeEx and the USPS to ship their goods.
LIKE EVERYTHING IN AMERICA, this will become a polarizing political issue, with Democrats supporting the union’s demands, which they say are necessary because of rising costs for housing, food, education, etc, while the company has enjoyed record profits.
IF A STRIKE BEINGS ON AUG. 1, there will be enormous pressure on Biden to impose Taft-Hartley if the walkout continues into the fall. Bill Clinton did not use Taft-Hartley when the union struck in 1997, but Biden is the most pro-union president in decades, and he could seek a cooling off period.
BOTTOM LINE: A brief strike in early August is likely; a long strike is unlikely — but the one certainty is significantly higher wages, still another reason why the Fed will be in no rush to cut rates this winter.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2023 AGF Management Limited. All rights reserved.