There are multiple potential stagflationary impacts from the strike. Starting with growth:
- Apart from the net exports impact on GDP (drop in imports is "positive" from a GDP accounting perspective, but drop in exports negative), there are multiple other indirect channels: for example; lower exports and a failure to receive inbound capital goods could hurt output and employment in the US, inventories could build if they are destined for export but remain onshore.
- We've seen reports of multiple estimates for the overall economic impact, and the difficulty in estimating it is evident in the wide range: Conference Board: $540M/day; Oxford Economics: $650M to $1.1B/day; JPMorgan: $3.8-4.5B/day. Others such as Wells Fargo play down the potential implications, though "a prolonged strike eventually could cause us to become more circumspect about the outlook".
- The impact is likely to be mitgated somewhat by preparations made in advance, with many importers having learned in part from the pandemic experience to front-load imports ahead of the holiday season. Several anecdotes have emerged of manufacturers stockpiling in preparation for the strike. That's been evident in both inventory and real import buildup which has been a little earlier this year than usual, with perhaps some of the latter due to new tariffs on China coming into effect in August.
US Non-Petroleum Imports In Real Terms ($B) - Seasonal Comparison; 2024 indicated. Source BBG, Census Bureau, MNI - The strike has been well-flagged: discussions broke down back in June. The September national ISM noted a 4th consecutive contraction in the Imports index, following 5 months of expansion, with "inbound international freight delivery precision...a challenge" in part due to the anticipated port strikes. The September 2024 MNI-Chicago Business Barometer, produced with the Chicago area ISM, noted "Supply chain disruptions are being overshadowed [by the strike]...Firms with higher inventories were strategic in planning a short delay with port operations. A prolonged strike would have a major increase in logistics to carrying cost."
The near-term activity impact therefore looks relatively contained. But the longer this goes on for, the more pronounced the impact will be. The West Coast disruptions a decade ago started in mid-2014 but the impact wasn't really felt in the trade data until Q1 2015 - the NY Fed estimated at the time that Q1 real net export growth probably was cut by 1.5pp as a result of the disruptions, equating to a -0.2pp impact on Q1 GDP. From their report at the time: "For exports, the evidence supports the view that the port dispute restrained shipments in the first quarter; most of the decline in exports through the West Coast ports does not appear to have been compensated with gains through other transportation modes."
2014-15 West Coast Labor Dispute Impact - Source: NY Fed - Another consideration regards employment: if the strike carries on through Sunday the 12th of October, and assuming the strikers don't get paid in that survey week, there could be a large negative impact on the October nonfarm payrolls report which is due out on Nov 1.