US OUTLOOK/OPINION
- Boeing workers late yesterday voted to accept a new labor contract, bringing an end to eight weeks of disruption including a strike that accounted for 33k of an unusually large 44k striking workers nationwide in the October payrolls reference period.
- Workers can return to work as early as Wednesday and must return by next Tuesday, so they should be counted as on the payroll in the November payrolls report.
- IAM representatives say 59% of union members voted in favor of the accord, which includes a 38% wage increase over four years and enhanced retirement contributions. (IAM link, Boeing link)
- This 38% wage increase over four years marks a continuation of large wage settlements in the past two years – see the below chart from Bloomberg Law compiling data back to 1988.
- It leaves an annualized run rate clearly above the 3.1% annualized or 3.8% Y/Y for private sector wages & salaries in Q3 ECI data. However, it’s important to view it after a period where pay only increased 4% between 2016-24 following a 2014 deal that also ended traditional guaranteed pensions.
- The particularly publicized nature of these negotiations runs a risk of feeding through to broader wage setting processes, but US union membership remains relatively low at ~6% for the private sector (vs 15% for Canada) and 33% for the public sector (vs 76% for Canada).
- It’s unlikely to alter Fed guidance around the labor market that has stood for some time now, e.g. Fed Chair Powell at Jackson Hole “It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon." It does however continue to present an upside risk to this baseline assumption.
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