The United Auto Workers Union strike against the Big 3 carmakers will have a limited impact on the U.S. economy—for now, experts say.
But the ripple effect of the strike will grow if it expands to other plants or goes on for weeks, said Steve Wyett, chief investment strategist for BOK Financial®.
"I think we'll see more intense negotiations," he said. "The decreased GDP from the strike won't be enough to tip us into a recession. However, once we add up the impact from all the feeder industries, it could have a ripple effect."
After weeks of negotiations with Ford, GM and Stellantis (the owner of Chrysler and Jeep), the UAW on Friday called out 13,000 employees to strike at three locations: a Ford factory in Wayne, Michigan; a GM plant in Wentzville, Missouri; and a Stellantis plant in Toledo, Ohio.
The union is asking for its share of the industry's highly profitable years during the COVID pandemic. The demands include a pay raise, more paid time off and the return of pensions for new employees.
Looking to target the automakers' most profitable models, the UAW chose the Ford F-150, Chevy Silverado and Ram pickups production plants. Depending on how negotiations go, the union may expand the strike to other sites.
With such a targeted approach, economist Gabe Ehrlich of the University of Michigan expects reduced spending in the communities surrounding the three plants. Though autoworkers will receive $500 a week in strike pay, they won't earn a paycheck, meaning tighter budgets and fewer dollars flowing through the local economy.
Anderson Economic Group predicted that a short 10-day strike could cause $5.6 billion in economic losses.
If all 150,000 workers were to go on strike for eight to 10 weeks, U.S. GDP would likely reduce by 0.2%-0.3%, economists say.
Implications for American workers
You're not wrong if you're feeling like there are more strikes in the news lately. A study from Cornell found that strikes were up by 52% in 2022, and in summer 2023, 11,500 screenwriters represented by WGA were joined by 160,000 striking actors.
And they're not the only ones. In June and July, 3,000 Starbucks workers and 6,000 Los Angeles hotel workers went on strike over disagreements about working conditions and pay. Using a possible strike as leverage, UPS workers and United Airlines employees were able to negotiate significant contract wins this year as well.
"Everyone is watching the UAW strike," said Wyett. "If the union gets the unprecedented 40-45% wage increase that it's demanding, it will impact other organizing campaigns."
With low unemployment rates, the demand for labor is exceeding supply, and workers are seizing the opportunity to bargain for higher wages, expanded benefits and a larger share of the economy. "If the UAW strike is successful and the labor market stays hot, we could see a continued increase in collective action," Wyett said.
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