U.S. port strike ends; full recovery expected in weeks

Ports on the U.S. East and Gulf Coasts reopened last Friday, October 4th, after dockworkers and port operators reached a wage agreement, ending the largest strike in the sector in nearly 50 years. Although the strike concluded sooner than expected, it will take time to clear the backlog of cargo, with estimates suggesting that the normal flow may not resume for two to three weeks.

“The port strike ended fairly quickly, removing any significant downside risk to the economy this quarter”, said Ryan Sweet, chief U.S. economist at Oxford Economics. However, 54 container ships were already lined up awaiting unloading, according to Everstream Analytics, and more vessels are expected to arrive in the coming days.

The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reached an agreement that includes a roughly 62% wage increase over six years, raising average hourly pay from US$ 39 to US$ 63. The strike, which affected 36 ports, was the first since 1977 and was estimated by JP Morgan analysts to cost the U.S. economy about US$ 5 billion per day.

The strike’s resolution also impacted the financial markets, as shares of shipping companies in Asia and Europe fell following the news. Companies like Maersk and Hapag-Lloyd saw their stock prices drop by 4.7% and 14.4%, respectively, as expectations of a spike in freight rates diminished.

Despite concerns, many retailers, including Walmart and IKEA, had already stocked up for the upcoming holiday shopping season, minimizing the short-term impact on product availability. In particular, toilet paper was not expected to see direct impacts from the strike, as more than 99% of tissue products used by Americans are produced in the U.S., according to North Carolina State’s College of Natural Resources. And nearly 90% of U.S. tissue manufacturers use recycled paper to make their products, per the American Forest & Paper Association.

However, the wage agreement is temporary, expiring on January 15th, and negotiations will continue on more complex issues, such as port automation, which workers see as a threat to jobs.

“The decision to end the current strike and allow the East and Gulf coast ports to reopen is good news for the nation’s economy”, said the National Retail Federation in a statement. “The sooner they reach a (final) deal, the better for all American families”, they concluded.