Rail Strike Impact Explainer
An Amtrak passenger train departs Chicago in the early evening on Sept 14. Photo: AP file
business

Rail strike would have wide impact on U.S. economy

8 Comments
By JOSH FUNK

American consumers and nearly every industry will be affected if freight trains grind to a halt next month.

One of the biggest rail unions rejected its deal Monday, joining three others that have failed to approve contracts over concerns about demanding schedules and the lack of paid sick time. That raises the risk of a strike, which could start as soon as Dec 5.

It wouldn’t take long for the effects of a rail strike to trickle through the economy. Many businesses only have a few days’ worth of raw materials and space for finished goods. Makers of food, fuel, cars and chemicals would all feel the squeeze, as would their customers.

That's not to mention the commuters who would be left stranded because many passenger railroads use tracks owned by the freight railroads.

The stakes are so high for the economy that Congress is expected to intervene and impose contract terms on railroad workers. The last time U.S. railroads went on strike was in 1992. That strike lasted two days before Congress intervened. An extended rail shutdown has not happened for a century, partly because a law passed in 1926 that governs rail negotiations made it much harder for workers to strike.

Here are some of the expected impacts of a rail strike:

$2 BILLION A DAY

Railroads haul about 40% of the nation's freight each year. The railroads estimated that a rail strike would cost the economy $2 billion a day in a report issued earlier this fall. Another recent report put together by a chemical industry trade group projected that if a strike drags on for a month some 700,000 jobs would be lost as manufacturers who rely on railroads shut down, prices of nearly everything would increase even more and the economy could be thrust into a recession.

And although some businesses would try to shift shipments over to trucks, there aren't nearly enough of them available. The Association of American Railroads trade group estimated that 467,000 additional trucks a day would be needed to handle everything railroads deliver.

CHEMICALS RUN DRY

Chemical manufacturers and refineries will be some of the first businesses affected, because railroads will stop shipping hazardous chemicals about a week before the strike deadline to ensure that no tank cars filled with dangerous liquids wind up stranded.

Jeff Sloan with the American Chemistry Council trade group said chemical plants could be close to shutting down by the time a rail strike actually begins because of that.

That means the chlorine that water treatment plants rely on to purify water, which they might only have about a week's supply of on hand, would become hard to get. It would be hard for manufacturers to make anything out of plastic without the chemicals that are part of the formula. Consumers will also pay more for gasoline if refineries shut down either because they can't get the ingredients they need to make fuel or because railroads aren't available to haul away byproducts like sulfur.

Chemical plants also produce carbon dioxide as a byproduct, so the supply of carbon dioxide that beverage makers use to carbonate soda and beer would also be restricted, even though the gas typically moves via pipelines.

PASSENGER PROBLEMS

Roughly half of all commuter rail systems rely at least in part on tracks that are owned by freight railroads, and nearly all of Amtrak’s long-distance trains run over the freight network.

Back in September, Amtrak cancelled all of its long-distance trains days ahead of the strike deadline to ensure passengers wouldn’t be left stranded in remote parts of the country while still en route to their destination.

And major commuter rail services in Chicago, Minneapolis, Maryland and Washington state all warned then that some of their operations would be suspended in the event of a rail strike.

FOOD FEARS

It would take about a week for customers to notice shortages of things like cereal, peanut butter and beer at the grocery store, said Tom Madrecki, vice president of supply chain for the Consumer Brands Association.

About 30% of all packaged food in the U.S. is moved by rail, he said. That percentage is much higher for denser, heavier items like cans of soup.

Some products, like cereal, cooking oils and beer, have entire operations built around rail deliveries of raw ingredients like grain, barley and peanuts, along with shipments of finished products.

Those companies typically keep only two to four days’ worth of raw ingredients on hand because it’s expensive to store them, Madrecki said, and grocers also keep a limited supply of products on hand.

Madrecki said big food companies don't like to discuss the threat of a rail strike because of worries about product shortages can lead to panic buying.

HUNGRY HERDS

Any disruption in rail service could threaten the health of chickens and pigs, which depend on trains to deliver their feed, and contribute to higher meat prices.

“Our members rely on about 27 million bushels of corn and 11 million bushels of soybean meal every week to feed their chickens. Much of that is moved by rail,” said Tom Super, a spokesman for the National Chicken Council, a trade group for the industry raising chickens for meat.

The National Grain and Feed Association said a rail strike now would hit pork and chicken producers in the southern U.S. hardest, because their local supply of corn and soybeans from this year’s harvest is likely exhausted and they’d have to ship feed by truck, dramatically increasing costs.

“They only have so much storage. They can’t go without rail service for too long before they’d have to shut down the feed mills and they run into problems,” said Max Fisher, the NGFA's chief economist.

RETAIL RISKS

Jess Dankert, the vice president for supply chain at the Retail Industry Leaders Association, said retailers’ inventory is largely in place for the holidays. But the industry is developing contingency plans.

“We don’t see, you know, canceling Christmas and that kind of narrative,” Dankert said. “But I think we will see the generalized disruption of really anything that moves by rail.”

David Garfield, a managing director with the consulting firm AlixPartners, said a rail strike could still impact holiday items shipped to stores later in December, and would definitely hamper stocking of next season’s goods.

Retailers are also concerned about online orders. Shippers like FedEx and UPS use rail cars that hold roughly 2,000 packages in each car.

AUTOMOBILE ANGST

Drivers are already paying record prices and often waiting months for new vehicles because of the production problems in the auto industry related to the shortage of computer chips in recent years.

That would only get worse if there is a rail strike, because roughly 75% of all new vehicles begin their journey from factories to dealerships on the railroad. Trains deliver some 2,000 carloads a day filled with vehicles.

And automakers may have a hard time keeping their plants running during a strike because some larger parts and raw materials are transported by rail.

Associated Press Writers David Pitt in Des Moines, Iowa, and Dee-Ann Durbin in Detroit contributed to this report.

© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

©2022 GPlusMedia Inc.


8 Comments
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The last time I checked, Union Pacific and many other logistics providers were raking in big profits. They need to pay and treat their workers better.

2 ( +2 / -0 )

Make railway great again!

-1 ( +0 / -1 )

Pay rail works more!

1 ( +1 / -0 )

The UK has so many strikes going on, including the rail network, that it is easier to tell people when something actually functions. Even when the strikes aren't on, the rail network in the UK is running on a much reduced timetable due to a labour shortage.

The US moves more by rail, so there is more impact and they may get higher wages. In the UK the strikes largely affect passengers, so they will just drag on, possibly for years, as the country and economy decays.

Those on low wages deserve increases so they can earn a living wage. In a recession, those on higher wages need to accept reality and understand that we will all have less money. Higher wages feed into price increases, but as other inflationary costs do too, prices will always rise by more than wages in an inflationary spiral.

That's why I used to post on here, saying that Japan should embrace deflation and be grateful for it. The alternative, as people are now discovering, is much worse.

An inflationary spiral may be stopped by a war or a crash. Or both. So, something to look forward to then.

In the UK, both main parties are embracing a higher wage economy as part of a Chinese politics/Soviet economy future. When you get there, there will be a lot missing. Things like coffee shops will no longer be viable, as all the inflationary pressures will feed in and you will have to sell $20 coffees. People won't buy them.

An entire raft of shops, products and other commercial ventures will simply vanish. If they are wise, they will close before the debts start to ramp up. If not, they will go bust. Whatever you enjoy doing, buying or visiting, a fair proportion of it will no longer exist.

The future is going to be wall-to-wall grim, so buckle up.

-2 ( +0 / -2 )

It amazes me that as large as companies like Union (Useless) Pacific and BNSF are, they don't offer sick leave for their employees. Their engineers and conductors can be worked as many as 30 days consecutively with no days off. You run a train for twelve hours, the maximum allowed by law, and then are taken in a van to a hotel to get your 8 or 10 hours of crew rest. After that you are on a two hour call. Your next train could go anywhere. Rinse, wash, repeat, day after day for weeks on end, and don't you dare get sick! What an awful industry.

0 ( +0 / -0 )

The US president consistently presents himself as pro-union, this will give him a chance to demonstrate his commitment. This article reads as, "if you're role is imperative to the economy, you can't strike". Certainly a sympathy administration would not agree.

1 ( +1 / -0 )

@OnTheTrail Great comment, but most union bosses today are just a middle man that gets paid good pocket money from these companies to keep the workers in check. Unions are not what they use to be workers pay their union dues only to hear a great speech that was prepared by the company in favor of the company. The union boss will get his money regardless while the workers continue to get blind sided.

The US president consistently presents himself as pro-union, this will give him a chance to demonstrate his commitment. This article reads as, "if you're role is imperative to the economy, you can't strike". Certainly a sympathy administration would not agree.

0 ( +0 / -0 )

The US president consistently presents himself as pro-union, this will give him a chance to demonstrate his commitment. This article reads as, "if you're role is imperative to the economy, you can't strike". Certainly a sympathy administration would not agree.

The Transportation Secretary has been leading the negotiations and the US President intervened directly to reach the agreement that most of the unions voted to accept. The President has held the threat of Congress stuffing a contract down their throats if they didn't agree to what the administration negotiated. It appears at least one of the unions involved is going to force Congress' hand. Neither party is going to condone a national railroad strike. Congress could impose the contract negotiated by the the administration or something completely different and possibly less favorable to the railroad workers. If Congress goes that route then the railroads and their unions must legally abide by whatever Congress decides.

0 ( +0 / -0 )

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