Review the latest Weekly Headings by CIO Larry Adam.
- Strike activity remains muted by historical standards
- Strike-related wage deals not likely to sway the Fed
- Corporate margins have room to absorb wage increases
Record-breaking heat waves dominate the news headlines, with 2023 shaping up to be one of, if not the hottest year on record. Extreme temperatures are shattering records across the U.S., Europe, and in parts of Asia – not just on land, but also in the sea. And temperatures are not the only thing heating up these days. With the historically strong job market and very low unemployment rate, labor market disputes are on the rise. Just look at the number of strikes and wage negotiations going on right now – from the Writers and Screen Actors Guilds to the Teamsters to the United Auto Workers Union. In fact, UPS (one of the nation’s largest package carriers) reached a tentative deal with the Teamsters Union, averting the biggest labor walkout since the 1950s and any potential negative impacts on the economy. While labor unrest is building, we do not expect the uptick in strike activity to have a meaningful impact on the Federal Reserve (Fed), the economy, or the markets. Here’s why:
- Headline risks ‘steamier’ than actual impact | The ominous-sounding headlines about strikes and disruptions are not as bad as they appear. Yes, it is true that the Bureau of Labor Statistics (BLS) reported that strike activity is up 44% from 2022 and is on pace to be the highest since 2000. But beneath the headlines, there have only been 16 strikes with more than 1,000 workers this year, which pales in comparison to prior decades. For example, the average number of strikes from 1950 through 1980 was over 300 per year. In addition, the total combined number of current workers on strike (~213k) is a tiny fraction of the total workforce (~0.1% of total employment). A big reason: union membership has been halved – down from over 20% of the total workforce in 1983 to ~10% today.