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Economists: It's too soon to gauge strike impact
But give it a week or two and economy may suffer
August 14, 1997
Web posted at: 10:26 p.m. EDT (0226 GMT)ARLINGTON, Virginia (CNN) -- The woman's apparel shop Kay Robinson manages in suburban Washington, D.C., is notable these days for having shelves with nothing on them.
"We have almost empty fixtures, and we have empty fixtures," Robinson said. "We have no merchandise to put on them."
Hers is one of hundreds of thousands of business around the United States waiting for last week's inventory to arrive, inventory that is piling up at plants and factories and other shops during the Teamsters strike of United Parcel Service.
"We operate on a 1 percent or 2 percent profit margin," explained Tracy Mullin, president of the National Retail Federation. "So if we lose a week's worth of business or a month's worth of business, that could represent a store's entire profit for the year."
UPS says the strike is nothing less than a national crisis. Management points out that it handles nearly 5 percent of the country's $7 trillion gross national product, and employs one of every 400 U.S. workers.
While some economists think UPS may be overstating its case, they also agree that if the strike continues another week or two it could have an adverse effect on the nation's economy.
Economist fear 'cascading chain'
"There is a kind of a cascading chain," said economist Alan Blinder. "If one can't sell, then that business doesn't buy and that means the next business doesn't sell, and the previous business doesn't sell, and so on."
"It will eventually affect nearly everyone, not just the people shipping packages, " says Donald Ratajczak, another economist.
Shifting to other shippers can also push up the costs for consumers.
Judy Hooper, a baker in Illinois, said she has been unable to ship her cookies out of state because the costs of using another shipper are too high.
"It would cost more than the cookies cost," she said. If the strike doesn't end this week, she said she'll have to start laying people off.
Small business owners have been emphatic about their desire to see the strike end quickly. The Small Business Administration says small companies are being hit hard.
The National Small Business United organization, which represents 65,000 small businesses, sent a letter to President Clinton Monday saying "something has to be done."
"Businesses are literally starving out there," said NSBU president Todd McCracken.
Real impact depends on how strike ends
Some economists say the strike's real impact will be determined not by how long it lasts, but by how it ends.
"The AFL-CIO sees a large stake in this disagreement that potentially goes beyond UPS workers," Blinder said.
If the Teamsters get what they're after, Wall Street fears that it could fuel demands by other unions, which could trigger a run on the corporate wallet.
"If the union is able to extract wage increases," said Merrill Lynch senior economist Martin Mauro, "is that going to be emulated by other unions? Might that set off a round of bigger wage increases nationwide?"
Wage increases could lead to higher prices, and higher prices to the inflationary spiral that would require a hike in interest rates. That, in turn, could hinder growth, and perhaps even cripple the roaring bull market on Wall Street.
"The most important thing is that strikes don't last forever," Blinder said. "The economy is normally quite resilient and comes bouncing back."
A comforting thought, perhaps. But Kay Robinson would rather have something she can put on her shelves.
Correspondent Kyoko Altman contributed to this report.
- Message Board: Can UPS and Teamsters reach an agreement?
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- Union leader: UPS pilots could strike near Christmas - August 14, 1997
- Strike support waning among some UPS employees - August 13, 1997
- UPS strike: Talking but no talks - August 13, 1997
- UPS may cut 15,000 jobs - August 12, 1997
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