Beyond the automakers: How the UAW strike may hit the US economy

Sep 16, 2023, 7:00 AM

New York (CNN) — With the United Auto Workers’ historic strike officially underway, experts s...

File - United Auto Workers members walk in the Labor Day parade in Detroit on Sept. 4, 2023. The union is threatening to strike any automaker that hasn't reached an agreement by the time contracts expire on Sept. 14. (AP Photo/Paul Sancya, File)

(AP Photo/Paul Sancya, File)

New York (CNN) — With the United Auto Workers’ historic strike officially underway, experts say the US economy is already getting bruised – but the strike’s impact isn’t likely to push the nation into a recession.

“That’s because the unionized part of the industry, while still large, is not as big a piece of the national economy isn’t as it once was,” Gabriel Ehrlich, an economic forecaster at the University of Michigan, told CNN.

But the ultimate impact of the strike depends on things like how long the strike lasts, if companies lay off workers at other plants, how many workers walk off their jobs and how long the unions and companies take to negotiate a deal.

UAW president Shawn Fain said “we’re not going to wreck the economy. The truth is we are going to wreck the billionaire economy.”

And while estimates of the economic impact of the strike don’t point at “wrecking the economy,” the damage could be significant.

For instance, if all UAW workers at Ford, General Motors and Stellantis strike for 10 days, it would cost the US economy $5 billion, according to Anderson Economic Group’s estimates.

Another estimate by Ehrlich assumes there would be a much smaller immediate spillover effect. He estimated $440 million worth of income would be lost nationally if all the UAW members strike for two weeks. If the strike lasts eight weeks, he estimates a $9.1 billion hit to incomes nationwide.

Here are the ways the US economy could get hurt by the strike:

Businesses near strike sites will see revenue slow

Although striking UAW members will be receiving $500 a week in strike pay, it likely won’t be sufficient for them to keep up their normal spending. That means local businesses near strike sites will lose out on revenue.

If the strike goes on long enough, it could lead employers near the affected auto plants to lay off workers, said Tyler Theile, vice president and director of public policy at Anderson Economic Group.

Suppliers that work with the Big Three may have to lay off workers

Because car inventories nationally are still below pre-pandemic levels, the Big Three automakers are going to be anxious to restart production as soon as the strike ends, said Ehrlich. That’s why he expects them to delay canceling orders with suppliers for necessary parts for as long as possible.

But when the automakers ultimately do begin canceling orders, it will have a ripple effect throughout the parts supplier network. At first, suppliers who work directly with the automakers, so-called tier one suppliers, will try to keep workers on the payroll because they’re worried about being able to rehire if they let people go, in what’s called “waiver hoarding behavior.”

But if a strike goes on long enough, they’ll have no choice but to lay off workers.

Then the pain may spread. Tier two suppliers -— those that supply the tier one businesses — could also have to lay off workers as a result.

Tax revenue will decline

Fewer people working because of the strikes will mean the government can’t collect as much tax revenue. That matters because it means that fewer programs will receive the funds they need.

At the state level, Ehrlich estimated that Michigan, the epicenter of many of the strikes, will see a $10.6 million decline in tax revenue if the strike lasts two weeks.

Cars could get more expensive

Anderson Economic Group estimated that 25,000 vehicles won’t be produced if the strike lasts 10 days. That would lead to higher car prices, especially since inventory is tight as is, said Theile.

Still, the strike’s impact will be nothing like the Covid pandemic and the computer chip shortages that largely shut down the entire US auto industry in recent years, said Jonathan Smoke, chief economist for Cox Automotive.

As it stands, prices for new vehicles are up almost 3% from last year, according to the August Consumer Price Index.

CNN’s Peter Valdes-Dapena contributed.

Related: United Auto Workers union strikes at GM, Ford and Stellantis

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

Business + Economy

Starbucks director of global agronomy, Carlos Mario Rodriguez at the Hacienda Alsacia coffee farm.

Danielle Wiener-Bronner, CNN

Coffee is in danger. Starbucks is working on solutions

Starbucks has distributed about 70 million coffee rust resistant trees to farmers, as part of its goal to give out 100 million trees by 2025.

58 minutes ago

FILE - New graduates line up before the start of a community college commencement in East Rutherfor...

Mark Jones

With student loan payments starting up, financial advisor offers tips

With the arrival of October, student loan payments will now resume.

15 hours ago

a "sold" sticker is shown on a "for sale" sign - DAVIS COUNTY, Utah -- Wannabe homebuyers in Davis ...

Aimee Cobabe

Davis County hopes to lower home prices by offering new loan

Wannabe homebuyers in Davis County can now apply for a new loan from the county. The hope is that this will help lower home prices over time.

18 hours ago

Frontline healthcare workers hold a demonstration on Labor Day outside Kaiser Permanente Los Angele...

Chris Isidore, CNN

Health care is in crisis. The looming strike by 75,000 health workers is just another sign of that

75,000 health care workers are participating in the nation’s largest health care strike in history.

1 day ago

A pedestrian views diamond jewelry in the window of a store in the Diamond District neighborhood of...

Eva Rothenberg, CNN

Diamond prices are down as people spend more on travel and food

Prices for rough diamonds — the unpolished and uncut stones — have dipped in 2023 as many post-pandemic consumers shy away from luxury goods.

1 day ago

Apple is blaming a software bug and other issues tied to popular apps such as Instagram and Uber fo...

MICHAEL LIEDTKE AP Technology Writer

Apple says it will fix software problems blamed for making iPhone 15 models too hot to handle

Apple is blaming a software bug and other issues for causing its recently released iPhone 15 models to heat up and "becoming too hot to handle."

2 days ago

Sponsored Articles

silhouette of a family looking over a lake with a bird in the top corner flying...

Bear Lake Convention and Visitors Bureau

8 Fun Activities To Do in Bear Lake Without Getting in the Water

Bear Lake offers plenty of activities for the whole family to enjoy without having to get in the water. Catch 8 of our favorite activities.

Wellsville Mountains in the spring with a pond in the foreground...

Wasatch Property Management

Advantages of Renting Over Owning a Home

Renting allows you to enjoy luxury amenities and low maintenance without the long-term commitment and responsibilities of owning a home.

Clouds over a red rock vista in Hurricane, Utah...

Wasatch Property Management

Why Southern Utah is a Retirement Paradise

Retirement in southern Utah offers plenty of cultural and recreational opportunities. Find out all that this region has to offer.

Human hand holding a protest banner stop vaping message over a crowded street background....

Prosperous Utah Communities

Utah’s Battle to Protect Youth from Vaping Epidemic Faces New Threat as Proposed Rule Threatens Progress

Utah's strict standards of nicotine levels in vaping products are at risk, increasing health hazards associated with use. Read more about how you can advocate for a better future for Utah's youth.

Aerial photo of Bear Lake shoreline with canopies and people camped out on the beach...

Visit Bear Lake

Last-Minute Summer Vacation Planning? Check Out Bear Lake!

Bear Lake is the perfect getaway if you are last-minute summer vacation planning. Enjoy activities with your whole family at this iconic lake.

close up of rose marvel saliva blooms in purple...

Shannon Cavalero

Drought Tolerant Perennials for Utah

The best drought tolerant plants for Utah can handle high elevations, alkaline soils, excessive exposure to wind, and use of secondary water.

Beyond the automakers: How the UAW strike may hit the US economy