A broad strike would shave off between 0.05 and 0.1 percentage point from annualized economic growth for every week it lasts, according to Goldman Sachs.
By idling factories, a strike also postpones the auto sectors full recovery from supply-chain disruptions caused by the Covid-19 pandemic, The Wall Street Journal said, adding that domestic vehicle production is returning to near to where it was before the pandemic. Over time, the strike could dent output and push up prices again.
“I dont expect the strike on its own to tip the national economy into recession, but there are other speed bumps coming,” said Gabe Ehrlich, an economist at the University of Michigan. “You put all those together and it looks like it might be a bumpy fourth quarter to end the year.” The next bump could be a partial government shutdown. Congress has until the end of September to agree to fund the government. For now, lawmakers are far apart.
WSJ said that if they cant reach a deal, all but the governments most essential workers
would be furloughed, perhaps as many as 800,000 nationwide. Those workers would likely spend less during the shutdown and the government would temporarily buy fewer goods and services.
In December 2018, a similar standoff caused a five-week partial shutdown in which the government funded some agencies and not others. Roughly 300,000 federal workers were furloughed. It shaved 0.1% off economic output in the fourth quarter of 2018 and 0.2% in the first quarter of 2019, according to the Congressional Budget Office (CBO).
Most of that lost economic activity was made up later, when the government reopened and federal workers received back pay, according to CBO.
Another bump will be the resumption of federal student loan payments Oct. 1. The restart could divert roughly $100 billion from Americans pockets over the coming year, according to an estimate from Wells Fargo economist Tim Quinlan.
That would be the first time many borrowers make payments since March 2020, when the Education Department paused them to h
elp cushion the financial effects of Covid-19.
Monthly payments for the tens of millions of student-loan borrowers affected average between $200 and $300 per person.
Higher gasoline prices add to that pressure. Brent crude oil prices have hovered above $90 a barrel for the past few days, up from just above $70 this summer. Gasoline prices surged 10.6% in August from the prior month, the largest one-month increase since June 2022, according to Labor Department data.
That caused consumer inflation to edge higher for the second straight month after trending down the prior year.
“Its the strike, its government shutdown, resumption of student loan payments, higher long-term rates, oil price shock,” Fed Chairman Jerome Powell said when asked Wednesday about external factors that could affect the economy.
Source: Qatar News Agency