Strikes and the economy
General Motors and the United Automobile Workers union are not the only winners in the tentative strike settlement now coming up for ratification with GM employees around the United States.
If preliminary indications prove correct, the American public also comes out ahead with the accord. It provides GM workers modest wage increases as well as a landmark job-security provision. Analysts do not expect the wage gains to add much to the price of new cars, which in many cases are already scheduled to post modest 1 to 2 percent price increases anyway. The GM rank and file would seem on solid ground in accepting the settlement. It was hammered out by GM and union officials after a period of long, tough bargaining.
Clearly, the American economy benefits whenever management and labor recognize their common interests - and their common competition from abroad in a day and age when the main rival is more apt to be a giant firm located overseas than some upstart down the block.
One of the important elements explaining Japan's economic success story is the relatively amicable relationship between industry and labor in that nation - a sense of shared interest that minimizes conflict (though not always disagreement) and keeps production lines humming.
The tentative auto workers settlement is not the only good news on the strike front. The United Mine Workers have reached a tentative contract with the Bituminous Coal Operators Association. The United Mine Workers are the New York Yankees of strikedom - in other words, put the mineworkers and the coal operators together in a negotiating room somewhere and the session is likely to resemble the Yankee clubhouse when George Steinbrenner comes in to rally his team. The result in most years: a strike or walkout.
The mine workers as of this writing say they may well strike some independent operators. But the economic impact of any such strikes would be considered negligible.
Now that the economy has shifted into a slower level of growth, any protracted auto or coal strike would have only accelerated a further slowdown. While the GM strike by itself, for example, would not have lowered actual growth all that much for the current quarter - perhaps as little as 0.3 percent through September, had the strike continued - it could have contributed to public unease about the future. Such concerns might in turn have worked against consumer spending.
The Commerce Department's flash estimate of growth for the US economy during the current third quarter (July through September) shows the economy slowing substantially from the pell-mell pace of the first half of the year. The estimate for the quarter is for 3.6 percent growth. That compares with a torrid growth of 8.8 percent for the first half of the year. The slower growth will mean lower inflation and, possibly, a reduction in interest rates, as was started by Morgan Guaranty Trust on Friday. But it will most likely not be enough to lower unemployment much from the current 7.5 percent jobless rate.
One positive element that economists will be closely monitoring: Retail sales , which dipped in July and August, are believed to be rebounding during September.
So the recovery goes on, although at a slower, more sustainable, pace.
That pacing, of course, will have to be watched closely to ensure that the momentum continues. The tentative auto and mine workers agreements cannot help but keep the recovery on course.