An influential railroad worker union rejected a Biden-brokered labor deal Monday morning, raising the prospect of a strike before the holidays.
Why it matters: The deal's failure is a setback for the White House, which brokered and sold it as a big win in September.
Driving the news: SMART Transportation Division, the union that represents rail conductors, voted against the deal. The rail workers can strike after Dec. 9 if the two sides don't reach an agreement.
- After that date, a strike could happen at any moment — unless lawmakers step in to implement a cooling-off period or even force the workers to accept a deal.
- "Our expectation is that no matter what happens, Congress is still going to need to step in," said Scott Jensen, director of issue communications, at the American Chemistry Council. It's one of many trade groups sounding alarms about the possibility of a shutdown.
Between the lines: The contract was brokered by union leadership and they had a tough time selling the deal to rank-and-file members, many of whom are incredibly angry about how they've been treated in recent years — particularly during the pandemic.
- Union leaders trying to sell the deal to members have gotten a lot more blowback than they were expecting, in part due to a worker group — unaffiliated with these organized unions — that's been pushing hard against the deal.
- Unlike in a lot of labor deals, pay isn't the main sticking point. It's work-life benefits — particularly sick leave.
- "We were somewhat surprised," when members voted no, said Peter Kennedy, director of strategic coordination research at BMWED, the third-largest union, which voted down the contract in October.
- "This is the best pay package I've seen in my career," said Kennedy, a near-20-year rail veteran. "If employees are willing to vote that down because of the lack of paid sick time, that tells you something."
The big picture: Any disruption to freight rail service would be a blow to the supply chain recovery and the economy.
- A long-lasting strike — not an impossibility — could even tip the country into recession, according to the Chemistry Council. The group projects that a month-long strike would pull close to $160 billion out of the economy, and lead to a 1% decline in GDP.
More possible and also worrying: As the December deadline creeps closer, the freight rail companies will start shutting down certain shipments — of hazardous chemicals, say — ahead of a potential strike.
- For example, in the run-up to the labor deal brokered in September, the rail companies stopped shipments of all hazardous chemicals — that meant a drop of nearly 2,000 carloads of chemical shipments for just one week in September.
- Those chemicals find their way into some critical everyday necessities — chlorine, used to keep drinking water clean, as well as ethanol and ammonia, used for fertilizer.
What to watch: Businesses are prepping for disruptions, says Jess Dankert, vice president of supply chain for the Retail Industry Leaders Association. That's when you'll start seeing cargo get backed up at the ports, for example.
- One reassuring note: Retailers are stocked for the holidays, she says. "We will still have Christmas this year."
Editor's note: This article has been updated with new details throughout.
