LOS ANGELES — As the strike at the nation’s busiest ports of Los Angeles and Long Beach reached day six on Monday, the current and projected economic impact weighed on those in the industry.
This story first appeared in the December 4, 2012 issue of WWD. Subscribe Today.
With operations at 10 of the 14 cargo container terminals shut down, about a dozen container ships sat offshore over the weekend, unable to unload or load cargo. Another 10 ships were scheduled to arrive Monday.
Each ship carries about five warehouses’ worth of goods. Based on last year’s estimates, about $1 billion a day in freight normally moves through the ports at this time of year. Last year, the two ports handled about 40 percent of the total value of all cargo container imports entering the U.S.
Apart from the impact on national retail, the strike is considered potentially disastrous for the Southern California economy because the ports of Los Angeles and Long Beach are crucial to the region’s trucking and transport industry, which employs about 595,000 people.
Economists have placed the impact at about $1 billion a day in forfeited worker pay, missing revenue for truckers and other businesses, and the value of the cargo that has been diverted to other ports including Oakland, Calif.; Mexico, and the Panama Canal.
Others believe the figure is inflated and caution that the immediate impact on the retail industry could be manageable.
“The immediate impact should be minor if it lasts only a week. Of course, it’s a negative to lose port- and transportation-related wages each day, but in terms of wider impact in retail, most businesses have received most of their Christmas inventory and are not going to close shop,” said Esmael Adibi, director for the Anderson Center for Economic Research at Chapman University. “If it lasts longer than two weeks, it could affect retailers with lean inventory and production processes that depend on parts or nonfinished goods on the ships.”
Industry groups the Retail Industry Leaders Association and the National Retail Federation last week sent letters to President Obama asking him to intervene in the strike. On Monday the NRF renewed the call, releasing a statement from its president and chief executive officer, Matthew Shay.
“The shutdown is already having a significant negative economic impact on retailers trying to bring in merchandise for their final push for holiday sales and will soon have an impact on consumers. The work stoppage not only impacts retailers, but is also affecting their product vendors — many of which are small businesses — and other industries like manufacturers and agricultural exporters that rely on the ports.…A protracted strike will ultimately result in higher prices at the very time we can least afford it. This strike is now at the national emergency stage impacting industries far and wide,” Shay said.
“We’re taking it day by day. Each day that ships linger with our goods on them, it creates a backlog,” said Kelly Kolb, vice president of government affairs at RILA, adding that they have not yet received a response from the White House. “Each of our members is working through their advertised sales to see what products being advertised are sitting on ships right now. A number of our retailers obviously have their holiday goods in stores and distribution centers, but Christmas isn’t the only shopping season. The Super Bowl on Feb. 3 is a big-time TV event, and spring is big for seasonal items like bathing suits, clothes, patio furniture and barbecues. That stuff should be moving in the next couple of weeks if not already.”
Kolb noted that during the 10-day Los Angeles ports strike in 2002, it was estimated that it took retailers one week to recover for every day of the strike.
Although talks between the 800-member International Longshore and Warehouse Union Local 63 Office Clerical Unit (OCU) and the Harbor Employers Association continued over the weekend, the two groups are still at odds. Los Angeles Mayor Antonio Villaraigosa on Monday called for round-the-clock bargaining with the help of a mediator.
“This cannot continue,” Villaraigosa wrote in a letter to John Fageaux Jr., president of the OCU, and Stephen L. Berry, chief negotiator for the employers group. He noted that the strike is “costing our local economy billions of dollars.”
Until it launched the strike last week, the union was working without a contract since June 30, 2010. At issue is the OCU’s concern of losing jobs through attrition without new hires to replace them, and fear that employers will outsource new jobs to nonunion workers.
The current strike by the clerical workers has crippled the ports because of support from the ILWU dockworkers, who have 50,000 members on the U.S. West Coast and in Hawaii and Canada. The dockworkers negotiate their contracts separately, but the 10,000 members who work at the Los Angeles and Long Beach ports have honored the clerical unit’s picket lines.