A walkout by more than 12,000 autoworkers yesterday could slow an outperforming US economy should it drag on — even risking the first monthly net drop in payroll employment in nearly three years — but is unlikely on its own to trigger a recession.
Economists see the most immediate risk to activity concentrated in the auto sector itself, which only this year got back on its feet after two years when COVID-19 pandemic-related supply chain bottlenecks hampered vehicle output. With dealer inventories restrained, sales of new cars and trucks slumped even as consumer demand remained strong.
After failing to reach a deal on a new contract with Detroit’s “Big Three” automakers, General Motors, Ford and Stellantis, the United Auto Workers (UAW) union yesterday went on strike at three plants in three states. The stoppage for now affects about 12,700 hourly employees.
Photo: AFP
Should it widen in the weeks ahead to include all 146,000 UAW members at the three companies, it could become the largest automotive industry strike in a quarter century — since more than 150,000 GM workers went off the job for nearly two months in 1998.
That would put “at risk half a billion dollars per day in an economy that generates more than US$26.7 trillion in goods and services each year, or more than US$73 billion per day,” RSM chief US economist Joe Brusuelas estimated this week.
RSM estimated the US economy would suffer a modest 0.2 percent drag to annualized growth of GDP this quarter should the strike action last for a month, Brusuelas said.
“While that amount is large in nominal dollar terms, it would not be large enough to tip the economy into recession. In the end, the impact of a such a strike would be modest compared to previous generations,” Brusuelas said.
Other economists offered comparable estimates of the potential drag from a prolonged strike by the Big Three’s full union membership.
The US economy this year has dodged what was a consensus expectation for falling into recession in the face of aggressive interest rate hikes by the US Federal Reserve to rein in the highest inflation in four decades.
In fact, growth in GDP motored along at an above-trend rate of just above 2 percent annualized through the first six months of the year, and indicators of activity so far in the third quarter suggest it has accelerated further.
That said, activity in some sectors — manufacturing in particular — has recently slowed or even stalled, and a historically hot job market has cooled over the summer.
A full-blown strike “could push US payroll growth temporarily negative,” Michael Pearce, lead US economist at Oxford Economics, wrote on Wednesday.
While this was the survey week for the US Department of Labor’s monthly nonfarm payrolls report for this month, the fact that union members were on the job for most of the week ahead of the walkout means they would be counted as employed for this month’s report, Pearce said.
That means any recorded knock to employment would likely not occur until next month, should the strike last that long, and that would not be reported until early November.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading