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Key Freight Rail Union Rejects Deal, Increasing Strike Risk
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Railroad Workers Point to Punishing Schedules as Cause of Strike
Employees say the inflexibility of scheduling upended their personal lives. The companies say they maintained service while using fewer resources.To defuse a labor dispute that brought the nation to the brink of a potentially catastrophic railroad strike, negotiators had to resolve a key issue: schedules that workers say were punishing, upending their personal lives and driving colleagues from the industry.Workers, industry analysts and customers say the practices emanate from a business model that focuses relentlessly on holding down expenses, including labor costs. They say this leaves rail networks with little capacity to work around a disruption, whether it be a personal issue for an employee or a natural disaster like a hurricane — or, for that matter, a pandemic.Negotiations in which the Biden administration took an active role produced a tentative contract deal announced early Thursday. The agreement included a significant pay increase for the workers, whose base wages typically start around $50,000 and top out around $100,000, excluding overtime and benefits. But scheduling was the sticking point.Unions complained that to manage a shortfall of employees, the carriers effectively forced their members to remain on call for days and sometimes weeks at a time, partly through the use of strict attendance policies that could lead to disciplinary action or even firing. They said the policies pushed workers to the limits of their physical and mental health.“Every facet of your life is dictated by this job,” said Gabe Christenson, who until this year worked as a conductor for a large freight rail carrier. “There’s no way to get away from it.” Carriers said employees could take time off through paid vacation, income replacement for sick workers or removal of themselves from the list of available workers.“Railroads provide multiple ways for employees to take time to care for themselves and their families,” the Association of American Railroads, an industry group, said in a statement earlier this week.By Sunday, leaders of 10 of the 12 unions in the talks had agreed to contract terms. But two unions representing conductors and engineers — about half the 115,000 freight rail workers involved in the dispute — held out for a concession on scheduling, like the ability to see a doctor or attend to a personal matter without risking disciplinary action.President Biden in the Oval Office on Thursday with representatives of the railroads and the unions as well as Labor Department officials.Doug Mills/The New York Times“It would not harm their operations to treat employees like humans and let them take care of medical issues,” Dennis Pierce, president of the Brotherhood of Locomotive Engineers and Trainmen, one of the two unions, said in an interview on Monday. “It’s the primary outstanding issue, one we won’t budge on — the request that they stop firing people who get sick.”After the tentative deal was announced, the two unions said it included “contract language exempting time off for certain medical events from carrier attendance policies.” The agreement will require ratification by union members, a process that could take a few weeks.In some respects, the freight rail industry is similar to other swaths of the economy, such as retail and food service, where employers have imposed increasingly lean staffing in recent decades.Rick Paterson, a longtime industry analyst with the investment bank Loop Capital, said the staffing trend for railroads became more pronounced in the early 2000s when, after years of consolidation, carriers and their investors began to recognize that they had pricing power.As a result, the dominant business model in the industry shifted from one in which the carriers sought larger volumes of traffic to one in which they sought to increase profits by raising prices and lowering expenses like labor costs.“They realized that if growing pricing is good for margins, then keeping costs low is even better,” said Mr. Paterson, who has referred to this thinking as “the cult of the operating ratio,” after the ratio of operating expenses to revenue.A freight train yard near the Port of Los Angeles on Thursday. A strike by freight rail workers would have been economically damaging.Alex Welsh for The New York TimesThe side effect, however, was to gradually eliminate any cushion in staffing levels.Unlike many workers, the conductors and engineers who operate trains don’t get weekends or other consistent days off.Instead, said Mr. Pierce, the president of the locomotive engineers union, workers go to the bottom of a list of available crews when they return home from a trip that can last days. The fewer the workers, the shorter the list, and the less time it takes for them to be summoned into action again.“It can go on indefinitely, till they interrupt the cycle by taking paid time off, which the companies routinely reject,” Mr. Pierce said.Major U.S. freight rail carriers began to accelerate the staffing cuts in recent years as they switched to a system known as precision scheduled railroading, or P.S.R., which focuses on scaling back excess equipment and employees and streamlining the shipping process. The industry has said P.S.R. enables carriers to run more efficiently and provide more reliable service, while also improving profits. Freight rail customers and employees say it has resulted in deteriorating working conditions and customer service and little resilience in dealing with unforeseen circumstances, like weather emergencies. The Surface Transportation Board, a federal regulatory agency, estimates that the carriers have 30 percent fewer employees today than six years ago.Reducing labor to match this operating model may have been sound in principle, said Mr. Paterson, the industry analyst. But he said the carriers appeared to have cut back too much to allow them to handle potential disruptions, of which the pandemic was an epic example.“When you do P.S.R., you can drop your head count by 30 percent, but why don’t you drop it 28 percent and build in a crew reserve?” he asked. “That didn’t happen.”With little margin for error, carriers found themselves with too few workers to operate their rail networks once business began to recover in the second half of 2020, putting more and more stress on their workers, and making it even harder for them to take time off.Freight rail workers on train tracks in Atlanta on Thursday.Dustin Chambers for The New York TimesWhen Mr. Christenson, the longtime conductor, who is also a co-chair of the industrywide group Railroad Workers United, began feeling run-down last year, he was reluctant to see a doctor. Under his company’s attendance policy, taking an unplanned day off could lead to disciplinary action, and “I worried about triggering an investigation,” he said.So he waited until he could get an appointment on a scheduled day off a few months later, at which point he got bad news: He had an infection that might have been easily resolved with medication but now required surgery.“They had to cut infected tissue out in my leg,” Mr. Christenson said.Railroad workers and their families, many of whom asked to remain anonymous for fear of reprisals, said similar attendance policies, which are partly intended to manage the industry’s labor shortfall, had resulted in workers’ missing important life events.This year, for example, BNSF Railway introduced a new point system for some employees, according to a February memo obtained by The New York Times. Under the policy, workers were awarded 30 points to start with and would lose points — from two to 10 — for scheduling a day off for a variety of reasons, including a family emergency, sickness or fatigue. They lose even more points for being unavailable at the last minute.When workers run out of points, they face escalating penalties, starting with a 10-day suspension, followed by a 20-day suspension and ending with possible firing. Workers can earn back points by being available for two weeks straight. BNSF said on Thursday that the policy was “designed to improve the consistency of crews being available for their shifts” and to give employees more “predictability and transparency” regarding their schedules. It said that the program was achieving those goals but that revisions had been made to give employees more flexibility. One railroad worker said the fast turnaround time between shifts had forced him to skip doctor’s appointments to address his symptoms of long Covid. Railroad workers’ family members said they rarely celebrated birthdays or holidays together even before the pandemic.Workers say that while they have paid vacation and days allotted for personal leave, the constraints that employers impose — like requiring vacation to be taken in limited windows that are far oversubscribed, or simply rejecting a proposed personal day — severely limit their options as a practical matter.Shippers have grown frustrated, too.Rail cars full of grain sat at production facilities in the Midwest for weeks at a time earlier this year, far longer than typical, said Max Fisher, the chief economist and treasurer for the National Grain and Feed Association.Chemical manufacturers, which rely on freight rail to move their products, have grown increasingly frustrated with the carriers since December, according to three surveys by the American Chemistry Council, an industry association. The latest, conducted in July, found that 46 percent of the companies felt that rail service was getting worse, while only 7 percent said it was improving.“Freight rail has been a constant thorn in our side and been a significant challenge for our members for quite some time,” said Chris Jahn, the organization’s chief executive.While the labor agreement announced on Thursday may avert a strike, it is unlikely to resolve the deeper issues that have put unions and rail carriers on a collision course. Even if carriers wanted to turn back the clock on efforts to increase efficiency, they would have shareholders to answer to.After Bill Ackman, the activist investor, won a proxy battle over the freight carrier Canadian Pacific a decade ago, the company hired Hunter Harrison, who pioneered P.S.R., as its chief executive. Mr. Harrison imposed the system there and then at CSX after joining that company in 2017, prompting investors to pressure other carriers to follow suit to eke out similar efficiencies.“Lurking in the background is the constant threat of shareholder activism if any of the railroads’ operating ratios become outliers on the high side,” Mr. Paterson said in testimony to the Surface Transportation Board this spring. More
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Strike Threat on Freight Railroads Is New Supply Chain Worry
Administration officials are pushing for a settlement to head off a walkout by tens of thousands of workers on Friday.Biden administration officials are racing to prevent a strike by tens of thousands of freight railroad workers that could further disrupt an already strained supply chain and cause billions of dollars in economic damage.The industry failed to reach a contract agreement with two unions representing much of the work force, and a federally mandated 30-day “cooling off” period ends on Friday, opening a door to strikes and lockouts. Some freight companies have started to limit services, and Amtrak, which carries many travelers on lines operated by freight railroads, said it would cancel some passenger service starting on Tuesday.Labor Secretary Martin J. Walsh pressured both sides over the weekend to reach an agreement, and administration officials have held dozens of calls with the industry and the unions, according to the Labor Department.“All parties need to stay at the table, bargain in good faith to resolve outstanding issues and come to an agreement,” the department said in a statement. “The fact that we are already seeing some impacts of contingency planning by railways again demonstrates that a shutdown of our freight rail system is an unacceptable outcome for our economy and the American people, and all parties must work to avoid that.”The deadlock puts President Biden in a complicated position. His administration has taken pains to restore and fortify the supply chain, which was deeply disrupted by the coronavirus pandemic. It has also worked hard to protect and endorse union rights.“A strike doesn’t help anybody,” Mr. Walsh said in an interview late last month. “A strike doesn’t help the workers. A strike doesn’t help the general public. A strike certainly doesn’t help the supply chain.”In July, Mr. Biden established an emergency board to help mediate the dispute between the industry, which includes six of the largest freight rail carriers, and about a dozen unions. Last month, that board recommended a resolution with a cumulative raise of 24 percent from 2020 through 2024, including an immediate 14 percent wage increase covering the first three years.Most of the unions agreed to the proposal, pending a vote of their membership. But two major unions are holding out for improvements to working conditions, which they say have steadily worsened in recent years as rail carriers have cut staffing.The Brotherhood of Locomotive Engineers and Trainmen and the SMART Transportation Division, which represent engineers and conductors, say workers must often stay on call for several days at a time, working 12-hour shifts with little notice, and are penalized for calling in sick.“Our unions remain at the bargaining table and have given the rail carriers a proposal that we would be willing to submit to our members for ratification, but it is the rail carriers that refuse to reach an acceptable agreement,” they said in a joint statement. “In fact, it was abundantly clear from our negotiations over the past few days that the railroads show no intentions of reaching an agreement with our unions.”Inflation F.A.Q.Card 1 of 5What is inflation? More
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Amazon Hub in Newark Is Canceled After Unions and Local Groups Object
The e-commerce giant planned to build an airport cargo center, hire 1,000 workers and invest hundreds of millions of dollars over 20 years.For the second time, plans by Amazon to substantially expand its presence in the New York area have been abandoned after labor and community groups mobilized in opposition.In 2019, Amazon abruptly canceled plans to build a second headquarters in New York City after facing a barrage of criticism that it did not anticipate. This time, the e-commerce giant was unable to complete a deal for a cargo hub at Newark Liberty International Airport.The project, which hinged on a 20-year lease worth hundreds of millions of dollars, attracted opposition after the Port Authority disclosed it last summer.“Unfortunately, the Port Authority and Amazon have been unable to reach an agreement on final lease terms and mutually concluded that further negotiations will not resolve the outstanding issues,” Huntley Lawrence, the Port Authority’s chief operating officer, said in a statement on Thursday.Advocacy groups and unions involved had said they could not support the lease unless Amazon made a set of concessions that included labor agreements and a zero-emissions benchmark at the facility.“This victory signals that if Amazon wants to continue growing in New Jersey, it’s going to have to do it on our terms,” said Sara Cullinane, director of Make the Road New Jersey, an advocacy group that had questioned the deal.Amazon, which expressed confidence in May that the deal would close, expressed disappointment in a statement, adding that “we’re proud of our robust presence in New Jersey and look forward to continued investments in the state.”Amazon had estimated that the project would create more than 1,000 jobs, though many of those jobs could still be created if the Port Authority awards the lease to another company. Two other companies bid on the project.“The growth of air cargo and the redevelopment of airport facilities in a manner that benefits the region as well as the local community remain a top priority of the Port Authority,” Mr. Lawrence, the chief operating officer, added in his statement.The bigger long-term impact may be on Amazon’s ability to deliver packages efficiently in the Northeast, which it serves with airport hubs near Allentown, Pa.; Hartford, Conn.; and Baltimore. “Newark was the obvious choice,” said Marc Wulfraat, an industry consultant who closely tracks Amazon’s facilities. “It is right there on the doorstep of New York City.”Understand the Unionization Efforts at AmazonBeating the Giant: A homegrown, low-budget push to unionize at a Staten Island warehouse led to a historic labor victory. (Workers at another nearby Amazon facility rejected joining a similar effort shortly after.)Retaliation: Weeks after the landmark win, Amazon fired several managers in Staten Island. Some saw it as retaliation for their involvement in the unionization efforts.Diverging Outcomes: Why has a union campaign at Starbucks spread so much further than at the e-commerce giant?Amazon’s Approach: The company has countered unionization efforts with mandatory “training” sessions that carry clear anti-union messages.Mr. Wulfraat said Amazon could look for other commercial airports in the region, even if their locations were less ideal, to support the growing package volume.It was in part the company’s prominence in the state that attracted opposition to the project. A report produced by groups seeking to block it pointed out that the number of Amazon facilities in New Jersey grew to 49 from one between 2013 and 2020, helping to nearly triple the number of warehouse workers in the state, to about 70,000. Over the same period, the average wage for those workers fell to about $44,000 per year from over $53,000 per year, adjusting for inflation, according to Labor Department data.New Jersey is one of the more unionized states in the country, while Amazon has opposed unionization efforts at its facilities.Amazon said that average starting pay for its hourly workers is more than $18 nationally. The median hourly wage in New Jersey was about $23 last year. The company also cited its benefits, including full health coverage for full-time employees as soon as they start working; a 401(k) plan with a 50 percent company match; and up to 20 weeks of paid parental leave.The Port Authority revealed the proposed lease with Amazon in August, the day its board voted to authorize the deal. The authority said that it expected the lease to take effect on or around Nov. 1, according to minutes of the meeting.“It was something that they were trying to slip in without notifying the community, which was quite unfortunate,” said Kim Gaddy, executive director of the South Ward Environmental Alliance, which focuses on environmental issues affecting Newark residents. Under the proposed deal, Amazon tentatively committed to investing $125 million in renovating two buildings at the airport, and to paying the Port Authority more than $300 million over 20 years — including $150 million up front.Amazon’s plan for the Newark hub involved renovating two buildings at the airport.Bryan Anselm for The New York TimesBy September, the groups led by Ms. Cullinane and Ms. Gaddy, along with other advocacy groups and unions like the Teamsters and the Retail, Wholesale and Department Store Union, began to coordinate their opposition. The groups circulated petitions that collected thousands of signatures from residents and staged public events like rallies and a march.The project appeared to stall after the November timetable for finalizing the lease passed without any announcement.In late March, a spokeswoman for Gov. Phil Murphy, who had initially praised the deal, said in a statement that “the governor encourages anyone doing business in our state to work collaboratively with labor partners in good faith.” (The governor’s office declined to comment on Thursday.) Other politicians in the state appeared to grow skeptical after the Amazon Labor Union’s election victory this year at a Staten Island warehouse, a result Amazon is contesting.Amazon uses an airport facility in Allentown, Pa., to serve the surrounding region, but it has outgrown the capacity.Mark Makela/ReutersAmazon has opened air hubs in recent years to move products through its own logistics network, rather than rely on outside providers. It prefers to fulfill customer orders with local inventory, for cheaper, quicker delivery, but when the product a customer wants is not in a nearby warehouse, it will fly the product to meet its shipping promises.Its operations expansion went into overdrive during the pandemic as e-commerce sales boomed. “We doubled our capacity that we built in the first 25 years of Amazon in just 24 months,” Andy Jassy, the chief executive, told investors in May.But the company has acknowledged that it overbuilt, expanding and hiring more than demand required, and in April it posted its first quarterly loss since 2015. This year Amazon has pulled back from some investments. “We’re trying to defer building activity on properties where we just don’t need the capacity yet, and we’re going let some leases expire as well,” Mr. Jassy said. More
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As Dockworkers Near Contract’s End, Many Others Have a Stake
LOS ANGELES — David Alvarado barreled south along the highway, staring through the windshield of his semi truck toward the towering cranes along the coastline.He had made the same 30-minute trek to the Port of Los Angeles twice that day; if things went well, he would make it twice more. Averaging four pickups and deliveries a day, Mr. Alvarado has learned, is what it takes to give his wife and three children a comfortable life.“This has been my life — it’s helped me support a family,” said Mr. Alvarado, who for 17 years has hauled cargo between warehouses across Southern California and the twin ports of Los Angeles and Long Beach, a global hub that handles 40 percent of the nation’s seaborne imports.He weathered the blow to his paycheck early in the pandemic when he was idling for six hours a day, waiting for cargo to be loaded off ships and onto his truck. Now the ports are bustling again, but there is a new source of anxiety: the imminent expiration of the union contract for dockworkers along the West Coast.If negotiations fail to head off a slowdown, a strike or a lockout, he said, “it will crush me financially.”The outcome will be crucial not only for the union dockworkers and port operators, but also for the ecosystem of workers surrounding the ports like Mr. Alvarado, and for a global supply chain reeling from coronavirus lockdowns and Russia’s invasion of Ukraine. Inflation’s surge to the highest rate in more than four decades is due, in part, to supply chain complications.The contract between the International Longshore and Warehouse Union, which represents 22,000 workers at 29 ports from San Diego to Seattle, and the Pacific Maritime Association, representing the shipping terminals, is set to expire on Friday. The union members primarily operate machinery like cranes and forklifts that move cargo containers on and off ships.In a statement this month, representatives of the two sides said that they didn’t expect a deal by the deadline but that they were dedicated to working toward an agreement.The negotiations have centered largely on whether to increase wages for the unionized workers, whose average salaries are in the low six figures, and expanding automation, such as using robots to move cargo containers, to speed up production, a priority for shipping companies.“It will crush me financially,” David Alvarado said of any work stoppage.Stella Kalinina for The New York TimesTrucks lined up to enter the Port of Los Angeles. Any slowdown, strike or lockout could further snarl the global supply chain.Stella Kalinina for The New York Times“Automation allows greater densification at existing port terminals, enabling greater cargo throughput and continued cargo growth over time,” Jim McKenna, the chief executive of the Pacific Maritime Association, said in a recent video statement on the negotiations.In an open letter posted on Facebook last month, the union president, Willie Adams, attacked moving toward automation, saying it would translate to lost jobs and prioritizes foreign profits over “what’s best for America.”The State of Jobs in the United StatesJob gains continue to maintain their impressive run, even as government policymakers took steps to cool the economy and ease inflation.May Jobs Report: U.S. employers added 390,000 jobs and the unemployment rate remained steady at 3.6 percent in the fifth month of 2022.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.Slowing Down: Economists and policymakers are beginning to argue that what the economy needs right now is less hiring and less wage growth. Here’s why.Opportunities for Teenagers: Jobs for high school and college students are expected to be plentiful this summer, and a large market means better pay.“Automation,” Mr. Adams wrote, “poses a great national security risk as it places our ports at risk of being hacked as other automated ports have experienced.”As the negotiations, which began in early May, continue, record levels of cargo have arrived here.In May, the Port of Los Angeles had its third-busiest month ever, handling nearly one million shipping container units, largely stocked with imports from Asia. Twenty-one ships were waiting to dock outside the local ports this week, down from 109 in January, according to the Marine Exchange of Southern California.On a recent trip here, President Biden — who authorized a plan last year to keep the Port of Los Angeles open 24 hours a day — met with negotiators to urge a swift agreement. Leaders on both sides say Mr. Biden has worked behind the scenes on the matter, hoping to avoid delays.When a breakdown in talks resulted in an 11-day lockout in 2002, the U.S. economy lost an estimated $11 billion. President George W. Bush eventually intervened, and the lockout was lifted. In 2015, when negotiations went on for nine months, the Obama administration intervened after the standoff led to a work slowdown and congestion at West Coast ports.Mr. Biden’s early intervention could help stave off severe backlogs, said Geraldine Knatz, a professor of the practice of policy and engineering at the University of Southern California.“In the past, the federal government would swoop in at the end when negotiations were at a stalemate,” said Ms. Knatz, who was executive director of the Port of Los Angeles from 2006 to 2014. “The relationship that developed between the ports and the Biden administration as a result of the supply chain crisis is something that did not exist before.”The contract between the International Longshore and Warehouse Union and the Pacific Maritime Association is set to expire this week. Stella Kalinina for The New York TimesEven so, contingency plans are in place, said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. Some retailers began pushing up their timetables months ago, ordering supplies long before they needed them, he said, and using ports along the East and Gulf Coasts when feasible.In an interview, Gene Seroka, executive director of the Port of Los Angeles, said he didn’t believe the looming contract deadline would lead to any delays: All the parties involved, he said, know that it’s already an exceptionally busy time for the region.Retail imports account for 75 percent of all cargo coming into the ports, and with back-to-school and holiday shopping seasons nearing, Mr. Seroka said he did not expect cargo volumes to shrink to more typical levels until next year.“Everyone is working as hard as they can,” Mr. Seroka said.But for some retailers, the current limbo brings back painful memories.In early 2015, as delays arose during contract talks, Charlie Woo laid off more than 600 seasonal workers from his company, Megatoys.“It was rough back then,” Mr. Woo said on a recent morning from his 330,000-square-foot warehouse in Commerce, Calif., an industrial city in Los Angeles County not far from the ports.Mr. Woo started Megatoys in 1989 and now imports around 1,000 cargo containers from China every year. The 40-foot containers come filled with small toys like plastic Easter eggs and miniature rubber soccer balls and basketballs, which his employees package into baskets sold at grocery stores and bigger outlets like Walmart and Target.During the pandemic disruptions last fall, some of his shipments were stalled by nearly three months — delays that ultimately translated into a 5 percent drop in sales for his company, which Mr. Woo said brings in tens of millions of dollars annually.He’s bracing for another hard year.“I expect problems; I just don’t know how big the problem will be,” said Mr. Woo, who also owns a manufacturing plant near Shenzhen, China, and said he hoped more U.S. terminals moved toward more automation.“We must find innovative solutions to catch up with the ports in Asia,” Mr. Woo said.Charlie Woo started Megatoys in 1989 and now imports around 1,000 cargo containers from China every year. Stella Kalinina for The New York TimesShipping containers at the Port of Los Angeles. The current limbo brings back painful memories for some retailers.Stella Kalinina for The New York TimesOn a recent afternoon, Mr. Alvarado, the truck driver, reminisced about the early days of the career he’d been born into.During summer vacations as a little boy, he’d ride shotgun with his father, who has driven a semi truck for nearly four decades at the ports, and they’d listen to Dodger baseball games together.“This is all I ever wanted to be,” Mr. Alvarado, 38, said. Over the years, he has seen many childhood friends move away because they could not afford to live here.It hasn’t always been easy for him, either. Last fall, with more than 80 cargo carriers anchored off the coast here, in part because of the lingering pandemic and a surge of imports ahead of the holiday season, he sometimes waited for hours before he finally got a load, said Mr. Alvarado, who is among the roughly 21,000 truck drivers authorized to pick up cargo at the ports.For an independent contractor, time is money: Mr. Alvarado works 16 hours some weekdays and aims to pick up and drop off four loads each day. When he does that consistently, he said, he can make up to $4,000 a week, before expenses.During the worst of the pandemic delays, he was lucky to get two loads a day, and although things have improved in recent months, he now frets about fuel prices.“Inflation has been intense,” he said.Filling up with 220 gallons for the week now typically costs $1,200, double that of several months ago, Mr. Alvarado said.“It all starts to add up,” he said. “You wonder if you should think about doing something else.”As for the prospects in the labor talks, Mr. Alvarado said he was trying to remain optimistic. The union workers, he said, remind him of his own family: men and women from blue-collar upbringings, many of them Latino with deep family ties to the ports. A work stoppage would be painful for many of them, too.“It will hurt all Americans,” he said.As he drove past the ports, Mr. Alvarado turned his truck into a warehouse parking lot, where the multicolored containers lined the asphalt like a row of neatly arranged Lego blocks.It was his third load of the day, and for this round, he didn’t have to wait on the longshoremen to load the carrier onto his truck. Instead, he backed his semi up to a chassis, and the blue container snapped into place.He pulled up Google Maps on his iPhone and looked at the distance to the drop-off in Fontana, Calif.: 67 miles, an hour and half.It might, Mr. Alvarado said, end up being a four-load day after all. More
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Biden Casts Inflation as a Global Problem During a Visit to the Port of Los Angeles
The visit to the nation’s busiest entry point for goods comes as President Biden struggles to show progress on resolving supply chain issues that are fueling inflation.LOS ANGELES — President Biden on Friday defended his administration’s efforts to deal with inflation, just hours after a new report showed a surprise spike in prices that puts new pressure on the White House to ease the burden on consumers.Mr. Biden used the Port of Los Angeles as a backdrop to highlight his fight against inflation, delivering a speech about how his team has tried to speed up the delivery of goods disrupted by the coronavirus pandemic.“The job market is the strongest it’s been since World War II, notwithstanding inflation,” Mr. Biden said, standing on the battleship Iowa, a decommissioned warship that has been turned into a museum.With shipping containers piled up behind him, Mr. Biden emphasized that his administration had taken action last year to reduce congestion at ports, allowing 97 percent of all packages to be delivered on time during the holiday shopping season.But six months later, serious problems remain and persistent inflation has become a major political liability for Mr. Biden.The war in Ukraine has disrupted flows of food, fuel and minerals, adding to pandemic-related shortages and pushing inflation to multidecade highs. Data released on Friday morning showed inflation picking up again, rising 1 percent from the previous month. Compared with one year ago, consumer prices rose 8.6 percent, the largest annual increase since 1981.While some clogs in the supply chain look to be clearing, analysts say that trend may yet stall — or even reverse — in the months to come, as retailers enter a busier fall season and dockworkers on the West Coast renegotiate a labor contract that could lead to work slowdowns or a strike.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Greedflation: Some experts contend that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.For Investors: At last, interest rates for money market funds have started to rise. But inflation means that in real terms, you’re still losing money.Mr. Biden said he understands that Americans are anxious.“They are anxious for good reason,” he said. But he stressed that inflation is largely the result of increases in the price of gasoline and food, and he blamed the price hikes in those goods on Russia’s invasion of Ukraine.Mr. Biden argued that large price increases in the United States were part of a global problem with inflation and that Americans were in better shape than their counterparts elsewhere because of a strong jobs market and a declining budget deficit.He also lashed out at nine shipping companies that he said had used the global economic situation to increase prices by 1,000 percent, artificially adding to the cost of goods around the world. He did not name the companies.But he said they “have raised their prices by as much as 1,000 percent.”He called on Congress to crack down on shipping companies that raise prices.“The rip-off is over,” he said.Mr. Biden is correct that soaring inflation is a global problem. In a note to clients on Friday, Deutsche Bank Research said the United States ranked 48th for its inflation rate on a list of 111 countries, just above the middle of the pack.But that is little comfort to U.S. households struggling with rising costs.Analysts say the U.S. logistics industry is heading into its busier fall season, when retailers bring in products for back-to-school shopping and the holidays. Chinese exports are also on the rise as an extended coronavirus lockdown lifts in Shanghai.And, most crucially, dockworkers on the West Coast are renegotiating a labor contract with port terminal operators that expires at the end of this month. If they fail to reach an agreement, West Coast ports may see slowdowns or shutdowns that would delay deliveries and add to supply chain gridlock.Over the past two decades, labor negotiations led to at least three such slowdowns or stoppages that resulted in delays. In recent weeks, some companies that typically ship into the West Coast have begun routing some goods to the East or Gulf Coasts to try to avoid any logjams.Gene Seroka, the executive director of the Port of Los Angeles, said he expected labor talks to go beyond the July 1 contract expiry date, but downplayed the risks to trade.“It’s important to know, with all this cargo on the way, the rank-and-file dockworkers will be out on the job every day,” he said.“And the employers know they’ve got to get these products to market,” he added. “So we’re going to give these people some room. Let them negotiate in their space, and the rest of us are going to work on keeping the cargo and the economy moving.”Dockworkers on the West Coast, including at the Port of Los Angeles, are renegotiating a labor contract with port terminal operators that expires at the end of this month. Failure to reach an agreement could further delay deliveries.Stella Kalinina for The New York TimesMr. Biden has kept close relationships with labor unions and may hesitate to put pressure on dockworkers to conclude any talks. But a work slowdown or strike would be bad news for the administration, which has frequently come under attack about rising prices.By some metrics, supply chain pressures have been easing in recent weeks. The average global price to ship a 40-foot container of goods fell to $7,370 as of June 3, down from a peak of more than $11,000 in September, though that was still five times higher than before the pandemic began, according to the Freightos Baltic Index.Inflation F.A.Q.Card 1 of 5What is inflation? More
- in Economy
The Pandemic’s Nerd Celebrities
When old rules of global commerce no longer seem to apply, masters of esoteric data — ocean shipping container times, anyone? — are thrust into the limelight.“Ship Happens: The Miniseries” is a podcast that would not exist if not for the pandemic, which prompted consumers to begin ordering couches and computer screens so voraciously that the world’s factories and ports could not keep up.But as furniture delays and car shortages began to dominate the headlines last year, Eytan Buchman and his colleagues at Freightos, a global shipping platform, saw an opportunity.“You never really pay attention to something until it’s broken,” said Mr. Buchman, chief marketing officer at the company. “Part of it was giddiness that, hey, people care.”Freightos, which started its podcast about supply chains in November, is among a spate of data providers whose wonks and once esoteric offerings have been catapulted into the spotlight by a pandemic that has rewritten the rules of global commerce and economics.Not that Mr. Buchman was happy that everything felt broken. But he saw that Freightos could help. He and his colleagues had a wealth of shipping data and expertise at their disposal, and they began to think of ways to share it with the world, producing an index of ocean container travel times, releasing the audio program and ramping up media appearances.What could have been a short moment of prominence has lasted well into 2022. Nothing — not shipping routes, not consumer spending, not the labor market and definitely not inflation — seems to be behaving the way it did before the coronavirus struck in early 2020.Inflation is running at its fastest rate in 40 years, and data next week is likely to show that prices climbed more than 8 percent over the year through March. Supply chains remain roiled, employers are desperate to fill open jobs, and Americans have surprised economists by spending right through the rapid price increases and rampant uncertainty.Researchers and policymakers are flying blind, and both they and ordinary people are turning to experts like Mr. Buchman as they try to sketch out a new map of a changed economic landscape. “A very select circle of enlightened individuals found supply chains interesting before, but it was not a widely shared passion,” said Phil Levy, chief economist at Flexport, a freight forwarding and customs brokerage company — displaying the sort of supply chain deadpan that bigger audiences, relatively speaking, are now enjoying.According to a profile kept by Bloomberg, Mr. Levy has racked up 26 unique media mentions so far this year, after 26 in all of 2021 and 15 in 2020. Suddenly, every economist and economics writer seems to be a trade analyst, trying to suss out what might happen to supplies and prices.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“Normally, when one does forecasting, you look at past experiences,” Mr. Levy said. “That changed with the pandemic.”The revolution started in the toilet paper aisle. At the onset of the pandemic, consumers abruptly started to shop differently. Nobody needed coffee to go or manicures; everyone wanted new home-office furniture.As the government sent out repeated stimulus checks and offered more generous unemployment insurance and families spent more time at home, Americans spent the money on goods rather than the services that consumed a big chunk of their budgets before the pandemic. Even as the aid has faded and business has returned to something approaching normal, demand for things has remained unusually strong.The world’s ships, ports and factories fell behind early in the pandemic, and they have been unable to fully catch up. The situation has only been intensified by unanticipated disruptions like a giant cargo ship’s getting stuck in the Suez Canal. The Ever Given spent six immobile days, drawing global attention to the precariousness of supply chains and ocean commerce — and increasing demand for experts who could explain it.“That was a turning point in freight fame,” Mr. Buchman recalled fondly.For Mr. Levy and his colleagues, the situation was not funny, per se — the blockage was poised to cause problems for customers — but it did spark a flurry of memes in Flexport’s internal Slack messaging channels. (One that sticks in his memory was a photo of the stranded ship superimposed with the words “I told you not to listen to the Waze directions.”)Ever Given stands as a symbol of a larger phenomenon in the pandemic economy: Disruptions keep surfacing, throwing an already struggling system even further out of whack. The mismatch between supply and demand has stoked inflation, which has surprised policymakers both because it has been so rapid and because it has proved long-lasting.And the upheaval extends beyond the world of shipping.Companies cannot find enough workers, in part because the pandemic appears to have accelerated a demographic shift. Baby boomers, who were entering retirement age, left the labor market in large numbers — and it is unclear if they will return. Parents coping with unpredictable child care also left the work force. Employers are grappling with the possibility that workers are in the midst of a “Great Resignation,” possibly encouraged by savings amassed during the pandemic. The labor market shortages have given them a chance to ask for higher pay and better workplace conditions.As the coronavirus era enters its third year, the economic mysteries are many: Will those workers come back? Will America’s appetite for new couches ever be sated? Is there any price that consumers will not pay for cars?Fiona Greig doesn’t know all of the answers. But she has data that might allow her — and others — to come closer than they otherwise would.“I’m now receiving inbound requests from asset managers in Germany, from all walks — our own Federal Reserve Bank, the White House, et cetera,” said Ms. Greig, director of consumer research and co-president at the JPMorgan Chase Institute.The economic data amassed by Fiona Greig at the JPMorgan Chase Institute has become closely watched.Melissa Lyttle for The New York TimesEarly in the pandemic, the institute focused on one metric that was of great interest to a lot of people: what people could spend. The now widely cited graphic uses Chase data to show how much cash households in different income bands have in their checking accounts in near real time, and policymakers and Wall Street econometricians alike have been using it to gauge the spending power of different groups of consumers.Inflation F.A.Q.Card 1 of 6What is inflation? More
- in Economy
As Inflation Surges, Biden Targets Ocean Shipping
The president is targeting shipping companies that have jacked up prices during the pandemic, but critics say bigger economic forces are at work.With inflation surging at its fastest pace in 40 years, President Biden has identified a new culprit that he says is helping fuel America’s skyrocketing prices: The ocean vessels that ferry containers stuffed with foreign products to America’s shores each year.Shipping prices have soared since the pandemic, as rising demand for food, couches, electronics and other goods collided with shutdowns at factories and ports, leading to a shortage of space on ocean vessels as countries competed to get products from foreign shores to their own.The price to transport a container from China to the West Coast of the United States costs 12 times as much as it did two years ago, while the time it takes a container to make that journey has nearly doubled. That has pushed up costs for companies that source products or parts from overseas, seeping into what consumers pay.Mr. Biden has pledged to try to lower costs by increasing competition in the shipping industry, which is dominated by a handful of foreign-owned ocean carriers. He has cited the industry’s record profits and directed his administration to provide more support for investigations into antitrust violations and other unfair practices.Congress is also considering legislation that would hand more power to the Federal Maritime Commission, an independent agency that polices international ocean transportation on behalf American companies and consumers.The bill, which has bipartisan support, would authorize the commission to take action against anticompetitive behavior, require shipping companies to comply with certain service standards and regulate how they impose certain fees on their customers. Mr. Biden is pushing lawmakers to add a provision that would allow the commission and Justice Department to review applications for new alliances between companies for antitrust issues, and reject those that are not in the public interest.The House passed its version of the bill in December; it must be reconciled with a Senate version.But it’s unclear to what extent more government oversight and enforcement will actually bring down shipping costs, which are being driven in large part by soaring consumer demand and persistent bottlenecks. Global supply chains are still plagued by delays and disruptions, including those stemming from the Russian invasion of Ukraine and China’s broad lockdowns in Shenzhen, Shanghai and elsewhere.“As a standard matter of economics, if you have inelastic supply and experience a surge in demand, you will see a rise in prices,” said Phil Levy, the chief economist at Flexport, a logistics company.The effect is expected to worsen in the coming months. Shipping rates typically take 12 to 18 months to fully pass through to consumer prices, said Nicholas Sly, an economist at the Federal Reserve Bank of Kansas City.“The goods that are being affected by shipping costs today are really the goods that consumers and American households are going to be buying many months from now, and that’s why those costs tend to show up later,” he said.Some of the price increases from late last summer have yet to work their way through into consumers, he said, and the conflict in Ukraine is causing further disruptions.Shipping prices have already skyrocketed so high that, for some products, they have erased companies’ profit margins.The cost to ship a container of goods from Asia to the U.S. West Coast surged to $16,353 as of March 11, nearly triple what it was last year, according to data from Freightos, a freight booking platform. While supply chain congestion showed some signs of easing in January and February, the Russian invasion of Ukraine has quickly worsened the situation along with lockdowns in China that have closed factories and warehouses.Analysts at Capital Economics, in a research note on Wednesday, said that it was still possible for China to suppress coronavirus infections without causing widespread disruption to global supply chains. “But the risk that global supply chains links within China get severed is the highest that it has been in two years,” they said.American businesses that use ocean carriers have been pushing for additional oversight of what they say is an opaque, lightly regulated industry.One of the main complaints among importers and exporters is that ocean carriers are charging customers huge and unexpected fees for delays in picking up or returning shipping containers, which are often mired in congestion in the ports or in warehouses. American farmers, who have struggled to get their goods overseas, say that ocean liners have refused to wait in port to load outgoing cargo or skipped some congested ports entirely. As a result, some have periodically been unable to get their products out of the United States.Eric Byer, the chief executive of the National Association of Chemical Distributors, said American companies were having trouble getting chlorine to clean swimming pools, citric acid to make soft drinks and phosphoric acid to add to fertilizer through American ports.“It’s taking weeks upon months, and they’re getting nickelled and dimed on costs. There are a lot of fees that are being imposed on products waiting in the San Pedro Bay,” he said, referring to the body of water outside the busy California ports of Los Angeles and Long Beach.“It’s been a lot of turmoil and challenges, a lot of unreliability,” said Patti Smith, the chief executive of DairyAmerica, which exports milk powder to foreign factories to be made into baby formula. Her company has sometimes been unable to get its products out of West Coast ports, she said, and has racked up extra warehousing costs and unexpected fines because of the delays.While Ms. Smith said she supported the administration’s efforts to enhance oversight of the shipping industries, she wasn’t sure that would do much to bring down overall prices.“I wouldn’t say it would necessarily lower prices. I think it might put prices more on a level playing field,” she said.The White House insists that its efforts can drive down costs, portraying the measures Mr. Biden announced as a way to calm skyrocketing inflation, which has become a huge economic concern among voters. Consumer prices surged 7.9 percent in the year to February, a 40-year high.American demand for foreign products, and for space on container ships, shows little sign of easing.Erin Schaff/The New York TimesThe White House has pointed to rapid consolidation in the industry over the past decade as a driver of higher prices, saying that three global shipping alliances now control 80 percent of global container ship capacity, and increased shipping costs would continue to fuel inflation. “Because of their market power, these alliances are able to cancel or change bookings and impose additional fees without notice,” the administration said in a fact sheet.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More
