By Dan Burns
(Reuters) -A walkout by more than 12,000 autoworkers on Friday could slow an outperforming U.S. 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 pandemic-related supply chain bottlenecks hampered vehicle output. With dealer inventories restrained, sales of new cars and trucks had slumped over much of that period 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 union went on strike on Friday at three plants in three states. The stoppage for now affects about 12,700 hourly employees.
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 $26.7 trillion in goods and services each year, or more than $73 billion per day," RSM's chief U.S. economist Joe Brusuelas estimated this week.
RSM estimates the U.S. economy would suffer a modest 0.2% drag to annualized growth of gross domestic product 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.
RISK TO PAYROLLS
The U.S. economy this year has dodged what was a consensus expectation for falling into recession in the face of aggressive interest rate hikes by the Federal Reserve to rein in the highest inflation in four decades.
In fact, growth in GDP - the broadest measure of economic output - motored along at an above-trend rate of just above 2% 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.