Boeing Strikes Bode Ill for the U.S. Economy

“No” is Boeing’s final word to union workers, who say they plan to remain off work for the “long haul” after the company walked away from the negotiating table.

“Further negotiations do not make sense at this point,” company officials announced. 

More than 30,000 workers from the International Association of Machinists walked off the job last month after union members overwhelmingly voted to strike. Nearly 18% of Boeing’s total workforce was gone in a day, placing heavy strain on the company’s profit and supply chains. The company has said it could face a $3.5 billion loss as a result of the strike.

Boeing previously offered its disgruntled workers a 30% pay raise over the next four years, calling this their “best and final offer.” The IAM stood firm on a 40% increase and renewal of an old pension plan, causing Boeing to rescind its offer and shut down negotiations for good–for now.

“Unfortunately, the union did not seriously consider our proposals,” Boeing spokesperson Stephanie Pope said in a statement. “Instead, the union made non-negotiable demands far in excess of what can be accepted if we are to remain competitive as a business.”

IAM responded that Boeing’s offer was simply “not good enough.”

“We stand together, united and defiant against one of the most powerful companies in the world,” IAM representatives said in a statement. “Boeing may have started this fight, but the Machinists will finish it.”

Within two weeks of the strike kickoff, U.S. GDP accordingly fell by $1 billion, according to estimates from IMPLAN. Most of that dropoff came from reduced output, with the rest dispersed among reduced household spending and lost supplier revenue.

“Those supply-chain effects are happening in the rest of the country and globally,” said Bjorn Markeson, regional economist with IMPLAN, “whereas the secondary effects that hit Washington State are the induced effects from household expenditures, as those employees have less money in their pocket.”

So far, other major players in the aviation and defense industries have stayed mostly clear of these showstopping strikes. But as supply chains are threatened by reduced demand from Boeing, experts predict that other industries could suffer, with economic woes compounded by port strikes and severe weather. Such a swift and dramatic change shows clearly that the economy is far more fragile and prone to shocks than most people realize–or have prepared for.

“This disruption will resonate far beyond Washington State,” Jay Timmons, The National Association of Manufacturers President and CEO, said in a statement. “The aerospace supply chain and manufacturers in the U.S. are interconnected deeply, and a continued halt in production will have devastating effects on our country.”

Products and materials with supply chains that will be directly affected by the Boeing strike include aluminum, titanium, steel, and composites. But those industries are only the first link in a long chain that will, eventually, make its way back to consumers in the form of reduced output, higher prices, and renewed sense of strife between employer and employed.

The breakdown of negotiation is just the latest entry in the list of events that have consumers worried–as if soaring credit card interest rates, a deepening deficit, and growing U.S. involvement in conflicts abroad wasn’t enough to convince everyone that the economy is enmeshed in a fight for its very existence.

“A dozen or so years [after the 2008 crisis], the economy is in much worse shape,” Peter Schiff said in a recent podcast episode. “We have far more debt now than we did in 2008. We have a much bigger bubble that encompasses more than just residential housing. And we’re on the precipice of a much greater economic crisis.”