News Analysis: U.S. railway deal averts more inflation, supply chain hassles

WASHINGTON, Sept. 16 (Xinhua) -- A tentative deal between U.S. railway companies and unions has averted a strike that would have created more inflation and supply chain woes.

At a time when inflation stands at record levels, a strike could have added yet another drag on the economy.

Likewise, as supply chain bottlenecks are easing, a strike could have caused supply chains to take a step backward.

Indeed, business leaders have warned that a "work stoppage would disrupt the flow of goods that feed industries across the U.S. economy," The Wall Street Journal reported.

"Bringing national rail operations to a halt would lead to widespread plant shutdowns, supply chain challenges, retail product shortages and lost jobs and productivity - a crisis that would exacerbate the economic downturn," Joshua Bolten, chief executive of the Business Roundtable, a lobbying association of business leaders, said in a statement.

"We urge swift resolution to ensure uninterrupted rail operations and access to the products and services on which Americans depend," said Bolten.

The U.S. railway system is utilized by manufacturing companies to get parts, and is used by retail firms in order to move merchandise from ports to store shelves.

Business groups noted that finding other modes of shipping goods would be expensive as well as difficult, especially given the shortage of trucks and truck drivers since COVID-19 arrived in the United States.

If a strike occurred, the U.S. supply chain would need 467,000 long-haul trucks immediately.

"Supply networks are at risk of disruption once again if railroad workers go on strike," wrote Rubeela Farooqi, chief U.S. economist for High Frequency Economics, as quoted in the Journal.

"Interruptions to rail traffic would cause product shortages, which would impact both sales and factory operations, with implications for prices," he said.

This occurs amid the worst inflation in 40 years, due to the current administration's profligate spending, the Federal Reserve's slow action, as well as record gas prices and other issues, economists said.

August saw the Consumer Price Index rise 8.3 percent from the same month last year, according to the Bureau of Labor Statistics. While that's down slightly from the previous month, rampant inflation is not fading as much as business leaders, consumers and Wall Street had hoped.

Against this backdrop, U.S. railroad firms and unions reached a tentative deal earlier this week.

U.S. Secretary of Labor Marty Walsh took to social media to announce the agreement early on Thursday, writing that "following more than 20 consecutive hours of negotiations," the temporary deal "balances the needs of workers, businesses, and our nation's economy."

The Association of American Railroads estimated in a recent report that a nationwide rail service interruption would idle more than 7,000 trains, and could cost more than 2 billion U.S. dollars per day of a shutdown.

The nation's two biggest rail unions reached the tentative deal after hours of negotiations, following nine other unions cut deals with the companies on Wednesday.

In a statement early Thursday, U.S. President Joe Biden billed the agreement "an important win for our economy and the American people."

The strike was averted at a key time for the White House, as Biden's approval rating hovers near record lows.

At a time when voters' chief concern is the economy and inflation, the strike aversion has saved the administration a major headache.