For some reason, the management of America’s railroads, aided by the federal government, cannot lock down a deal with the unions to keep railroads running. Money is not a major concern; these railroads mint money. If there is a strike, America’s supply-chain problem, which already contributes to red-hot inflation, will get even worse.
Railroad companies had to negotiate with 12 unions; seven have accepted deals. The rank and file at three unions voted against the agreements hammered out by their leadership. Two unions, the SMART Transportation Division and the Brotherhood of Locomotive Engineers and Trainmen, never cut deals.
How serious is the problem? According to The Wall Street Journal, “Union Pacific Corp. and CSX Corp. and other freight railroads move about 40% of U.S. long-distance cargo and serve the agricultural, energy and manufacturing sectors.”
Inflation has eased some in the last month, which has caused optimism that the worst of rising prices is behind the country. The BLS Consumer Price Index was up 7.7% last month year over year. While this is very high, it is better than most months since the start of the year. Some economists reasoned that a series of steep rate hikes by the Federal Reserve had done their job in bringing inflation down.
The Fed may be able to control interest rates, but it cannot negotiate with unions.
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Investors believe CSX has done fairly well. Its shares have mirrored the moves of the Standard & Poor’s 500 over the last year. It makes lots of money. Last year, CSX had net income of $3.8 billion on $12.5 billion in revenue.
One can only imagine what will happen to food prices with very low grain supplies. The same holds for coal, particularly as winter approaches. Food and fuel make up much of the CPI. Americans are already wary about spending. And they should be, because of the coming recession. This downturn will put millions of jobs at risk, as every recession does.
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Unions will either have deals with the railroads in a matter of days or they won’t. If they don’t, prepare for a sharp jump in already high inflation.
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