The United Auto Workers union is on a historic simultaneous strike against Detroit’s big three automakers, and noted economist Mohamed El-Erian commented on a report that showed even ahead of UAW’s walkout, the pace of labor strikes has quickened to a level not seen since 2020.
What Happened: Labor stoppages from strikes led to 4.1 million missed days of work in August, marking the biggest total since Aug. 2000, a Wall Street Journal report said, citing Labor Department data.
The surge seen last month followed strikes by Hollywood actors and writers, with the Screen Actors Guild-American Federation of Television and Radio Artists along having 160,000 members and the Writers Guild of America with about 11,500 members, it said.
The report also noted that the UAW has been involved in over 60 work stoppages involving 1,000 workers or more. The union has among it members workers from non-auto manufacturing industries.
Why It’s Important: When Bloomberg’s Lisa Abramowicz shared the story, El-Erian explained the development. “This is indicative of a shift in bargaining power back to labor after decades of an ever-higher GDP share of capital,” the economist said. Gross capital formation is a component of GDP that refers to the outlays on additions to the fixed assets of the economy plus net changes in the level of inventories.
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Data from the World Bank show that gross fixed capital formation as a percentage of GDP has been northward bound since 20100.
El-Erian said, “Indeed, I am surprised it took so long given the tightness of the labor market and the size of the unanticipated inflation shock.”
Despite the successive and aggressive rate hikes by the Federal Reserve in the current rate-tightening cycle, the labor market has remained tight. The tightness is measured as the ratio of vacancies to the number of unemployed. At the start of 2023, there were two job openings for every unemployed person, the highest such ratio that has been recorded in Bureau of Labor Statistics data, Kenan Institute of Private Enterprise said in a report in February.
As El-Erian pointed out, the inflationary pressure continues to remain elevated despite cooling off a peak in the summer of 2022. Higher inflation eats into workers’ real wages, making it difficult for them to make ends meet, especially in an inflationary environment.
The iShares TIPS Bond ETF TIP, which tracks the investment results of an index composed of inflation-protected U.S. Treasury bonds, rose 0.01% to $105.12, according to Benzinga Pro data.
Photo by International Monetary Fund on Flickr
Read Next: El-Erian Pours Cold Water On Market Convergence Hopes, Says It’s Wiser To Brace For Bumpier 2nd Half
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