September 25, 2023

U.S. Economy Facing Government Shutdown, Major Labor Strike — Tell USCC How It Will Affect Your Company

The United States is facing two major events that could have far-reaching consequences for the nation’s economy and its employers: a potential federal government shutdown and expansion of the United Auto Workers (UAW) strike.

Here are the latest updates on both issues:

  • Federal Government Shutdown. Spending bills generally originate in the U.S. House of Representatives, but Speaker of the House Kevin McCarthy (R-Calif.) twice canceled votes on a short-term spending plan developed by his party last week. By the end of the week, House GOP leaders had pivoted from trying to pass a short-term continuing resolution to approving appropriations bills one-by-one. That feat will be nearly impossible to achieve by the end of this week, which is when fiscal year 2023 funding runs out. In the meantime, Senate Majority Leader Charles Schumer (D-N.Y.) has established a process by which the Senate could move a funding bill first. Lawmakers have until Saturday to come up with a solution or large portions of the federal government will shut down starting Sunday.
  • UAW Strike. Last Friday, the UAW announced it will expand its strike by ordering employees to walk off the job at 38 General Motors and Stellantis parts distribution facilities across 28 states. The labor union and the three auto companies involved in negotiations seem no closer to a new contract, which means the strikes could expand further in the coming days. UAW leaders also invited President Joe Biden to join the picket line. Former President Donald Trump will travel to Detroit this week to show support for union workers.

How will these two events affect the U.S. economy?

As the U.S. Chamber of Commerce (USCC) noted in a memo sent last week, economists often assert that the macroeconomic impact of a government shutdown is relatively mild. This conclusion is largely based on viewing the economic reverberations solely through the lens of federal spending in the economy. In other words: that opinion fundamentally misses the microeconomic impacts for the private sector and Americans and communities across the country.

Individuals and businesses rely on the discretionary functions of government on a daily basis. During the 2019 federal government shutdown, for example, the U.S. Small Business Administration (SBA) was unable to process about 700 applications for $140 million in small business loans and the Federal Housing Administration (FHA) was unable to process over 500 applications for loans to develop, rehabilitate, or refinance around 80,000 multifamily rental units. In all, the 35-day shutdown in 2019 cost the U.S. economy $5 billion.

The USCC is looking for brief, but specific descriptions of how the shutdown will hurt the private sector. If you have data or anecdotes that can be used to educate policymakers and the public, please email Makinizi Hoover at The USCC can keep identifying information confidential if you request.

Meanwhile, the UAW strike could have an even larger impact on the U.S. economy. A USCC blog post noted the three automakers produced 4.8 million vehicles in the United States in 2022 and employ 238,000 workers at 260 assembly plants, manufacturing facilities, research labs, distribution centers, and other facilities across 31 states. They also work with nearly 9,700 dealerships, which employ nearly 660,000 U.S. workers.

Additionally, every vehicle produced by these automakers contains anywhere from 8,000 to 12,000 different components manufactured by U.S. suppliers. More than 690,000 supplier jobs are estimated to be tied to the three automakers, which accounts for anywhere from 20 percent to 70 percent of the suppliers’ businesses. While a UAW fund can partially support its members during a strike, employees of these smaller companies would not be protected. During the 2019 UAW strike on General Motors, suppliers had to temporarily lay off approximately 75,000 workers.

Read more about the potential economic fallout from a full-scale UAW strike here.

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