Potential Railroad Strike & How It Affects The Economy

Will:
All right, Dan, we are back with another episode of Safety Stock. And Dan, I want you to imagine something. Okay. You know, if you want close your eyes.

Dan:
All right.

Will:
What does the world look like when you are not able to commute to your job? Be a train because the trains are not running. What does the world look like? If you are paying $9 for a loaf of bread, or what does the world look like? If you’re in some places they just don’t have bread for you to buy. Do you wanna be in this world?

Dan:
It’s pretty apocalyptic.

Will:
It is apocalyptic. What happens when there’s a lot of places that, you know, rely on fertilizer to support their crops and they can’t grow anything because they don’t have the right fertilizer in order to get things going. You’re

Dan:
Gonna have a little, you’re gonna have a crippling economy and then a shortage, and unfortunately, a possible famine, which don’t want

Will:
No famines are not good. And unfortunately we are closer to this day than we really wanna be. There is currently a possible strike that could happen starting this Friday, between two of the largest unions representing train workers and the companies that own those railway lines. And if there is not a contract that gets signed by Friday, or if the us government doesn’t step in which they’ve had to do in the past to prevent these type of issues, we could start seeing these type of problems. Dan highlight some of the other issues that may occur.

Dan:
Yeah. I mean, as you mentioned, Friday, September 16th is a pretty pretty big day for this industry, but what makes it so disruptive is that according to the association of American railroads, the freight rail industry, it shut down what costs, what cause a disruption of more than 2 billion per day in economic output, 2 billion. Yeah, that’s a, that’s a lot of money. And on top of that rail accounts for about 28% of the us freight movement, trucking is nearly 40% of the us movement. So that means in each, in one day there’s 7,000 long distance class, one trains that would just be idle. That’s covering 140,000 mile network in 49 states. You’re continental 49 states. Sorry, Hawaii, but that’s massive disruption. But then how can we offset that? If there is a rail strike? Well, glad that you asked, well, even though you didn’t ask, you would need 460,000 additional trucks just to service those goods now,

Will:
But at least we have enough truck drivers, right? Yeah.

Dan:
Yeah. I mean, we’ve, we’ve gone great detail, especially on our, our, our last episode. We’ve talked about where there’s a trucking shortage of drivers and there’s not, cuz people don’t want to enter that line of work. There’s already shortage of 80,000 drivers. So you combine those two and you know, we’re, we’re math guys here. We can do simple adding and subtracting here. It just equals a very bad, bad number. And the consequences, you know, havoc in the supply chain, inflationary pressures will probably rise. They already did rise, CPI rise for for August. So it’s not like inflation’s cooling down yet. So this is just bad news, not only for supply chain, but for just, I guess, civilization we can call it.

Will:
Yeah. I, I think the one picture that we’re looking to paint here is that we are all touched by the rail industry in the United States. And not only are we touched as it as, you know, someone living in the United States, but it also has a global aspect to the economy in that because of what’s going on between the war and Ukraine with Russia, there is grain shortages on a global scale. And a lot of that is being made up in terms with exports from the us. If 20% of those exports are being affected from a rail network, that is a huge number for people that are not going to be able to access that food. And as Dan mentioned, you know, a famine is certainly on the table. You know, we’ve seen issues specifically from container ships being backlogged, whether it was in Los Angeles at the beginning of the year into late last year, whether it’s on the east coast, as things shifted a little bit towards Savannah and some of those Eastern ports, if trains are not able to move those containers are going to pile up or not have space, they will not have anywhere to go because rail yards have to take those goods, start moving them.

Will:
Chicago is a big nerve hub as it goes through. If it’s going back and forth through the middle of the country, those container shorts will back up and then we will have to unfurl these issues that we’ll have seen. And, you know, for every, you know, two weeks, you know, it could send a system shock for a month, two months before we even get close to catching back up. So yeah, it is in the best of interest of everyone watching for this deal to get done.

Dan:
Yeah. And as you mentioned earlier, like the white house in this position may have pointed a presidential emergency board that released recommendations in August to bring the railroad and unions closer to your deal. Five of those unions have reached 10 of agreements with railroads on a new contract based off those recommendations. So it’s called for a 24% raise over five years and backpack, but it doesn’t address all of the workers’ concerns about the grueling hours that they endure limited time off going for hospital visits. So the bulk of rail workers that belong to the unions that haven’t struck a deal and a recent survey from this grassroots group, railroad workers United found that more than nine and 10 railroad workers would vote to reject the presidential emergency board recommendations and go on strike. Now, if the workers do vote for a strike, Congress would likely intervene to block it.

Dan:
Now, I don’t know what those details could be. Obviously you, you want, there’d be some sort of intervention cuz we, we talk about 2 billion. A day of economic output is massive. Just even one day on strike has huge disastrous I guess, role to the, to the economy. But the expectation that we probably should, you know, be optimist here, that there will be a agreement reached on September 16th. If not one is again, ready for your late night news commentaries, cuz there’s gonna be a lot of, a lot of back and forth there that you wanna stay out of.

Will:
You’re gonna hear about this more and more until a deal gets done. And if any point in time you have questions about what are some of the things that you can do or are there really anything that you can do feel free to reach out to us? You can reach us at hello@anvyl.com. That’s A-N-V-Y-L.com. And also, you know, the Avil software allows you to get realtime updates from your suppliers. And these are one of the reasons why you need that visibility because if you have goods that are stuck and you don’t know they’re stuff and you’re planning for them to get there, you know, it’s a lot easier to find out when it happens versus two weeks later and you get other problems down the road. So Dan, I think we’re excited to see a guilt deal get done here. There’s a good chance Congress steps in. But you know, in terms of what you can do, happy to speak to you, reach out to us.