Rail strikes, Black Friday, and consumer debt

By Alex Riemersma, Ally Logistics’ Pricing Analyst

After a strong bipartisan push from the House of Representatives to add seven sick days to the proposed labor agreement between the Railroads and Railroad Unions was shot down in the Senate, President Biden signed the pre-existing labor agreement into law.

This agreement, which was drawn up in September of 2022, will grant rail employees a 24% raise by 2024. It also removed penalties for employees who refused to take additional shifts while the railroads were facing employee shortages.

Eight of the twelve major rail unions had already voted to pass this agreement, but four unions, including the largest of the twelve, voted the agreement down and threatened to strike unless paid sick leave was added to the proposal.

The addition of paid sick leave will have to wait until the contract is up for renegotiation, and barring a wildcat walkout, railroads across the country will remain in operation without the possibility of strike for the foreseeable future.

In the midst of all of this, we experienced a record-breaking Black Friday. Online retail sales on Black Friday broke a new spending record of $9.12 Billion. Additionally, a statistic released by the Bureau of Economic Analysis shows that inflation-adjusted consumer spending jumped 0.5% month over month in October, an increase of magnitude not seen since January.

Consumers are showing a surprising amount of confidence given the inflationary pressures that continue to linger. Whether consumers can afford these purchases remains uncertain.

According to CNBC, credit card balances have jumped 15% annually, the highest jump recorded in 20 years. Record-setting amounts of revolving credit card debt paired with “buy now, pay later” programs which have seen a surge in recent months will eventually catch up to irresponsible consumers.

As things stand at this exact moment, the American economy still seems to be flexing its muscle as holiday spending occurs unimpeded by today’s high inflation.

With Black Friday and the prospect of a rail strike in the rearview mirror, overall freight volumes may see a slight drop in the coming weeks. Now more than ever, having flexibility with your supply chain is looking like a “must” going into 2023.