As the strike at the ports Long Beach and Los Angeles enters its second week, negotiators are reportedly not close to a deal. So both sides have agreed to let a federal mediator step in. The labor dispute is sending ripples through the Southern California economy.
“This is a significant sector of our economy,” says Robert Kleinhenz, chief economist with the Los Angeles County Economic Development Corporation. “ It accounts for about 160,000 jobs in Los Angeles County, and about 250,000 [jobs] in the region. And that’s just the number of direct jobs associated with trade.”
He says it could have been worse. This is a slow period at the ports. Most of the goods tied to the holidays were shipped months ago. Nonetheless, several hundred million dollars worth of cargo is stalled at, or diverted from, the ports of Los Angeles and Long Beach every day.
The labor dispute centers around clerical employees protesting the outsourcing of jobs to lower paid non-union workers. Dock workers have honored the picket line, bringing shipments to a halt.
Economist Paul Bingham with CDM Smith tracks freight transportation. He says the clerical workers have been trying to negotiate a new contract for more than two years. So, will a federal mediator make a difference?
“I think it can certainly help,” says Bingham. “We’ve just seen an example with the unions on the East Coast and the Gulf coast, with their own labor dispute contract negotiation earlier this year, that the federal mediator was able to come in and get a 90-day cooling-off period.”
The strike in Southern California has not stopped all traffic. Some companies are sending their cargo on those ships not impacted by the by the strike.
“If I’m shipping today out of Asia, that’s probably going to affect which companies are filling their ships,” says Bingham.
For example, he says COSCO, China’s largest steam ship company, is getting some extra business.
So are some ports. Ensenada, Mexico, is only about 50 miles south of the border. Consultant Kenn Morris is president of Crossborder Group.
“The port of Ensenada is positioning itself as an alternative port,” says Morris. “It’s been doing that by investing in infrastructure. And it’s also been developing stronger ties with container lines from China and Japan. With Central America and South America.”
Some companies are temporarily moving their products using air cargo. That’s more expensive. But Morris says, “it’s a lot more expensive to shut down a factory line.”
If the strike in Southern California drags on, more cargo could be re-routed through the Panama Canal, creating opportunities for ports on the Gulf and East coasts.
Even if those changes in shipping are intended to be temporary, economist Kleinhenz takes them seriously.
“Back in 2002, when we had a major strike, it occurred during the peak season, and shippers looked to other ports, not just in the near term, but in the long term.”