With US job market imbalanced, labor strikes surge to highest level since 2000

The tenaciously hot US job market has prompted the highest level of labor strikes in decades, as workers look to capitalize on the potentially fleeting leverage they have over employers.

More than 100,000 combined workers were on strike at the end of the first week in October in separate actions by healthcare workers at Kaiser Permanente Inc. and automakers from General Motors Co., Ford Motor Co. and Stellantis NV. Unions representing screen actors and writers, hotel workers, teachers and other employees have also gone on strike during the year. Labor actions have resulted in more than 7.4 million days of missed work due to stoppages so far in 2023, more than triple the 2022 total and the highest yearly amount since 2000, according to the latest government data.

Business owners continue to struggle to fill job openings, unemployment remains near historic lows and, while it is leveling off, wages continue to grow at a higher rate than inflation. As the Federal Reserve plans to keep rates at levels higher and longer than previously forecast to cool a stubbornly robust economy, the labor market's strong run is expected to weaken at some point, potentially motivating efforts by workers to demand better pay and benefits.

"I think the strikes are a symptom of the current labor market, with workers believing they have leverage over employers," said Sonu Varghese, director of investment platform at Carson Wealth. "And as long as the labor market remains tight, that's likely to continue."

Tight job market

US employers added 336,000 jobs in September, roughly double economists' expectations, and the unemployment rate was 3.8%, unchanged from August, the US Bureau of Labor Statistics reported Oct. 6. The unemployment rate has been below 4% since February 2022.

About 3.2% of workers aged 25-54 were unemployed in September, an uptick from 3.1% in August. Workforce participation for the so-called prime age workers group also matched its highest level since 2001 in September at 83.5%.

Meanwhile, there were more than 9.6 million job openings in August, about 1.5 potential positions for every unemployed American seeking work, according to the latest government data.

Pay is also rising faster than the broadest measure of inflation. Average hourly earnings jumped 4.2% annually in September, slower than the 4.3% growth in August. The consumer price index rose 3.7% in August, the latest data available, while prices excluding volatile food and energy costs rose 4.3%.

With inflation continuing to run above the Fed's 2% target and the job market still out of balance, the number of workers expected to strike will likely rise into 2024.

"The cost of living squeeze has been painful for everyone and with employers vocally complaining about the lack of available people to fill vacancies, workers and unions are not afraid to use their more influential voice to demand a greater share of the pie to compensate for the loss of spending power," said James Knightley, chief international economist with ING.

"If the perception of job security wasn't as high, then it would be doubtful that unions would be pushing quite so hard."

Rising strikes

In addition, many of the workers who are or recently went on strike may have been subject to multiyear contracts nearing expiration, meaning they had to wait to negotiate higher pay as the job market tightened and inflation climbed, said Cory Stahle, a labor market economist with Indeed.com.

"Many of these strikes that we're seeing are coming from groups that are saying, 'OK, we saw all these wage gains in 2021 and 2022 and we haven't got a piece of that yet,'" Stahle said.

Still, the leverage that workers have in order to demand higher pay may soon fall off if the Fed hikes fully take root, the labor market falters or the economy tumbles into a recession, Knightley with ING said.

"I think there is a window where there is opportunity to push for higher pay, and while the economy is performing well, there is a good chance they will win a significant deal," Knightley said.

"However, the economic outlook is becoming more challenging and corporates could use this to say that some of these inflation-busting demands are simply impossible to agree to and would damage profitability that could eventually lead to job losses."