Yahoo Finance’s Kevin Cirilli joins the Live show to discuss the White House’s five-year tentative agreement with railroad strikers.
- So here are three things you need to know right now here this morning. The White House announced it has reached a tentative agreement with freight rail workers, avoiding what would have been an economically damaging strike. Talks had previously been stalled over a worker push for improved working conditions, better pay, and lower health-care costs. Joining us now to break it all down is Yahoo Finance Contributor Kevin Cirilli. Kevin?
KEVIN CIRILLI: President Biden celebrating a five-year tentative agreement with railroad strikers. And he alerted Labor Secretary Marty Walsh yesterday evening to really say that they had reached a deal, a five-year agreement. Let's take a look at the specifics of this, 24% raises and $5,000 in bonuses specifically for these rail workers. Now, that's going to be retroactive all the way back to 2020. There's also some attendance changes for the workers.
But Labor Secretary Walsh tweeting out, quote, "The Biden administration applauds all parties for reaching this hard-fought, mutually-beneficial deal. Our rail system is integral to our supply chain. And a disruption would have been catastrophic-- would have had catastrophic impacts on industries, travelers, and families across the country." Brian, specifically how the energy sector had reacted to this, were pressing for a deal, they were incredibly, incredibly apprehensive about the need for supply shortages, as well as scarcity in the energy sector heading into the winter, especially as it relates, obviously, to crude and, of course, heating oil.
Now, the last time this happened, just to provide a flashback, was 30 years ago back in the early 1990s. And Congress had to get involved. Now, we should note here that there was bipartisan movement on Capitol Hill that should there have been a strike that Congress was fully prepared to intervene. But again, Washington, industry, and rail strikers and the administration breathing a collective sigh of relief as this deal has been met that would have just really been significant supply chain disruptions just a few weeks away from the winter and, of course, from the midterm elections.
- Kevin, how are the union members expected to vote on this? What does that next step look like?
KEVIN CIRILLI: Well, the next step, I think, in terms of the next couple of days that we're to be watching is whether or not they break the terms of the agreement. But for the president of the United States to come out and to say that there is a deal, for Labor Secretary Walsh to say that there is a deal, and we're seeing the responses trickle in from the business community. The Business Roundtable, for example, had really been pushing for there to be a deal.
And I think that what you also saw as it relates to Capitol Hill is that Republicans and Democrats were fully prepared to intervene and still remain fully prepared to intervene should there be any potential hijinks in the next couple of days. But again, this deal being met, this is being celebrated by the administration, and Republicans fully prepared to, again, enter in the Senate should this not come to fruition, as it is expected to do so.
- All right, our Kevin Cirilli, thank you so much. Just to add a couple of notes on this, we talked earlier in the week to Amit Mehrotra, who covers the railroads. And he talked about that this was probably going to be the outcome, right? He did not think there was going to be a strike.
I think most of the people who follow the railroad industry closely said there was going to be some sort of intervention if it came to that to avoid the strike. The stakes are just too high to avoid inflation, another push on inflation. So kind of interesting here that it's happening with this timing, I suppose, but you do have the theater aspect of it.
- Yeah, and the market, I would say, just didn't really price in this potentially really crippling the economy. I talked to Goldman Sachs's chief economist, Jan Hatzius about this early on in the week. He said he's only looking for a little impact.
Now, he published a note this morning just before we got this news, highlighting that the railroads ship around $2 billion per day of goods, 3% of US economic activity. If there was a strike, there would be a hit, maybe not as big as some would think. But still, I mean, it would be a big impact here.
- And there's so much that the rail companies have had to navigate over the course of this year, whether it was earlier this year, in February, March, when Union Pacific, we were discussing with them about how they were navigating even in the West Coast some of the rail robberies that were taking place because of the slow-moving nature of some of those and the packages, the goods that were ultimately getting stolen from those. And so with all of that in mind, the rail industry has had to navigate a ton over the course of just the first half of this year and then the most recent months with some of the negotiations. And now on the labor front we'll see exactly what type of aversion of crisis This will actually provide going forward and where the union vote will take place from here, too.