Boeing strike costs U.S. $1 billion of GDP in just two weeks as negotiations resume

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The strike that has hobbled Boeing for two weeks is being felt not just at the company, but also across the entire country. As of Friday, the fallout from the strike accounts for a $1 billion reduction in U.S. GDP, according to estimates from Bjorn Markeson of economic analysis and modeling company IMPLAN. According to Markeson’s calculations, this loss totals $700 million in Washington State alone, almost half of which is accounted for by lost wages in the state. Boeing’s latest offer did not appear to impress over 32,000 striking workers, but the costs are mounting on both sides. Production of 737s jetliners, Boeing’s headline commercial offering, has ground to a halt. The company has been forced to implement sweeping cost-cutting measures, including severe cuts to supplier spending, a pause on most purchase orders, a hiring freeze, and rolling furloughs for nonunion managers and employees one of out every four weeks. The striking workers, meanwhile, received their final paychecks last week, the Associated Press reported. They’ll also lose their company-provided health insurance at the end of the month, Boeing confirmed. The strike has cost Boeing workers and shareholders a combined $1.25 billion so far, according to estimates released by Anderson Economic Group, a different way of measuring the economic impact than gross domestic product. Boeing’s debt also sits at the precipice of being downgraded to junk, which would substantially raise borrowing costs for a company that is hemorrhaging cash. Boeing strike hits supply chain, household spending When it comes to the macroeconomic impact of the strike, Markeson told Fortune roughly half of the $1 billion overall loss in GDP was attributed Boeing’s drop in output. The other half, he said, came from reduced business for suppliers and decreases in household spending. Typically, he said, the effects of such a shock on suppliers and labor income are roughly even, both locally and nationally. Boeing’s intricate supply chain extends globally, however, making that impact quite disperse. The decrease in consumer spending from machinists and other affected workers, meanwhile, is concentrated in the Pacific Northwest. “Those supply chain effects are happening in the rest of the country and globally,” said Markeson, a regional economist who also teaches at Brandeis University, “whereas the secondary effects that hit Washington State are the induced effects from household expenditures, as those employees have less money in their pocket.” The strike has cost Boeing’s suppliers an estimated $144 million, according to Anderson, while non-Boeing workers in the Seattle area are down a projected $25 million. Earlier this month, Boeing thought it had avoided a strike after it reached an agreement with union reps to raise pay by 25% over four years. Workers from the International Association of Machinists and Aerospace Workers overwhelming rejected the deal, however, and walked off the job on Sept. 13. Many are calling for a 40% increase in wages after years in which their pay hikes have lagged behind the rest of the industry. Boeing said it made its “best and final” offer on Monday after two days of talks with union reps and federal mediators last week failed to produce an agreement. Local union leaders blasted the company for publicizing the offer before returning to the negotiating table. The union said it would refuse to vote on the proposal by Friday, the deadline Boeing set for the deal. Both sides, however, said they would resume talks on Friday. The company’s stock rose 1.5% on Thursday, trading around the $155 mark after market open Friday, but remains down 38% on the year.

Reporting By Greg McKenna

Fortune via Reuters Connect