Fallout From Short Ports Closure Could Be Minor
By CONOR DOUGHERTY
As shippers and dockworkers bickered last week over which side was to blame for the port lockout, a separate debate took place outside the negotiating room.
What’s the impact going to be?
A report from maritime consultant Martin & Associates estimated the economic damage at $1 billion a day. Such big numbers have added to the pressure on both sides to agree on a new contract or at least reopen the West Coast ports.
But as is often the case during the heat of a labor dispute, reality gets in the way of rhetoric. And by late in the week, a growing number of economists were cautioning that the effects of a lockout or strike were being distorted.
“That stuff about a $1 billion a day,I’ve been fighting that for the past two days,” said Stephen Levy, director of the Center for Continuing Study of the California Economy. “I don’t think we’ve lost a season that can’t be made up in a couple of weeks. It’s hard to think automobile or machinery sales can’t be postponed more than two weeks.”
The general consensus is that the Southland’s economy will brush off the effects of a short-term closure of the ports of Los Angeles and Long Beach. Wages have been lost in and around the ports, and many local companies will see a temporary rise in the cost of doing business.
But given the vastness of area’s economy, there are few signs of any widespread fallout,and with it, any sustained declines in job growth and personal spending.
The best way to visualize the overall effect is in waves.
By the middle of last week, the shutdown began to take its toll on local warehousing and wholesale operations, which usually don’t keep more than a week or two of inventory.
Next in line would come manufacturers,both here and overseas,that face slowed or shuttered production lines.
Next are retailers, who are not expected to feel anything, aside from costs passed on to them by suppliers, unless the port is closed for several weeks or a month.
Finally, come consumers who are unlikely to notice any significant dislocation.
Assuming that the work stoppage is soon resolved, economists and local business owners expect that most sales lost from delayed goods can be readily made up.
“The losses really occur if the work stoppage goes beyond the point people have prepared for. We’re all guessing that might be three weeks to a month,” Levy said.
Added John Martin, who prepared the Martin & Associates report for the Pacific Maritime Association, which represents shippers: “You’re not going to be experiencing lost sales over a five-day shutdown.”
There are certain to be some adverse consequences. As of late last week, there were at least 150 vessels waiting to be unloaded, and getting those goods onto trucks or rail cars will require overtime costs at all levels. Truckers will not be able to recoup all of their losses and produce growers and wholesalers are faced with the prospect of rotting grapes and lettuce.
But much of the merchandise headed for department store shelves this holiday season had been brought in earlier than usual. And while much of the media coverage has focused on losses from spoiled fruits and vegetables, only 4% of the $147 billion in imports and exports that went through the Los Angeles Customs District in 2001 consisted of perishable products.
“You don’t ship stuff to Asia that’s going to rot,” said Chris Thornberg, a senior economist at UCLA’s Anderson Forecast.
Determining the economic impact of a port stoppage on any real-time basis is problematic because there are so many imponderables. How much of the goods waiting to be unloaded eventually will be delivered and sold? How many shipments are being moved through other means, such as air freight or the rerouting of ships?
Complicating the picture is an uncertain economy that has heavily relied on consumer spending for more than a year. Any risk of that spending spigot being turned off sends off chills to Wall Street, Washington and Corporate America.
And as a rule, trade data tends to lag by weeks or even months.
“The point is, we don’t have a figure because we don’t have experience with something like this,” said Stephen Cohen, professor of regional planning at the University of California, Berkeley, who is among those concerned about even a limited stoppage. “The last dock shutdown was in the early ’70s and frankly, import-export didn’t really matter that much. Now there is a total dependency.”
The most obvious impact starts at the ports themselves. Locally, 74,000 jobs are affected by the shutdown, including those of many in OC. About half are longshoreman, truckers, railroad and warehouse employees who will get hit the hardest.
(The balance consists of workers servicing the area around the ports, such as adjacent restaurants and grocery stores.)
Union workers who cover most of the $12.2 million in wages doled out each week by the ports of Los Angeles and Long Beach have not been paid during the lockout. Independent truckers who haul port containers exclusively also lost out because they are paid by the load.
But beyond the ports, the impacts are less clear.
As for manufacturing, the effects could be positive as well as negative.
Clare Davey, a branch manager for Adecco Inc., a temporary placement firm that supplies manufacturing and warehouse workers, said that nearly every employer she deals with has cut back on orders for this week.
But she remains optimistic that the lost business will be made up.
“I hope people are going to need extra help once this is finished,” she said.
And many local companies that have lost business to overseas manufacturing in the last few years see the port problems as a newfound opportunity.
“If it goes on for a long period of time it would definitely weigh in our favor,” said Kent Shortle, chief financial officer of Rangers Die Casting in Lynwood.
Dougherty is a staff writer with the Los Angeles Business Journal.
