As the year draws to a close, the US economy faces a potential "Black Christmas" crisis—the persistent shadow of a nationwide rail strike. While some rail unions have reached agreements with management, key unions have yet to approve new labor contracts, making the early December expiration of the "cooling-off" period particularly sensitive. Should a strike occur, the US economy could suffer massive daily losses exceeding $2 billion.
Labor Negotiations: Progress Amid Stalemate
The current negotiations center on new labor agreements between 12 US rail unions and major freight railroads. These talks are based on recommendations from the Presidential Emergency Board (PEB) appointed by President Biden, which proposed a 24% cumulative wage increase over five years (2020-2024), an immediate 14.1% pay raise, and annual $1,000 bonuses. The National Carriers' Conference Committee (NCCC), representing freight railroads in collective bargaining, emphasized that some bonuses would be retroactive and paid immediately upon contract ratification.
Recently, the Brotherhood of Locomotive Engineers and Trainmen (BLET) approved its agreement, concluding negotiations for over 20,000 rail workers—a positive development. However, SMART-TD, representing approximately 28,000 employees including conductors and yard workers, saw its first contract fail ratification by less than 1%. The NCCC noted that SMART-TD's second agreement covering about 1,300 yardmasters was approved.
The Association of American Railroads (AAR) reports that eight unions, including some SMART-TD members, have accepted the PEB's terms. However, four unions (BMWED, BRS, IBB, and SMART-TD) remain unsettled, with BRS's cooling-off period set to expire on December 5.
Industry Warnings: Strike Would Cripple Economy
AAR President and CEO Ian Jefferies stated: "BLET joined most unions in approving the largest wage increases in nearly 50 years while achieving greater schedule predictability. Railroads stand ready to reach agreements based on the PEB framework with remaining unions, but the window is closing as deadlines approach. If remaining unions don't ratify, Congress must act to prevent a catastrophic $2 billion daily economic impact."
An AAR September report warned that failure to reach agreements by September 16 could idle over 7,000 daily trains, causing retail shortages, manufacturing shutdowns, job losses, and travel disruptions. The report urged congressional intervention to prevent service interruptions that would damage every rail-dependent economic sector.
AAR officials emphasized that PEB guidelines "significantly improve schedule predictability" and require railroads to address scheduling issues through interest arbitration if necessary.
Stakeholder Perspectives: Impacts and Responses
Many industry observers suggest any strike would likely be brief. Tony Hatch of ABH Consulting noted union leadership strongly favors ratification, predicting any work stoppage might last only one day. He cautioned that industries like automotive and steel—which operate just-in-time systems—could experience temporary layoffs, but final agreements would likely mirror PEB recommendations.
National Retail Federation CEO Matthew Shay warned: "A holiday-season rail strike would devastate businesses, consumers, and the economy. With inflation already straining households, Congress must intervene to prevent catastrophic shutdowns." He emphasized that eight of twelve unions have approved contracts, urging remaining parties to resolve differences without disruption.
FourKites analysis highlighted dual impacts of renewed negotiations: potential holiday sales disruptions and broader economic damage during ongoing uncertainty. Network Collaboration GM Glenn Koepke outlined potential consequences:
- Retail chaos as executives assess supply chain vulnerabilities, though major retailers likely have sufficient inventory
- Critical raw material shortages causing manufacturing stoppages in petroleum, packaging, automotive, and agriculture—with peak impact when factories reopen post-holidays
- Overwhelmed trucking capacity unable to replace daily rail volume, creating market turbulence favoring carriers and 3PLs
Koepke predicted resolution without major disruption, despite persistent threats. Proxima consultant Spencer Shute noted shippers are already diverting freight to trucks, though the market can't fully absorb rail volumes. He warned that full strikes could halt 30% of US freight, severely impacting auto, fertilizer, and dry food sectors during holidays and into 2023.
As developments unfold, businesses and policymakers hope for resolution before the cooling-off periods expire—keeping goods moving on America's rails without strike disruptions.