Good morning! I found the VP debate last night engaging but not market-moving enough to warrant more than one line in this newsletter.

Today’s edition unpacks the economic impact of the first East Coast port strike in five decades.

Striking rich

Thousands of dockworkers across the East and Gulf coasts went on strike Tuesday for the first time since 1977 in a bid for a 77% pay raise and improved job security against automation.

Thirty-six ports from Boston to Houston have been shut down as a result, accounting for almost half of all monthly imports to the US, as the chart below from AP illustrates.

To be clear, longshoremen hold one of the highest-earning blue-collar jobs in the country.

Many of those on strike in New York and New Jersey made upwards of $150,000 in the financial year that ended in 2020, according to a report from regulators.

Some earned more than $450,000 salary that year — well above the median salary for a New York-based doctor, according to data from ZipRecruiter.

With that in mind, here’s what the dockworkers’ union wants in a new contract:

• A 77% pay increase over six years

• Limits on automation for cargo handling

• Better benefits

Before the strike kicked off, the union rejected an offer from the United States Maritime Alliance — which represents the port owners and shipping companies — for a 50% wage increase.

Most industry experts expect the two sides to come to an agreement within a few days. If not, the US economy and everyday Americans will pay the price.

“If this strike lasts a long time, you’ll want to get your Christmas shopping done early,” said Rhys Williams, chief strategist at Wayve Capital Management. 

In his view, a strike lasting longer than a few weeks could shave off a full percentage point from US GDP in the fourth quarter and stir a rebound in inflation.

“Goods inflation might accelerate if the strike is long,” said Morgan Stanley economist Diego Anzoategui. “Watch food and beverages for initial impact.”

The union, for its part, has pointed to the record profits that shipping companies made during the pandemic, as well inflation cutting into their wages.

Meanwhile, a prolonged work stoppage could prevent large retailers from stocking their shelves ahead of the holiday demand boom. 

In that scenario, stores will have to raise prices due to lack of inventory. While it’s possible retailers see better margins on the limited units they do have in stock, consumers will likely face steeper prices.

All of the above could ultimately drag on share prices for retail giants like Home Depot, Costco and Walmart — and boost air freight stocks like FedEx and UPS.

JPMorgan analysts estimate that the port strike could cost the US economy $3.8 to $4.5 billion a day.

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Elsewhere:

🎃 Investors are spooked to start October. Stocks tumbled Tuesday as tensions in the Middle East intensified, oil prices spiked, and Iran fired missiles at Israel. The port strike on the East Coast and inflation concerns as well as Hurricane Helene also has injected jitters into markets. (CNBC)

📉 Americans aren’t quitting their jobs. Workers are becoming wary of the slowing labor market. Fresh data showed the quit rate — one sign of employee confidence — dropped in August to its lowest mark since June 2020. Meanwhile, the JOLTS survey showed 5.31 million hires were made in August, less than the month before. (Yahoo Finance)

👟Nike posted mixed earnings. The stock dropped in after-hours trading as the shoe company announced it would postpone its investor day. The company pulled in $11.59 billion in the quarter, slightly below Wall Street’s expectations. Over the last year, Nike’s been accused of falling behind on innovation and ceding market share to competitors. (CNBC)

Rapid-fire:

• The death toll from Hurricane Helene hovers at 137 with hundreds still missing (CNN)

• Samsung will cut thousands of jobs worldwide starting in Asia and Australia (Bloomberg)

• CNN launched a paywall for its news website and plans to charge readers $3.99 a month (Reuters)

• BlackRock CEO Larry Fink says the market is pricing in too many interest-rate cuts from the Fed, given that the economy is still growing (Bloomberg)

• Charles Schwab named President Rick Wurster as its next CEO as Walt Bettinger will retire after a 16-year tenure (WSJ)

• A prolonged port strike could impact prices for perishable foods, car tires, beer, wine, and salt (Business Insider)

• Car companies are dragging through weak sales numbers as high prices keep purchases below pre-pandemic levels (WSJ)

Last thing:

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