What the Recent Dockworker’s Strike Has to do With You.

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What the Recent Dockworker’s Strike Has to do With You.

At the beginning of October, we saw the International Longshoreman’s Association representing 45,000 Dockworkers in ports all over the Eastern United States hit the picket lines. The Union demanded a 77% wage increase over a 6-year period for its members. They also demanded a total ban on robots and automation – anything that might potentially replace these workers in the future. The strike was short, with ports countering with a 62% raise. The Union recommended its members go back to work while details regarding the ports’ stances on automation are yet to be worked out. According to PBS.org the strike has been suspended until January 15th. This event underscores a theme I’ve mentioned in previous episodes that I think will be prevalent over the next quarter century, a mismatch of available labor for needed labor. What I mean by that is that we have a two-sided challenge for the labor market. First of all, the U.S labor force is becoming pickier about the jobs it will or will not do. But in addition to that, the jobs that are needed in the labor market and the skills required to do those jobs are changing exponentially. The way this plays out is you might have plenty of people looking for jobs, but they can’t find them because their skills don’t match the jobs that are available. So it’s not merely a labor shortage – it’s a labor fit shortage. Even when the labor needs do fit the labor skills available, the cost of that labor is likely to go up. In this example, the dockworkers’ higher wage negotiations will end up raising the prices on the goods they unload. This is one reason why I think inflation is not dead. It may be subdued, but I think some degree of inflation will be with us for several years.

Another example is the transportation market. Elon musk’s unveiling of the cyber cab last week reminds us that robots, machines, and artificial intelligence are not just affecting dock workers. Musk claims that production on a cyber cab will begin in 2026, and that the vehicle will cost less than $30,000. It’s the ultimate autonomous vehicle. It’s an Uber that doesn’t have a driver. He claims that you’ll be able to go to sleep while the vehicle is driving and wake up at your destination. Now Musk has been notorious in the past for overpromising on deadlines. But he has also been consistent in eventually delivering. His company, SpaceX has done things that seemed impossible 20 years ago. He has a reputation of pushing the envelope and re-imagining what is possible. There are safety issues to address and there will be accidents along the way, but it is very possible that we will not need humans to operate vehicles at some point in the not too distant future. This won’t become ubiquitous in the next five years. But it very well could in the next 25.

So how can you be successful in this age of reshuffling of the labor market? I think we will have to master the art of strategic partnerships. I believe that specialization and scale will be more necessary than ever to cover the rising regulatory costs of doing business. You won’t be able to hire all the people you need to run your business, but you can partner with others who can do that work for your business. For example, you might not be able to afford a CFO for your business. Maybe you can afford it, but they are in such high demand you can’t find someone to hire for this role. Well, you might be able to partner with a firm that offers fractional CFO’s. That is, people who serve, let’s say, four different companies in this role who you can “rent” to take care of this part of your business. I don’t think small businesses are going to be able to assemble everyone in house that they need to run their business in the future. So those leaders who get good at cultivating partnerships with others will have a competitive advantage. In some ways, business owners are going to have to have a “General Contractor” mindset when it comes to running their businesses. You will need to have the relationships to assemble a set of “sub-contractors” that can partner with you to help your business run. Finding competent and dependable partners will be the challenge and the leaders who can do this well will have an edge.

Recent developments in the labor market have recalibrated interest rates. A stronger report than expected for the job market moved the 10-year government bond, one of the proxy rates from which other rates take their cue, is back above 4%. Because of this recent strength in the labor market, it is anticipated that the Fed’s next move on short-term interest rates will likely be a quarter percent cut the day after the election. On September 18, the Fed cut rates by an aggressive half percent. But with inflation not abating as much as hoped for in September, quarter percent cuts appear to make more sense based on the data we have today. Although a lower interest-rate environment in coming months seems likely, these moves rarely happen in a straight line. Lots of data, including an uncertain outcome in the presidential election three weeks away, can have dramatic impact on the direction of interest rates.

Since we’ve been talking about employees, I want you to know that at Foundation Bank and MBC, we have some of the best ones around. We call them teammates, because as I mentioned in this episode, finding meaningful partnerships to create a team-based culture is going to be essential for small businesses to win in the future. Our outstanding teammates are waiting to serve you in McKenzie, Paris, Alamo, Jackson, Obion and Paris Landing. And we even have clients outside of those areas who love our team so much that they want to work with us no matter where they live. Wherever you might live, start a conversation with one of our teammates today by visiting your local branch or exploring our website. We also hope you’ll subscribe to this podcast to it in your favorite podcast app and share it on social media. until our next episode, God bless you.

-President Chad P. Wilson, CFP

Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of Foundation Bank/McKenzie Banking Company on October 22, 2024. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. Any rates mentioned are subject to change and are accurate as of the recording date. MBC/Foundation Bank is an Equal Housing Lender, Member FDIC.