Monday, July 6, 2015


West Coast Port Congestion Shaved 0.2 Percentage Points Off Economic Growth in 1Q -NY Fed

Exports suffered as traffic backed up at West Coast ports during labor negotiations, contributing to economic weakness at the start of the year

Containers are loaded at the Port of Long Beach in Long Beach ENLARGE
Containers are loaded at the Port of Long Beach in Long Beach Photo: Tim Rue/Bloomberg News
Congestion at the nation’s West Coast ports shaved roughly 0.2 percentage point off of U.S. growth in the first quarter, researchers with the Federal Reserve Bank of New York said.
That’s equal to the amount that gross domestic product contracted in the first three months of the year. The economy performed worse than expected at the start of 2015, a period when West Coast ports were plagued by slowdowns while dockworkers and marine terminal employers negotiated a contract.
For weeks, dozens of container cargo ships sat waiting outside the ports of Los Angeles and Long Beach, the main hub for most goods traveling to the U.S. from Asia. Oakland and Seattle-Tacoma are also major hubs, particularly for agricultural exports—many of which went bad while waiting in port.

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The International Longshore and Warehouse Union and the Pacific Maritime Association, which represents the employer companies, blamed each other for the delays. Employers accused the workers of deliberate slowdowns, while the longshoremen said their employers were cutting shifts.
The Fed researchers estimated that in the first quarter of 2015, export and import growth on the West Coast was down 14 to 20 percentage points relative to other U.S. ports.
“The dispute had the most bite in the first quarter, with imports and exports through the West Coast ports plunging,” the researchers wrote in a blog post Thursday, though they added that the strong dollar and weak foreign demand likely contributed to that decline.
Based on the Fed analysis, import declines at West Coast ports were “largely compensated by reallocation to other ports.” And March saw a surge of imports, after the new contract terms were reached February 20.
Exporters, however, did not appear to find alternative modes of transportation so readily, and they didn’t bounce back as fully as importers, the researchers wrote. That could be because they didn’t have access to imported raw materials and parts, causing supply chains to back up and eventually reduced output and employment.
The result: real export growth was reduced by 1.5 percentage points in the first quarter, equal to a 0.2 percentage point drag on the overall economy.