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A Potential Railway Strike Is Already Slamming the Economy

Just the potential of a nationwide railway strike is already hurting the economy as railways pause shipments of hazardous and security-sensitive materials.

Just the potential for a nationwide railway strike is already hurting the U.S. economy.

A possible strike by unionized workers at two of the country’s biggest railroad operators -- Union Pacific  (UNP) - Get Free Report and CSX  (CSX) - Get Free Report -- that would bring a screeching halt to freight shipments is already having an impact on the flow of goods.

America's freight railroads have already stopped accepting shipments of hazardous and other security-sensitive materials because of the looming threat of a strike, according to CNN Business.

Union Pacific, one of the major national railroads whose operations would be halted by a strike, said the move is meant to "protect employees, customers, and the communities we serve," according to CNN.

More specifically, the railroad's trade group said the step is necessary to "ensure that no such cargo is left on an unattended or unsecured train."

140,000 Workers Looking for Better 'Quality of Life' Provisions 

The crux of the dispute has pegged freight companies like Union Pacific, CSX and BNSF Railway, owned by Warren Buffett's Berkshire Hathaway  (BRK.A) - Get Free Report, against labor unions representing around 140,000 workers who are pushing for improvements in “quality of life provisions,” namely agreements on attendance policies, vacation and sick days.

There are 12 major unions and 10 of those 12 have already reached agreements, but the Brotherhood of Locomotive Engineers and Trainmen, as well as the SMART Transportation Division, are pushing for more.

"The railroads are using shippers, consumers, and the supply chain of our nation as pawns in an effort to get our unions to cave into their contract demands," the unions said in a statement. "Our unions will not cave into these scare tactics, and Congress must not cave into what can only be described as corporate terrorism."

The unions' position show the rising stakes surrounding what could lead to the first national railroad strike in 30 years as soon as this Friday. About 60,000 union members who work for the railroad are set to go on strike, including the engineers and conductors who make up the two-person crews on each train. 

Even though 45,000 other union members belong to unions that have reached tentative deals with the railroads, a strike by engineers and conductors would bring the freight rail system, which carries nearly 30% of the nation's freight, to a screeching halt -- just in time for the busy holiday shopping season.

A Potential National Economic Disaster 

A massive rail strike could very well deal yet another blow to the U.S. economy, even a national economic disaster, in the words of the U.S. Chamber of Commerce.

Indeed, a sudden-stop in freight railway traffic is the last thing the U.S. economy needs as it struggles to get over several years of supply chain issues that have already left store shelves barren and prompted temporary factory closures due to lack of just-in-time parts -- which in turn has fueled inflation, which came in hot yet again in August, prompting concerns the Federal Reserve will continue on its war path of raising interest rates.

Labor law for railroad and airline employees is different from the law that controls labor relations for the vast majority of private sector workers. The Railway Labor Act, the nation's oldest labor law, allows Congress to take action to keep workers on the job in case of a strike or a lockout.

But it's not clear that Congress could act quickly to find a bipartisan measure needed to win the votes to avert a strike, especially just weeks before crucial midterm elections.

"The railroads show no intentions of reaching an agreement with our unions, but they cannot legally lock out our members until the end of the cooling-off period," said the union in a statement. "Instead, they are locking out their customers beginning on Monday and further harming the supply chain in an effort to provoke congressional action."