Experts worry UAW strike could tip U.S. economy into recession

The auto industry makes up 3% of America's gross domestic product, making it a key economic sector.

Now that a portion of the factories that make those cars and trucks are no longer operating, the question turns toward what kind of economic fallout could be facing. Less of a question is which areas could be hit the hardest as most agree that Michigan could see the worst of the financial harm.

People baked into the industry are praying the strike will be short.

"Our hope is this is a very short stint. If it were to go longer, it would affect dealerships as far inventory with less coming in," said Roy Williams, a general sales manager at Avis Ford.

Williams isn't taking a position in the standoff between the United Auto Workers union and Detroit's big three automakers. But he emphasized it will be both members of the industry and customers shopping for cars that will suffer.

"I think it’s gonna be short-lived, I think the two sides are going to come together and it'll be a good thing for both parties and then we'll move on," he said. "But I would like to try to not have customers have the trepidation of not purchasing."

It's a question a lot of dealers are now asking.

And with several other burdens already present for car customers, a strike will only make shopping for a vehicle even worse.

"Not only do you have the prices being driven up because the fact you have low supply, but you've also have interest rates being high as a result of the fed again increasing interest rates," said Dr. Michael Greiner. "I think I saw auto interest rates are getting close to 8% which is absolutely insane based on what we've seen over the past few years."

Another expert who follows labor says if macroeconomic forces continue to hammer the consumer, it won't be long until the federal government gets involved.

"Keeping the economy from tipping into a recession or inflation from going up more than it has, I think all those things are going to lead to some sort of intervention if we get out beyond two weeks," said Dr. Marick Masters. 

He said the concern for the Biden administration is ensuring that both electrification and striking workers don't tip the economy into a recession. If the strike lasts longer than two weeks, that could become a real possibility.

The UAW's strike fund could allow workers about 11 weeks of pay while off the line.