How the cost of the Southern California port strike was twisted into '$1 billion a day'

By Jock O'Connell

This article was published in the Forum section of the Sacramento Bee on Sunday, Dec. 9, 2012.

For eight days until this past Wednesday, members of the International Longshore and Warehouse Union were on strike at the ports of Los Angeles and Long Beach.

Their action effectively hobbled operations at the two ports, which sit adjacent to each other in Southern California's San Pedro Bay and which together serve as the point of entry for nearly 40 percent of the containerized shipments entering all U.S. seaports.

The strike began Nov. 27 and targeted 10 of the 14 terminals at the two ports. The action prevented ships from being loaded or unloaded and thus stranded vast quantities of goods.

By last weekend, the cost of the port closure was widely being pegged at $1 billion per day.

There was just one problem: The figure was indefensible.

It had no empirical basis, and it was certainly not derived from any analysis, whether systematic or back-of-the-envelope.

I should know, because I was the one who inadvertently gave it life.

And, herewith, is my cautionary tale of how a statistic cited in one context gets misread and then goes viral in the hothouse of a 24-hour news cycle.

When it became clear the dispute between the union and the terminal operators might not be settled quickly, questions started being asked about the strike's economic consequences.

Among the first to ask was Ronald White, a business writer for the Los Angeles Times, and for an answer he called me on the third day of the strike.

I am an international trade economist, and, while I live in Sacramento, I'm associated with Beacon Economics, a prominent L.A.-based consulting firm.

I explained to White that the cost of the strike couldn't really be calculated until it was over because its length would largely determine its severity. And some costs might prove impossible to quantify.

The only firm statistic I could give him was that the dollar value of cargoes passing through the ports at this time of year was around $1.125 billion a day.

White's article appeared in the Times on Dec. 1 and correctly reported what I had told him: "About $1 billion a day in freight moves through the ports at this time of year."

But that is not what lots of people read.

By that afternoon, $1 billion was widely being proclaimed as the strike's daily price tag. Predictably, this only further inflamed anti-union sentiment.

But stranded cargo is not necessarily lost cargo. Ships were not dumping thousands of containers into San Pedro Bay. Apart from a very small volume of perishable goods, virtually all of those stranded shipments would eventually get to market.

A billion dollars a day was not merely a stretch, it was a statistical delusion.

But it stuck.

Over the next few days, it would regularly find its way into newspaper headlines. It would be cited on local as well as national TV news programs.

It would be bandied about on radio talk shows. It was referenced by maritime industry executives and politicians, including Los Angeles Mayor Antonio Villaraigosa. It even made it into a formal plea for White House intervention from the National Retailers Association.

The fact that it was a groundless numerical malaprop seemed irrelevant. As Times business columnist Michael Hitzlik would later remark: "Big, round numbers always get people's attention."

To his credit, Southern California Public Radio's Ben Bergman started questioning the figures on Monday, Dec. 3, before the strike ended. Tracing the number's pedigree, Bergman reported that "O'Connell said last week that L.A. and Long Beach ports handle about $1 billion of cargo a day, but many misinterpreted that to mean the strike is costing that much."

Even so, when the strike ended late the next day, national news outlets like the Wall Street Journal's Market Watch persisted in reporting the cost of the eight-day strike to have been "an estimated $8 billion."

On Wednesday, Hitzlik penned a column entitled "Port strike numbers are out to sea," in which he conclusively demonstrated how the billion-dollar-a-day figure was "bogus" and that the strike's real impact was a "tiny blip in terms of national GDP."

That same day media critic Mark Lacter published a scathing review of the strike's press coverage on the L.A. Observed website. And here's where things started getting especially interesting for me.

Lacter immediately got to his chief complaint: " it starts with the one number that has dominated news reports (and was parroted by local officials) for the past week: That the economic impact of the walkout was running $1 billion a day."

So how, he asked, did that figure start making the rounds?

"Well, Jock O'Connell, a trade analyst at Beacon Economics, says it inadvertently came from him," Lacter wrote.

The strike is now over, and it's possible that its resolution was indeed hastened by the popular belief that, at a billion dollars a day, a long strike could cripple the nation's fragile economic recovery.

But now, at least, it's a number free to vanish safely back into the thin air from which it came.