Domino Effect of Higher Wages Could Prompt Retailers to Raise Prices

A potential strike by 340,000 unionized workers at UPS Inc. threatens to unravel progress in tackling two of the U.S. economy’s biggest hurdles in decades: inflation and supply chain disruptions.

In the absence of a labor deal by Aug. 1, a walkout by members of the International Brotherhood of Teamsters would snarl shipments of the 19 million packages that UPS moves daily in the U.S. It would also enable competitors such as FedEx Corp. to raise prices to help manage some of the parcels that would pour into its networks.

Economists say the strike might raise the inflation rate — which the Federal Reserve has sought to curb via an aggressive tightening campaign after it reached a four-decade high of 9.1% last year. And if the Teamsters’ demand for much higher wages is met, this could be a harbinger for other outsized salary increases, further complicating the Fed’s effort to get price growth to its 2% annual target.