After 13 months, West Coast ports have reached a deal with workers. The new new six-year deal covers workers at all 29 West Coast ports. Gene Seroka, Port of Los Angeles Executive Director, joins Yahoo Finance Live to discuss how the deal was reached and what it means for the ports.

Video Transcript

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AKIKO FUJITA: After 13 months of negotiations, West Coast Ports and the Dockworkers Union have reached a deal. It comes after ports stretching from Seattle to LA saw terminals temporarily closed, work stoppages, and government intervention just last week. President Biden's Labor Secretary Julie Su waded into the debate and pushed for a resolution, which eventually came on Wednesday. That includes a 32% wage increase for workers over the next six years.

Many retail associations are breathing a sigh of relief as is our next guest. That is Gene Seroka, the Executive Director of the Port of Los Angeles. Gene, we started this conversation more than a year ago in terms of the negotiations that were happening. How instrumental was the White House, specifically the Labor Secretary in helping reach this deal?

GENE SEROKA: Well, good afternoon, Akiko. Good to see you. Julie Su's presence was absolutely critical in getting this deal over the finish line. Please remember, she was the California State Labor Secretary for a number of years before moving to Washington in the capacity of Deputy Secretary of Labor.

And now as acting and appointed to go in front of the US Senate for vote on the permanent job, she's known both of these parties very well over the time that she's worked with them. And this dialogue had been ongoing. She didn't just parachute in at the last minute and try to influence the negotiations. These are partnerships she's developed over a number of years.

And she was holding weekly calls with both parties, talking individually on the phone during the past several months. And it was determined by some of us that it was probably time that she visited with the folks face to face. And for those three days in San Francisco, she was able to do shuttle diplomacy, get the two sides together on critical issues, and come out Wednesday night with the tentative agreement.

DIANE KING HALL: And, Gene, so we saw that there was this 32% pay increase that you got in the deal, the one-time hero bonus as well. So kudos to the workers for that. What else did you secure from the deal? And are you happy overall with it?

GENE SEROKA: I'm pleased. And as the Port Authority in Los Angeles, I'm not at the negotiating table. But as a former Pacific Maritime Association Board member and working with both sides regularly as well as the White House and Julie Su herself, we kind of see how this was beginning to develop.

And it was imperative that these workers get paid what they're worth. They were out on the job on average 6-plus days a week during the pandemic when we had that unbelievable cargo surge for 2 and 1/2 years. They really kept the American economy moving. At the same time, the companies have to be competitive now as we go to our next step. And that's to try to bring some of this cargo that's moved away from us back here to the West Coast and specifically Los Angeles.

AKIKO FUJITA: So let's talk about that. When you look at cargo volume, they're down 27% at least in the first five months of the year compared to where you were last year. A lot of that has been diverted to the East Coast ports. You've said before that you're not sure all of that can come back. What do you do now to bring them back?

GENE SEROKA: It all started this week. I was up in Tacoma, Washington, Akiko, at the Annual Agriculture Transportation Coalition meeting, their 35th meeting led by Peter Friedman talking with about 450 members of growers, farmers, producers, canners, and trying to share with them the ground truth of what's happening here in Los Angeles. And now that we have the solidification of a collective bargaining agreement, trying to build their confidence in bringing cargo back.

It's my estimation that about 15% of our normal cargo has moved to the East and Gulf Coast. The balance of the decline that you just mentioned is based on the economy. Inventory levels are still very high today, whether it be in finished retail goods or manufacturing parts and components.

We're starting to see a little bit more momentum and cargo coming across the Pacific. There are about 58 ships on their way right now. And that's the highest it's been in several months. I think that we'll get on a more normal cadence of cargo flow in the second half of the year. And with this deal and the continuing move forward of the US economy, I think, we're going to have a better second half than we saw in the first six months.

DIANE KING HALL: So that's an optimistic view, Gene. But let's play the other side of the coin in terms of there's still expectations for at least a mild recession. What does that do to the ports if that is something that we should see this year?

GENE SEROKA: Yeah, Diane, I know this has been talked about now for seemingly two-plus years from experts across a wide variety of industries in the United States. I just don't see it. Again, by textbook definition, it's two consecutive quarters of GDP decline. We already saw that back in 2022.

Now, again, looking at the economy and its equation today, it's kind of unique. 339 jobs were created last month, Inflation has come down 11 consecutive months, annualized at 4% with the last report. 3.7% unemployment rate, the lowest since the late 1960s.

And what was even more encouraging are the last two months of retail sales where many of us are spending more in the service sector. Every airplane I'm on is full, the restaurants are packed, and people are going back out to the baseball games again. But our economy keeps moving along.

So we're going to keep watching this closely. As a leading indicator of the US economy, I can tell you right now that we're seeing a lot of cargo come across the Pacific. And the other thing that I'm not seeing are canceled purchase orders. Typically, these orders go into factories in Asia 90 to 120 days before a vessel departs. And I'm not seeing levels of cancelation that would cause me concern for the back half of the year.

AKIKO FUJITA: Gene, we always like to ask you about what's happening over in Asia just given where your cargo comes from. We saw the PBOC yesterday over in China cut their medium term lending rate. The economy, the recovery in China simply hasn't taken off as quickly as expected. You're on the receiving end of some of that cargo. What does that look like to you right now from your vantage point?

GENE SEROKA: Order is so far in the first half of the year, Akiko, as I mentioned, have been very light because of the inventory levels that remain here in the warehouse and complexes across the country. The St Louis Fed has said, our inventory sales ratio is above 1.30. The folks that manage this part of our supply chain like to see that inventory sales ratio about 1.1 and 1.15.

And if you're like me, you're getting emails and texts every day from your favorite retailers offering deep discounts on inventory. So we've still got a ways to go to push those products out of the domestic warehousing system before we're really going to kick it in gear on new imports coming in. But again, I like where we stand. Summer fashion, back to school, and fall fashion culture right now are looking like they did a little more traditionally before the pandemic. And it's going to be up to a big year end retail holiday season to define what the overall year is going to end up like.

AKIKO FUJITA: That's why we always like to get your perspective there. Gene Seroka from the Port of LA, good to talk to you today. Have a good weekend.