A union representing nearly 12,000 railroad workers yesterday voted down the tentative contract agreement between freight railroad companies and all 12 of their unions brokered by the White House last month, Emily writes.

Why it matters: The rejection, by the Brotherhood of Maintenance of Way Employes Division of the Teamsters (BMWED), raises the prospect once again of a nationwide rail strike. That would be devastating for the economy and possibly arrive during the peak holiday season — a political headache for the Biden administration.

• "Railroaders do not feel valued. They resent the fact that management holds no regard for their quality of life, illustrated by their stubborn reluctance to provide a higher quantity of paid time off, especially for sickness," said BMWED president Tony Cardwell in a statement.
• The rejection is a "big deal," a union official told Axios. If the parties can't come to terms, then there could be a strike that other unions would honor — or Congress might step in.

The reaction: In a statement, the group that represents the freight companies in bargaining, the National Carriers' Conference Committee, said they were "disappointed," but noted that for now, nothing changes. "The failed ratification does not present risk of an immediate service disruption," it said.

State of play: There are 12 unions that represent about 115,000 workers. Four other unions have ratified the agreement, and over the next month or so, seven more are set to vote.

• The agreement gives employees a substantial pay raise — after nearly three years of no increases — but doesn't adequately address many workers' concerns over workplace conditions, insiders told Axios.
• The two largest unions that represent conductors and engineers — making up about half the total rail workforce — aren't set to conclude voting until Nov. 17.
• A further back-and-forth wouldn't be unusual. Last year, John Deere union members voted down a contract two times over pay increases they saw as inadequate before finally approving one in mid-November. They also went on strike for a time.

If the unions vote down the deal, it could be left to a lame-duck Congress to step in. That would give Democrats more cover to force workers into a deal, Bascome Majors, a railroad analyst at Susquehanna, wrote in a recent note.

What they're saying: Jeremy Ferguson, president of SMART, the biggest union with 37,000 members, said the tentative agreement fell short of his expectations.

• "I will not sell members on this tentative agreement. It is my responsibility and duty to provide you with factual information and allow you to make an educated choice," he added in a separate statement.
• The most vocal workers are saying they don't like the deal — but it's not clear if they're in the majority.

What to watch: The upcoming votes.

Go deeper.

Railroads raked in record profits over the past few years, largely by cutting their workforces. It's an issue that keeps coming up in conversations among union workers, who say they didn't see any of the money, Emily writes.

• The rub: For the companies, now there's little left to cut. The industry is struggling with a worker shortage. And if the economy goes through a major slowdown in the near future — as economists say it might — the old playbook won't work to keep profits fat.

Why it matters: These kinds of workforce problems are playing out throughout the entire economy, and may help explain why unemployment and layoffs are at record lows — despite some economic skittishness.

• Employers fought hard to get workers back, and letting them go again doesn't seem quite as appealing.

Between the lines: Traditionally railroad companies were quick to furlough employees when the economy slowed down, said Christian Wetherbee, senior transportation analyst at Citi. That strategy failed them during COVID when many of those workers just didn't come back.

• Now some companies are rethinking things.

The big question: "Do you hold on to the employee and take the short-term pain from a financial perspective, or do you furlough them and take the risk that they won't be there when you get back?"

By the numbers: The rails reduced headcount by 20%-30% over the past several years, said Wetherbee.

• Take Union Pacific: It went from 47,000 employees in 2015 to 30,000 in 2021.
• Industry hauling volumes over the same period were down — but profitability surged, "largely on the back of reduced workforce," Wetherbee said.

Now: Rail operators are struggling to hire and retain workers. “We’ve seen a significantly higher attrition rate than what we had ever normally experienced,” CSX CEO James Foote told investors on a second-quarter earnings call. (Foote retired last month.)

• In a statement to Axios, the company said it's making "significant progress" in getting its workforce back to pre-pandemic levels.

What to watch: If a new worker agreement gets ratified, the higher pay laid out in the contract could help improve worker relations and stem the tide of attrition.

🏦 Bank of England intervenes and warns of "material risk." (CNBC)

⚠️ IMF, World Bank and Jamie Dimon raise recession concerns. (Bloomberg)

💻 PC shipments plunged 19.5% in Q3. (WSJ)

When an economy collapses, that country's banks tend to fail. But the opposite is also true: Bank failures can cause economic collapse, Axios' Felix Salmon writes.

• That central insight was awarded this year's economics Nobel prize. The winners are Ben Bernanke, Douglas Diamond and Philip Dybvig.

Why it matters: Bernanke was able to put his theory into practice as chairman of the Federal Reserve during the financial crisis of 2008-09.

• By using extraordinary powers to prevent a broad wave of bank implosions, Bernanke prevented the Great Recession from becoming a second Great Depression.

What they're saying: "Bernanke believed that it was critical to rescue the banks and the shadow banks," writes George Mason economist Alex Tabarrok, "not because he was beholden to financial interests (he was not a Wall Street guy) but because he believed the banks were a critical bridge between savers and investors and if that link were broken the results would be catastrophic."

💭 Our thought bubble, from Axios' Neil Irwin:

• Banks matter for the rest of the economy. That’s the basic insight of Bernanke, Diamond and Dybvig.
• Bernanke showed that when banks fail, the ripple effects are profound, as shown most clearly in 1930-33. His landmark paper on the Great Depression was published in 1983.
• It's a remarkable accident of history that a man with that particular intellectual backing was in place to prevent it from happening again.

Go deeper: Nobel Prize press release