(NEW YORK) — Hurricane Ian could cripple Florida’s already-fragile homeowners insurance market. Experts say a major storm like Ian could push some of those insurance companies into insolvency, making it harder for people to collect on claims.
Since January 2020, at least a dozen insurance companies in the state have gone out of business, including six this year alone. Nearly 30 others are on the Florida Office of Insurance Regulation’s “Watch List” because of financial instability.
“Hurricane Ian will test the financial preparedness of some insurers to cover losses to their portfolios, in particular smaller Florida carriers with high exposure concentrations in the impacted areas,” Jeff Waters, an analyst at risk analytics company RMS and meteorologist, told ABC News. Waters said Florida is a peak catastrophe zone for reinsurers, and those with exposure will likely incur meaningful losses.
More than 1 million homes on the Florida Gulf Coast are in the storm’s path, and while Ian’s track and severity can change in the coming days, one early estimate pegs the potential reconstruction cost at $258 billion, according to Corelogic, a property analytics firm.
Industry analysts say years of rampant and frivolous litigation and scams have brought Florida’s home-insurance market to its knees, with many large insurers like Allstate and State Farm, reducing their exposure to the state in the past decade.
“Insurers most exposed to the storm will be the Florida-only insurers, which we define as insurance companies with at least 75% of their homeowners and commercial property premiums written in Florida,” according to a report from Moody’s Analytics submitted to ABC News.
The state-run, taxpayer-subsidized Citizens Property Insurance Corp. stands to lose the most. As more local insurance companies in Florida have closed their doors, Citizens has seen its number of policyholders swell from 700,000 to more than 1 million in just the past year.
Florida state Sen. Jeff Brandes, a Republican from St. Petersburg and a vocal critic of Florida’s insurance industry, warns that if Citizens can’t pay its claims, Floridians should brace for assessments to go up on their own insurance policies under a state law that allows it to assess non-customers to pay out claims.
“Every policy holder in the state of Florida, home and auto, should be watching this storm very carefully because it could have a direct impact on their pocketbooks,” said Brandes. He predicts policy holders will see rate hikes of up to 40% next year as a result of Ian.
A spokesperson for Citizens did not immediately respond to ABC News’ request for comment.
Florida is already home to the highest insurance premiums in the U.S., something Charlie Crist, the former Florida governor running against incumbent Gov. Ron DeSantis, blames on his opponent.
“Gov. DeSantis let these insurance companies double Floridians’ rates and they’re still going belly up when homeowners need them most. You pay and pay and pay, and the insurance company isn’t there for you in the end anyway,” Crist said in a statement Monday.
A spokesperson for DeSantis did not immediately respond to ABC News’ request for comment.
In May, DeSantis signed a bipartisan property insurance reform bill into law that poured $2 billion into a reinsurance relief program and $150 million into a grant program for hurricane retrofitting. Among other things, it prohibits insurance companies from denying coverage based on the age of a roof and limits attorney fees on frivolous claims and lawsuits.
At a news conference Tuesday, DeSantis said a lot of the damage from Ian would be from flooding and storm surge. DeSantis said the danger with the Tampa Bay area is that the water has no place to go, noting that the area has close to 1 million residents enrolled in a national flood insurance program.
Homeowner policies typically do not cover flood damage, and most homeowners located in a flood zone often get coverage from the Federal Emergency Management Agency (FEMA). Most private property insurance companies insure primarily for wind damage.
President Joe Biden on Thursday approved DeSantis’ request for a disaster declaration for a number of counties in the state. It includes grants for temporary housing and home repairs and low-cost loans to cover uninsured property losses.
“The expense will be higher because of higher construction costs and overall inflation,” Denise Rappmund, the vice president of Moody’s Public Project and Infrastructure Finance Group, told ABC News. “FEMA is the key source of aid following a natural disaster, but much of the costs to repair and rebuild damaged property will be borne by property insurers who will benefit from $2 billion of state-funded reinsurance.”
Analysts say Hurricane Ian has the potential to be among the four costliest storms in U.S. history, mostly because Florida’s population has exploded in recent years.
No state in the eastern U.S. has grown faster in population than Florida in the past decade and the state’s fastest growing cities: Tampa, Fort Myers and Sarasota, are all in the storm’s path. Analysts warn that more people and more homes mean that a major storm could become more destructive and costly.
(NEW YORK) — As elevated prices for oil and gas strain U.S. households, the country faces a weather event that some fear will send the costs of these essentials even higher: Hurricane Ian.
The category 4 hurricane on Wednesday sustained wind speeds of 150 miles per hour as it made landfall on Florida’s west coast.
Speaking at an event in Washington, D.C., on Wednesday, President Joe Biden warned oil and gas companies against raising prices amid the storm.
“Do not, let me repeat, do not use this as an excuse to raise gasoline prices or gouge the American people,” he said.
Americans need not worry about price increases for gasoline as a result of the hurricane, industry analysts told ABC News, noting that the path of the storm has averted key oil-producing states, such as Texas and New Orleans.
The storm will not cause widespread food price hikes, either, since Florida isn’t a major producer of food, analysts said. However, the state is a top exporter of citrus fruit — such as oranges and grapefruits — which could experience price hikes depending on the extent of damage, an analyst said.
Here’s what to know about the impact Hurricane Ian will have on gas and food prices:
The impact of Hurricane Ian on gas prices
Hurricane Ian will not affect gasoline prices, industry analysts said.
“I don’t think it’ll have any impact at all,” Andy Lipow, a longtime oil analyst and president of Lipow Oil Associates, told ABC News.
Florida, the analysts said, simply doesn’t produce much oil. The state doesn’t host any oil refineries and accounts for about 6,000 barrels of oil production each day, Lipow estimated. That output makes up a tiny fraction of overall U.S. oil production, which amounts to 11.8 million barrels per day, the U.S. Energy Information Administration reported this month.
“Just as a matter of geography, there is no direct effect on the oil and gas market,” Pavel Molchanov, a senior energy analyst at Raymond James, told ABC News. “Florida is not an energy-producing state in the way Texas and Louisiana are.”
Hurricane Ian did cause temporary disruption of major oil platforms in the gulf of Mexico, however. As a precaution, BP and Chevron on Monday cut production at offshore oil platforms, evacuating personnel as the storm grew in strength, Lipow said.
Those facilities produce 485,000 barrels per day and represent 27% of oil production in the Gulf of Mexico but less than 5% of overall U.S. oil production, Lipow said.
But the disruption is temporary. BP began working to return personnel to its offshore platforms on Tuesday, the company said.
“Once they get the people out there, it’s back to production within a day,” Lipow said.
The effect of Hurricane Ian on food prices
Similarly, the hurricane won’t cause large-scale hikes in food prices, since Florida doesn’t play a major role in the sector, industry analysts said.
“It’s just one state in the union and a state that really does not produce a lot of food,” Kenneth Scott Zuckerberg, lead economist for grain and farm supply with CoBank, told ABC News. “In the grand scheme of things, this is well within the context of what happens in the agricultural sector.”
However, the state does factor significantly in the production of two items: fertilizer and citrus fruit, the analysts said.
Phosphate, a key ingredient of fertilizer, is mined and manufactured in the Tampa Bay-area, where a single company, Mosaic, produces 50% of North American phosphate fertilizer, the company says.
Damage to phosphate-related facilities could disrupt the tight market for fertilizer, but farmers typically accept smaller profit margins rather than pass the cost increases along to consumers, Zuckerberg said.
Another top export in Florida, citrus fruit, accounts for 70% of such foods produced in the U.S. Oranges, grapefruits, tangerines and the juices derived from them could undergo a hike in prices in a matter of weeks if the hurricane damages crops, said Arlan Suderman, a chief commodities analyst for financial services firm StoneX.
“The market is anticipatory,” Suderman told ABC News. “As soon as the hurricane goes through and they make an assessment, they’ll be pricing in expectations.”
If damage to citrus trees proves significant, Suderman said, the recovery of the citrus supply could take “several years.”
(NEW YORK) — A year of sharp declines for the stock market reversed over the summer, giving stocks a much-needed rebound. But a bout of deep losses across the major stock indices in recent weeks has renewed fears of further decline.
The S&P 500 on Monday closed at a lower point than it has on any other day of 2022. The Dow Jones Industrial Average, meanwhile, fell officially into bear market territory, meaning it had dropped at least 20% from its most recent peak.
The recent drop marks the latest swing of this year’s market seesaw. Bouncing back from a historic plunge over the first half of 2022, the S&P 500 rose more than 15% during a two-month period beginning in mid-June. Over that same period, the tech-heavy Nasdaq spiked more than 17% and the Dow rose nearly 14%.
In recent weeks, the stock market has soured, however, over indication from the Federal Reserve that it intends to continue an aggressive series of borrowing cost hikes until it brings inflation under control — a policy approach that heightens the risk of tipping the U.S. economy into a recession, market analysts told ABC News.
Still, investors and retirees shouldn’t sell their stock holdings in a panic. In fact, some investors should buy additional shares, anticipating that low-priced stocks will eventually recover and yield significant gains, the analysts said.
“Recessions, as painful as they are, ultimately lead to discounted prices,” Dan Ives, managing director and senior equity research analyst at Wedbush Securities, told ABC News. “Investors that can navigate that risk could be rewarded on the other side of the dark storm.”
Here’s what you need to know about why stocks are falling, how much further the decline could go and what investors and retirees should do in response:
Why are stocks falling?
Stocks are falling because the Fed has put forward a string of aggressive interest rate hikes in recent months.
The policy approach aims to slash price increases by slowing the economy and choking off demand. But the move risks tipping the U.S. into a recession and putting millions out of work.
A recession poses a serious threat to the stock market because it could dramatically cut corporate profits, the key focus for stock forecasters. As workers lose their jobs and consumers cut back on spending, business gains dry up.
“The main reason stocks remain vulnerable in recessionary environments is that corporate profitability is affected,” Christine Benz, the director of personal finance at financial research firm Morningstar, told ABC News. “That makes prevailing stock prices harder to justify if corporate profitability is sinking.”
Typically, the market has climbed in response to news about slowing inflation and a potential softening of rate increases; inflation spikes and rate moves are a common cause of selloffs.
Inflation data released earlier this month revealed that prices rose unexpectedly in August, sending the market tumbling. Last week, the Federal Reserve instituted a 0.75% rate hike, which sent stocks falling even further.
How far will the stock market fall?
It’s difficult to predict the specific length of a market slide, the analysts said. But history suggests the downturn could last for several more months and possibly more than a year and that stock prices may fall even further.
Keith Lerner, co-CIO and chief market strategist for Truist Advisory Services, said the rate hikes instituted by the Fed would weigh on the economy for at least 6 to 12 months and potentially even longer.
“Even if the Fed changes course, the rate increases they’ve just done this year haven’t had their full impact,” Lerner told ABC News. “With that backdrop, we think it will continue to be a volatile market and the economy will be weakened.”
If the U.S. falls into a recession, those losses could be even more pronounced, Lerner added.
Since 1950, the average decline for the S&P 500 during a recession is about 29%, he said. So far this year, the S&P 500 has fallen nearly 24%.
“The market is pricing a mild recession into stocks,” said Ives of Wedbush Securities.
The plummet in the S&P 500 this year qualifies it for bear market territory, which offers another lens for assessing the index’s historical performance.
In the 26 bear markets since 1929, the S&P 500 has lost an average of 35.6% of its value over a typical duration of 289 days or about 9-and-a-half months, according to a report from Hartford Funds.
What should investors and retirees do?
Investors, including those nearing or in retirement, shouldn’t sell their stock holdings out of panic, the experts said.
“Often when you make changes in response to the market activity, you find that the market recovers not long thereafter,” said Benz. “My advice is for investors to have long-term strategic asset allocation that makes sense for them and stick with it.”
Take, for instance, a 45-year-old investor with a portfolio made up of 70% stocks and 30% bonds, Benz said. The declining value of the stock market may send the balance awry, shrinking the share made up of stocks and raising the share made up of bonds.
Such an individual should buy more stock holdings in an effort to bring the proportions back into alignment with the initial portfolio balance, she added.
“It doesn’t feel great – you’re adding to the asset class that hasn’t performed well,” Benz said. “The virtue of the strategy is that it enforces discipline for this idea of putting money into the market when stocks are down and arguably cheaper.”
Added Lerner: “The price of admission in the stock market are drawdowns. There are drawdowns every year – some are bigger than others.”
For investors nearing or in retirement, the choice is more difficult, since they may lack the long-term time horizon of younger investors. The economic headwinds this year have hurt bonds, a popular safe haven for retiree portfolios.
“This has been a really tough year for those in that age band,” Benz said.
She advised pulling out some cash reserves but also urged individuals against overdoing this strategy, especially in a high-inflation environment. People should cash out the “least-depressed assets” in their portfolio, such as short-term bonds or high-quality intermediate bonds, she added.
Retirees could also benefit from placing their money in savings accounts, which tend to offer higher interest rates as the Fed heightens borrowing costs, Benz said. Elevated yields on savings accounts, however, still remain well below the inflation rate.
“Shop around for savings accounts, because there is a huge disparity in terms of yields,” she said.
(NEW YORK) — If you grew up in a household with a Costco membership, chances are you can instantly recall sampling everything from spinach- and cheese-filled ravioli to electrolyte beverages and the feeling of freezing in the produce and refrigerator section, all to be rewarded with a post-shopping bite from the iconic food court where a crisp $5 bill could make you feel like royalty.
With 578 Costco warehouses across 46 states — more locations than The Cheesecake Factory, In-N-Out Burger or Wienerschnitzel, to name a few — thousands of U.S. consumers have come to know and love the Kirkland Signature hot-dog-and-soda combo, which has maintained the same $1.50 price since 1985.
And the company’s chief financial officer confirmed they are committed to keeping it that way.
During a presentation on Costco’s fourth-fiscal-quarter fiscal results, Richard Galanti told investors and reporters there are other areas, including Costco’s gasoline sales or travel business, where they could potentially turn more profit to help offset the low-priced food court meal.
When asked about Costco’s margins holding despite inflationary pressures and areas where they’re being more aggressive on pricing, Galanti said, “Lightning just struck me.”
“There are some businesses that are doing well with margin like gas business on a smaller way — in the travel business, those things help us be more aggressive in other areas,” such as “hold the price on the hot dog and the soda a little longer, forever,” he said.
Earlier this year, another Costco executive also said the hallmark item of the retailer’s prepared food court offerings would continue to hold at the same price.
Galanti also noted the strength in Costco’s fresh food business sales over a two-year period through this most recent quarter.
“The enormity of the improvement in the bottom-line, even now as we’re getting some of that back now, still net-net, were better than we were two years ago,” he explained of the company’s earnings. “So all those things help that process.”
(NEW YORK) — U.S. consumer confidence rose more than expected this month, extending a rebound in sentiment that began with a jump in August.
The growing confidence in the U.S. economy defies recession fears on Wall Street less than a week after the Federal Reserve raised its benchmark interest rate and forecasted rising unemployment.
The Conference Board said on Tuesday its Consumer Confidence Index rose to 108.0 this month from 103.6 in August. Consumer sentiment improved both for the current state of the labor market and business conditions.
Last week, the Federal Reserve escalated its fight against inflation by raising borrowing costs 0.75% — a repeat of the same hike it imposed at each of the last two meetings. Prior to this year, the Fed last matched a hike of this magnitude in 1994.
The central bank said additional rate hikes would likely follow.
The data from the Conference Board signals resilient consumer confidence, which could sustain consumer spending.
The Fed, which aims to fight inflation by slowing the economy, may see the data as a sign that it should continue its significant rate hikes. The approach, however, risks tipping the U.S. into an economic downturn and putting millions out of work.
Before the Consumer Confidence Index jumped in August, it had dropped for three consecutive months. It reached its lowest point of the year in July.
The present situation index, which measures consumer sentiment toward current business and labor market conditions, rose to 149.6 from 145.3 last month. The expectations index, which assesses the short-term outlook for income, business and labor market conditions, jumped to 80.3 from 75.8.
The persistence of elevated prices has weighed on U.S. consumers and investors for well over a year. A higher-than-expected inflation report this month sent the S&P 500 tumbling for its worst day of 2022.
Inflation data showed that prices rose unexpectedly in August from the month prior but the overall year-over-year inflation rate fell slightly to 8.3%.
(NEW YORK) — As prices continue to climb on an array of goods due to inflation and increased production costs — like fuel for transportation — farm owners have warned that pumpkins could have a higher price tag this season.
With Halloween fast approaching, pumpkins used for jack-o’-lanterns and fall decor are up to $5.68 compared to $4.92 last year on average and may vary by location.
Farm owners from Texas to Maryland have seen a nearly 20% increase “mostly due to fuel costs increases,” Kama Bozeman of YesterLand Farm told Tyler, Texas, ABC News affiliate KTLV.
“The price of fuel has affected everything, the fertilizer for … pumpkins has been, you know, unbelievable,” Tammy Adkins, a farmer in Salisbury, Maryland, told ABC News affiliate WMDT. “It seems that everything has gone up and of course parents see that at the grocery store so it’s affected us as well.”
In addition to the rising costs, farmers have reported that drought conditions have also impacted some crops.
“We didn’t have much rain in August, so the hot weather — where it gets above 90 degrees — we didn’t get the pollination we should’ve got,” Gaylon Adkins the owner of Adkins Farm Market said. “So we’re looking at about probably a half a crop of pumpkins.”
The summer of dry weather has forced farmers like Adkins to get creative.
“I’ve already bought a few of pumpkins up in Delaware, I’ll probably get some in Pennsylvania,” Adkins continued. “I really need to finish picking my field and see what I got but I know I probably will not have enough.”
At Happy Day Farm in New Jersey, owner Tim Stockel said families can still get their hands on fall crops but said they may look different this year.
“Pumpkins this year are a little bit smaller due to the lack of rain,” Stockel told ABC News. “But they are healthy and we do have an abundance of amount to pick from.”
With Americans set to spend a record $10.6 billion celebrating Halloween this year, according to the National Retail Federation, and $3.4 billion of that on decorations, consumers will need to find ways to save without compromising on the staple squash.
Dr. Kerri Camp, a marketing professor at the University of Texas at Tyler, suggests “purchasing from local farms — because transportation costs will have less of an impact on the actual pumpkin prices.”
(NEW YORK) — Amazon has announced a second Prime event happening next month, just ahead of the busy holiday season.
The retail giant has introduced Amazon Prime’s early access sale which will take place Oct. 11-12, making it the first time there will be two Prime events in one year.
The 48-hour shopping event first took place in July and is back to give Prime members exclusive early access to holiday deals across all categories including electronics, fashion, home, kitchen, pets, toys and Amazon devices.
Amazon Prime’s early access sale will include deals on big-name brands including Peloton, New Balance, Philips Sonicare and more.
For the first time, the company is also planning to curate a top 100 selection of some of its best deals including offerings from iRobot, KitchenAid and Samsung. Prime members will have the added benefit of shopping up to 80% off select Fire TV smart TVs, as well as additional savings on Alexa-enabled devices and products from Adidas, LEGO, Ashley Furniture and more.
“We are so excited to help Prime members kick off the holiday season with Amazon’s new Prime Early Access Sale — an exclusive opportunity for members to get deep discounts on top brands we know they are looking for this time of year,” Jamil Ghani, vice president of Amazon Prime, said in a statement. “And members can start enjoying exclusive Prime benefits and offers now, plus find gift ideas for the family with our holiday gift guides and this year’s Toys We Love list.”
News of Amazon’s fall Prime shopping event follows other retailers rolling out their own early pre-Black Friday sales shopping events.
Target Deal Days is slated to kick off Oct. 6-8 offering thousands of deals on everything from toys and gifts to everyday essentials.
Additionally, Walmart has shared news that the company will be hosting a sales event similar to Amazon and Target, but further details and dates have not yet been confirmed.
Experts agree that these earlier-than-usual sales may be a result of rising inflation.
“First, by starting earlier, retailers are giving holiday shoppers longer durations of time to stretch those paychecks that are already tight,” ABC News technology and consumer correspondent Becky Worley said on Good Morning America.
“Because of inflation, consumers are buying fewer discretionary items like clothing, so expect sales there,” she added. “Then, there’s the whiplash effect with inventory which was scarce during COVID — in many cases, now there’s too much stock.”
(NEW YORK) — On hot days, some over 100 degrees, workers spend hours harvesting fruits and vegetables for very little money — produce that ends up on kitchen tables of people across the country.
Tens of thousands of these workers have experienced heat-related injuries and hundreds more have died from heat, all while earning an average of $25,000 to $29,999 per year in one of the most hazardous jobs in the country, the Economic Policy Institute found.
The workers, a majority of whom are Latino and undocumented, are in a constant battle for fair and safe labor practices.
However, the labor rights movement transcends industries, though it may look quite different for others.
And in local and federal government agencies, interns have been at the center of a debate about unpaid labor.
It wasn’t until recently that some government offices have begun paying their interns, which has created a new pathway for people from lower-income households to support themselves while gaining entry-level experience in policy and politics.
Pay Our Interns, created and spearheaded by two Latinos, fueled this change through their advocacy on Capitol Hill.
Latinos have been a major force in the labor rights movement for decades, with icons such as Dolores Huerta, Cesar Chavez, and Emma Tenayuca as the leaders of the fight.
Farm workers harness collective organizing power
On Aug. 3, farm workers began a 24-day, 335-mile “March for the Governor’s Signature” to urge California Gov. Gavin Newsom to sign a farm a farm workers rights bill.
The bill would make it easier for workers to vote for a union,, without intimidation from supervisors, foreman and labor contractors. Farm workers say that voting, as it is now, discourages participation in union efforts.
“Currently, the only way that they do it is in person, at the premises of the employer, where the supervisors are looking over their shoulders, where they hire security, where, in many cases, immigration has been called and farm workers have been deported,” said Teresa Romero, the president of the labor union United Farm Workers.
However, Newsom has expressed concerns about the bill.
“We cannot support an untested mail-in election process that lacks critical provisions to protect the integrity of the election,” Newsom spokesperson Erin Mellon told CalMatters.
Farmworkers face challenging workplace conditions, including low pay, unsafe conditions, and very few if any protections against abuse or misconduct.
Romero, who leads the organization, says many undocumented workers pay taxes, but can’t collect social security and can’t retire. Some are left working long hours for years past the average retiring age.
“They work and feed us all,” Romero said.
She continued, “They move from crop to crop, moving their children from city to city to be able to support their family. And if we knew that, all of us would be willing to pay a little more for our food, just so these people have the respect, dignity, and the pay that they deserve.”
Without them, she says, we wouldn’t have food on our tables.
Romero urges people to be conscious of where they buy their food, how workers are represented and how they’re protected. She said the fight for fair working practices shouldn’t stop and end with farm workers themselves. She said their labor fight is a collective fight.
“This is not just manual labor,” she said. “These are professionals who know exactly what to do when to do with different crops.”
Fighting for fair labor conditions in the office
“Our society got too comfortable with unpaid labor,” says Carlos Mark Vera, a co-founder of Pay Our Interns.
He and Guillermo Creamer Jr. created the group to put an end to unpaid labor primarily in the public service space. Before 2017, Pay Our Interns found that only 10 percent of congressional interns were paid.
The organization has since worked with Congress to allocate $48 million for lawmakers to pay their interns.
“Since then that fund has actually been growing each year, which is unheard of, you know, usually programs don’t increase that quickly,” said Vera. “Now that we have Congress invested in this, and they’re very supportive of this, we’ve leveraged that for other ones. So this past year, we secured funding for White House interns, State Department interns for the first time in history.”
Unpaid internships push low-income or financially strained students out of the running to gain experience.
Unpaid internships often force students to choose between finding a job that pays their bills or paying for an internship out of their own funds – since Vera says that internship expenses like traveling or supplies often come from the intern’s wallet.
This primarily affects Black and brown students, and makes it harder for some students to enter certain fields if only unpaid internships are available.
“How do you grow wealth in this country? A lot of times, it’s just entering through professional pathways. But when there’s a price to participating in these opportunities … We know that many Black and brown families cannot afford to do that,” said Creamer.
They say they were raised in a culture where people had to “pay their dues” through unpaid labor. However, they say the culture is shifting and people are learning that their work should be valued at all levels.
Vera’s own sister, a sophomore in college, was interviewing for an internship when she asked if it was paid – and the employer said it wasn’t.
She explained that her brother had an organization dedicated to eradicating unpaid labor, and declined the opportunity.
“They call the next day, and they’re like, ‘Okay, how about $18 an hour?'” Vera said, applauding his sister for advocating for herself.
(WASHINGTON) — The Federal Reserve escalated its fight against inflation this week, instituting a major rate increase and saying more will likely follow. The moves will cause a jump in the number of unemployed Americans by the end of next year, the central bank said.
The Fed has put forward a series of aggressive interest rate hikes in recent months as it tries to slash price increases by slowing the economy and choking off demand. But the approach risks tipping the United States into a recession and causing widespread joblessness.
Fed Chair Jerome Powell on Wednesday acknowledged that rate hikes would cause pain for the U.S. economy, as growth slows and unemployment rises. He added, however, that “a failure to restore price stability would mean far greater pain later on.”
The job losses forecasted by the Fed this week would by the end of 2023 raise the unemployment rate from its current level of 3.7% to 4.4%. That outcome would add an estimated 1.2 million unemployed people, according to Omair Sharif, the founder of research firm Inflation Insights.
Those job losses will disproportionately fall on some of the most vulnerable workers, including minorities and less-educated employees, according to economists and studies of past downturns.
Here are the groups of workers who would most likely lose their jobs if unemployment rises:
Black and Hispanic workers
Black workers would be among the first to lose their jobs if unemployment spikes, since they’re disproportionately concentrated in industries sensitive to economic downturns. Racial discrimination often influences choices made by companies about which workers to fire, economists said.
“The Fed’s actions really do mean some disparate impact for Black workers in the American economy,” Michelle Holder, a labor economist at John Jay College of Criminal Justice, told ABC News.
The vulnerability of Black workers in a downturn manifested during the most recent recession, in spring 2020, when the pandemic caused higher unemployment for Black workers at every education level when compared with their white counterparts, a RAND Corporation study found.
Overall, the unemployment rate for Black workers in the early period of the pandemic peaked at 16.8%, while the unemployment rate for white workers reached only 14.1%.
Between the late 1980s and mid-2000s, government employment data shows “considerable evidence” that Black workers are among the first ones fired as the economy weakens, according to an economic study published in 2010 in Demography, an academic journal.
“To be blunt, discrimination still occurs in the American labor market,” Holder said.
A similar dynamic of disproportionate job losses impacts Hispanic workers, the economists said.
William Spriggs, the chief economist at the AFL-CIO labor union and a professor of economics at Howard University, said Hispanic workers would suffer acutely in a downturn brought about by interest rate hikes, since they’re disproportionately represented in the construction industry.
When the Fed raises rates, it often leads to a spike in mortgage rates, causing prospective homebuyers to put off their purchases and builders to delay further construction. U.S. 30-year fixed-rate mortgages jumped to 6.29% on Thursday, the highest level in 14 years, according to Freddie Mac’s mortgage market survey.
As of last year, Hispanic workers made up nearly a third of all construction workers, according to a National Association of Home Builders analysis of government data published in June.
“We’ve already seen construction work is slowing,” Spriggs told ABC News. “Those construction workers get hit first.”
Less-educated workers
Another group that would stand among the first to end up jobless amid a downturn is less-educated workers.
Two years ago, during the pandemic-induced recession, less-educated workers suffered far more acute job losses than their better-educated peers, according to a study published in 2021 by the Institute for New Economic Thinking.
In general, when the economy weakens, poorly educated workers endure a more negative effect on employment than their better-educated counterparts, according to a study published by the Minneapolis Federal Reserve in 2010.
In the Great Recession, the employment rate for workers with just a high school diploma fell 5.6%, while the employment rate for workers with a college degree fell less than 1%, the study found.
“Workers who tend to fare better when the economy contracts are better-educated workers,” said Holder.
Young workers
Data from the two most recent recessions, in 2020 and 2007, indicates that young workers suffer disproportionately when the economy contracts.
During the pandemic-induced recession, young workers became jobless at a much higher rate than older workers, according to a study released by the left-leaning Economic Policy Institute in 2020.
From spring 2019 to spring 2020, the overall unemployment rate among workers ages 16 to 24 rose from 8.4% to 24.4%, while unemployment for workers ages 25 and older rose from 2.8% to 11.3%, the study found.
A similar outcome followed the Great Recession. Between 2007 and 2010, workers between the ages of 16 and 24 suffered a more dramatic drop in employment than any other age group, according to a Brookings Institution analysis of government data that focused on the ratio of employed workers in a given demographic compared to its representation in the population as a whole.
(NEW YORK) — If there was any doubt about where outdoor clothing company Patagonia stood on environmentalism, it was quickly put to rest last week when founder Yvon Chouinard and his family donated their ownership to efforts that would protect the planet.
“Earth is now our only shareholder,” Chouinard wrote on Patagonia’s website.
But can the generous donation from a billionaire — this one valued at more than $3 billion — and the spoils from his successful retail company move the needle on finding solutions to mitigate global warming?
Experts told ABC News that the unprecedented move itself won’t be enough to make significant strides in curbing emissions and the rise in global temperatures. But the domino effect that results from inspiring future philanthropists to make similar donations could reverberate throughout the climate fight, they hypothesized.
The drastic nature of the move is emblematic of the dire consequences that could result if major action is not taken, Hans Cole, head of environmental grants, campaigns and impact for Patagonia, told ABC News.
“It really just acknowledges the increasing urgency around the crisis — around climate, around biodiversity, and around how those impact people and communities around the world,” Cole said.
Here is what experts have to say about the monumental donation:
How the Patagonia donation is different from other billionaire philanthropy
Donations from the wealthiest Americans occur on a regular basis but rarely draw as much attention as the gift made by Chouinard.
The donation differs from most billionaire philanthropy for two key reasons.
First, the donation involves the giving away of Chouinard’s company. Chouinard gave up nearly all of his shares in Patagonia and vowed to donate the company’s annual profits. However, the maneuver draws on a two-tiered stock system of voting and non-voting shares, allowing Chouinard to retain control of the company.
Under the arrangement, Chouinard donated 98% of his non-voting shares in the company to a nonprofit, the Holdfast Collective. However, 2% of the shares — which make up all of the company’s voting shares — will be retained in the Patagonia Purpose Trust.
“The Chouinards have total control of Patagonia through the trust, and they’re giving everything else away,” Daniel Hemel, a law professor at New York University, told ABC News.
The move is “unusual but it’s not unique,” Hemel added, noting that dual-class share structures are used at companies such as Google and The New York Times. He also cited a similar model of philanthropy undertaken by Facebook CEO Mark Zuckerberg. “Zuckerberg has mostly control of Facebook through the shares he’s retained and he’s giving some of it away,” Hemel said.
Hemel said he lends “credence” to the rationale for continued control of Patagonia offered by Chouinard, who said the maneuver will allow him to protect the company’s commitment to environment-friendly values.
The second feature of the donation that distinguishes it centers on the nonprofit formed by Chouinard, which will allow him to pursue political advocacy and donate to political candidates.
Most large-dollar philanthropy made by wealthy people goes to 501(c)(3) organizations, such as the Gates Foundation, Hemel said. Donations to such organizations are tax-deductible, but the groups are forbidden by law from participating in political campaigns or giving to political candidates.
However, the nonprofit created by Chouinard as the recipient of this donation, the Holdfast Collective, is classified as a 501(c)(4), which means the gift forgoes an income tax deduction but the organization can participate in politics. The Collective “can advocate for causes and political candidates in addition to making grants and investments in our planet,” Patagonia said on its website.
Philanthropists have made giant donations to the climate fight in the past
The donation from Chouinard, valued at more than $3 billion, joins a flurry of large-dollar philanthropy in recent years focused on the climate. While Chouinard’s donation is smaller than that of some of his peers, the Holdfast Collective differs from other climate philanthropy because of its capacity to participate in political campaigns.
In 2020, Amazon Executive Chair Jeff Bezos pledged $10 billion to address climate change with the formation of the Bezos Earth Fund, which does not support political candidates. So far, the organization has granted $1.54 billion to programs that range from restoring mangroves in Columbia and Fiji to empowering grassroots environmental justice groups and providing technology for farmers in India.
Last year, Laurene Powell Jobs, the widow of late Apple founder Steve Jobs, pledged $3.5 billion to fight climate change through the Waverley Street Foundation, an organization formed by Jobs in 2016.
It aims to address the problem by supporting local groups in communities worldwide that are “at work in the trenches of the battle for a livable planet,” the organization said last month. As a 501(c)(3), the Waverley Street Foundation is not allowed to participate in political campaigns.
Meanwhile, the ClimateWorks Foundation, which says it has granted over $1.3 billion to more than 600 grantees in over 50 countries, uses environmental expertise to channel donations for projects worldwide. As with the Bezos Earth Fund, the ClimateWorks Foundation supports a wide range of programs, including efforts to remove carbon dioxide from the atmosphere and reverse forest loss.
The ClimateWorks Foundation doesn’t participate in political campaigns, either, as it’s also a 501(c)(3).
The approach from Chouinard — a significant departure from most billionaire climate giving — allows the organization to amplify its impact, Hemel said.
“What the Chouinards realize is that effective action to protect the planet from climate change is going to need to be government action,” he said. “Three billion dollars potentially can make a difference in elections.”
If they were to spend “a fraction” of the $3 billion on a U.S. Senate race, for example, that ends up changing the Senate majority, “then they could be leveraging that fraction of $3 billion into hundreds of billions in additional climate investment,” Hemel added.
Harvey Dale, a professor of philanthropy and law at New York University, echoed the view that the scale of private giving on climate-related issues pales in comparison with public spending.
“I suppose if you took all the money in all the foundations in the country — many hundreds of billions of dollars — you would say, ‘Wow, how about that,'” Dale told ABC News. “It’s a tiny bit compared to the amount [President Joe] Biden recommended in legislation just a year or two ago.”
To adequately address climate change, the scale of public investment must far outweigh that of the donor community, Dale said.
“The amount of money in the philanthropic sector is a drop in the bucket compared to how much the government would spend,” he added.
The donation follows the company’s ethos of sustainability
Patagonia has decades of experience in working to make its carbon footprint as small as possible in addition to tackling aspects of the environmental crisis, Cole said.
The company says it uses materials with lower environmental impacts, has cleaned up parts of its supply chain and encourages practices such as a program that allows customers to sell or trade their used pieces.
“It has been a 50-year journey for us, absolutely throwing everything we can, all the resources possible,” Cole said.
In the past few years, Patagonia has increased its environmental commitments, even changing its mission statement to saving the planet, Cole said. Customers who wear the Patagonia brand, often those committed to sports and pastimes that keep them out in nature, tend to agree with the goals.
Even after the transfer of ownership, Patagonia will continue to donate 1% of its sales each year to grassroots environmental nonprofits, according to its website.
The unprecedented donation could inspire more
Experts say that Patagonia could inspire other companies and wealthy philanthropists to join the race to mitigate climate change.
Patagonia hopes that as many businesses and organizations as possible will replicate or take pieces of their plan and adapt it to their unique situation, Cole said.
“We want this to have legs,” he said.
Tailoring to the needs of companies of different sizes and operations will also be key, John Forrer, director of the Institute for Corporate Responsibility at George Washington University, said.
“You have your own company interests, you have your own company values, you have what your stakeholders think is a good idea,” he told ABC News.
With any company that dedicates funds and a portion of its mission statement to the climate crisis, it will be important that it’s not done with the sole intent of “corporate greenwashing” as a cheap PR stunt, tax breaks or profit motives, Rachel Cleetus, policy director and lead economist at the Union of Concerned Scientists’ climate and energy program, told ABC News.
Rather, businesses need to really care about issues such as transitioning the economy to clean energy to make a difference — something the Chouinard family has exemplified, Cleetus said, adding that there are many businesses that claim publicly they are for climate solutions but are actually lobbying for policies that undermine climate progress.
“Patagonia is in a whole different class, they’re actually walking the walk. That’s what we need more businesses to do,” Cleetus said.
The world can’t rely on the generosity of billionaires, experts say
Making meaningful gains in the urgent fight against global warming will require much more than donations from a handful of exceptionally rich individuals, the experts said. Especially since just 2% of global giving is allocated toward climate change mitigation, according to a report published in May by the Climate Justice Resilience Fund.
It will take systemic change across many sectors to fix a broken system that causes more harm to the planet, Cleetus said.
“The scale of the immensity and the urgency of the climate crisis is such that it won’t be enough to have a few very rich people donate money,” Cleetus said.
Cole added that the Chouinard family is aware that Patagonia, even with its lofty mission, can’t solve the climate crisis on its own.
“We need, frankly, the entire business community and governments and civil society to work together to get this done,” Cole said. “We can’t do it alone. Patagonia can’t do it alone.”
In addition, those in charge of the funds will need to ensure they are allocated to the most appropriate sectors, the experts said.
Frontline communities — or communities that will be most impacted by climate-related weather events as they intensify in the future — should be prioritized, as well as impoverished and marginalized communities, Cleetus said, adding that the climate crisis is “inequitable at its core.”
“It’s often Black and brown and indigenous communities and very low-income communities — so seeing where the needs are most acute,” she said. “Very often, there are also communities that are bearing the brunt of pollution from fossil fuels and have for a long time.”
Public policy from governments around the world to assertively address the challenge will be necessary, and philanthropy can help move the needle in that regard by providing assistance to governments when conceptualizing those policies, Jennifer Kitt, president of the Climate Leader Initiative, told ABC News.
This was evident two decades ago when philanthropies helped to pass policies to put solar panels on rooftops to generate power, which was a “huge challenge” — especially when incorporating them into building codes, Kitt said.
The money could also be well spent on investing in new technologies that are “actually going to make a difference” in reducing greenhouse gas emissions, such as batteries and other forms of renewable power, Forrer said.
Educating the public about how the climate crisis affects them — such as how the war in Ukraine is causing oil prices worldwide to skyrocket — will also be a crucial way to use the funds, the experts said.
“Philanthropists can be quite influential in the ways that move too slowly and not to scale,” Kitt said.
