How to build an emergency fund, how much to save for it and how to avoid spending it

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(NEW YORK) — We’ve been taught to expect the unexpected, and when it comes to finances, the best way to do that is with an emergency fund.

An emergency fund contains cash for unforeseen moments “that throw your life into financial uncertainty and disarray,” said Rebecca Jarvis, ABC News’ chief business and economics correspondent. These could include a death in the family, a debilitating illness, a divorce or a job loss.

“Life is full of surprises and sometimes they have a giant price tag,” Jarvis said.

How much should you save in your emergency fund?

Jarvis points out that emergency funds should be for “hurricanes” as opposed to “rainy day” inconveniences such as car repairs or broken appliances or phones.

“You want to look at your weekly budget — how much are you spending on food and groceries? What is the cost of electricity and utilities? How much do you have to pay for rent or your mortgage? These are all necessities, things that you would have to make payments on in order to keep the status quo,” Jarvis said.

She recommends building up six months’ worth of these expenses for your emergency fund.

“But if you can’t get there right away, at least [try to] have three months worth of savings to cover all the necessities,” Jarvis said, noting that if you have children or job instability, you may eventually wish to save a larger padding.

If that total is a challenge, “it can be helpful to start with a smaller number, like $500, which can still be crucial in getting you through a difficult time,” said Kimberly Palmer, a personal finance expert at NerdWallet, who shared a calculator that can help determine an amount you can strive to reach.

“The goal here is to give yourself that cushion so that you’re not shouldering the financial burden, along with the emotional burden, of these major lifestyle changes,” Jarvis said.

“Knowing that the money is there if you need it creates a peace of mind and a freedom to live in the present and not be thinking constantly about what happens in the future if you don’t have this safety net,” she said.

Where to put your money and how to save

Even though your emergency fund is a last resort, that money should be ready to deploy at a moment’s notice, Jarvis said.

A savings account or a money market fund are options to contain your emergency fund, as are CDs, 401(k)s or even IRAs, but some of these can have fees associated with them for early withdrawals.

As far as contributing toward your emergency fund, Jarvis suggests making it a part of your budget.

“Give a little to that emergency fund every week, every month, until you get to the point where you have those six months of savings on hand,” she said, further suggesting tracking and celebrating your progress along the way.

And if you’re carrying a lot of debt, Jarvis recommends building your emergency savings, even if you have to scale back on debt payments.

“You should be building out that emergency fund before you build out anything else, because it is going to be the underpinnings of having some degree of security and knowing that if the unforeseen crops up, you have the ability to take care of yourself and your family,” she said.

“Having that emergency savings fund can help prevent you from accruing even more debt if you face an unexpected emergency,” Palmer added.

“If you don’t have an emergency savings fund or you’ve depleted your emergency savings fund, create that line item, that small amount in your budget where you are consistently setting a little bit of money aside so that when and if you need it again in the future, you have it,” Jarvis said.

Additionally, Palmer suggests taking a look at your spending on “wants” each month, which can include eating out, subscriptions, clothing, etc.

“If you can cut back on those categories and redirect the money into savings instead, it can be a great way to build up your emergency fund,” she said, noting the 50/30/20 budget plan to assess and reallocate your funds.

Protect your hard work

“In general, you should keep your emergency fund for true emergencies and have other [long-term and short-term] savings accounts for other goals, such as vacations or big purchases,” Palmer said. “Keeping it in a savings account designated for emergencies instead of your daily checking account can be one way to help keep it separate.”

And also make sure you’re assessing “emergencies” with a clear head.

“Here’s a good barometer: Consider whether you actually need something to survive. If you don’t, it’s not an emergency,” Jarvis said.

“Building an emergency savings takes work and the last thing you want is to undo all of that hard work with a decision on the fly,” Jarvis added. “Going on a cruise is not an emergency.”

Copyright © 2022, ABC Audio. All rights reserved.

Festive new holiday candy from Hershey’s, M&Ms and more

The Hershey Company

(NEW YORK) — As the holiday season gets underway, confectioners are busily unveiling new festive sweets.

Hershey’s recently shared a peek at some brand new holiday candy, including its first-ever hot chocolate bombs, which are available with marshmallows or cinnamon chips. The chocolate balls will be available for a limited time and melt into a cup of hot cocoa with the addition of warm milk poured directly over top.

“These hot chocolate bombs are the perfect cozy companion to sip on as you wrap holiday gifts and a great stocking stuffer to boot,” The Hershey Company stated in a press release.

Another new confection this year is a Hershey’s Milk Chocolate Holiday bar, which is dressed up for the holidays from the inside out with 24 varieties of seasonal imprinted images such as stars, wreaths, trees, stockings and more.

Dr. Seuss’s The Grinch and The Hershey Company have also partnered once again to make Grinch-themed Hershey’s Kisses. In addition to the 9.5-ounce and 7.4-ounce bags, there is a new tree-shaped decorative gift box filled with the assorted Grinch foil wrapped Kisses.

“The holidays are a special time where we can take a moment to relish in the traditions and enjoy seasonal treats that make the season so cherished,” Katie Behrman, associate brand manager of seasons at The Hershey Company, said in a statement.

For fans of candy coated chocolate M&Ms, the company released a new array of personalized gift jars and dispensers that are perfect for Christmas, Hanukkah or Kwanzaa, priced from $29.99 to $49.99.

The limited time holiday boxes are an easy, ready-to-go gift, and are filled with the iconic candy.

Another item hitting shelves in time for seasonal celebrations are the new espresso and dark chocolate M&M’s, the latest flavor innovation with a bold burst of coffee flavor.

The new candy bowl must-have ranges from $3.75 to $4.49 per pack.

Copyright © 2022, ABC Audio. All rights reserved.

Biden says Congress must avert rail strike but it’s ‘not an easy call’; workers ‘disappointed’

Florian Roden / EyeEm/Getty Images

(WASHINGTON) — President Joe Biden on Monday asked Congress to intervene and avert a potential strike of the nation’s railway workers — which could upend huge parts of the economy that depend on freight to move goods — by forcing the workers’ unions to accept a deal negotiated earlier this year.

In a statement, Biden described himself as a “proud pro-labor” president and said his decision was a difficult one.

But he said the larger economic considerations outweighed those concerns.

As at least one of the unions involved express dismay at the move, trade groups applauded Biden’s request of Congress.

“I am reluctant to override the ratification procedures and the views of those who voted against the agreement. But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal,” he said.

He asked Congress to quickly pass legislation to adopt the tentative deal between the rail companies and employees that was reached in September and brokered by the White House.

If a deal is not reached — or forced by Congress — then a strike could begin after the Dec. 9 deadline. Outgoing Speaker Nancy Pelosi said in a statement Monday night that the House will soon take up such legislation and won’t modify the agreed-upon terms from September.

Like Biden, she said, “We are reluctant to bypass the standard ratification process for the Tentative Agreement — but we must act to prevent a catastrophic nationwide rail strike, which would grind our economy to a halt.”

The tentative contract included a 24% compounded wage increase and $5,000 total in lump-sum payments.

Pelosi praised certain elements of that deal but said, “Democrats are continuing to fight for more of railroad workers’ priorities, including paid sick leave.” Sen. Bernie Sanders, I-Vt., a member of the Democratic caucus, has said his colleagues should do more for workers.

The two largest unions had initially highlighted how the tentative agreement included “wage increases, bonuses, with no increases to insurance copays and deductibles” and improved time-off policies, which had become a sticking point.

While eight of the 12 rail unions then went on to formally ratify the agreement, four rejected it — including the largest in the nation, with 50.8% of its workers voting against the deal.

Some of the workers’ groups who rejected the agreement cited frustration with compensation and working conditions, particularly a lack of paid sick days.

Because all of the rail workers have vowed not to cross the picket line in the event of a stoppage, the objections of four of the 12 unions ensures a strike unless there is a last-minute change in negotiations or congressional intervention.

Biden said Monday he was calling for Congress to act on advice of his secretaries of labor, agriculture transportation, who “believe that there is no path to resolve the dispute at the bargaining table and have recommended that we seek Congressional action,” according to his statement.

In urging Congress to ratify the deal between the rail companies and workers, however, Biden also warned lawmakers not to try and change the terms on their own. “Some in Congress want to modify the deal to either improve it for labor or for management. However well-intentioned, any changes would risk delay and a debilitating shutdown. The agreement was reached in good faith by both sides,” he said.

A strike would “devastate our economy,” he said, noting that “the holiday season” was no time for that outcome.

Why rail workers rejected the deal

Unions have said rail employees are seeking improvements to working conditions, since workers do not receive paid sick days. The unions have accused rail companies of penalizing workers for taking time off for medical reasons and holding the nation’s economy hostage to ensure a favorable deal.

The National Carriers’ Conference Committee, or NCCC, which represents the nation’s freight railroads in national collective bargaining, has said rail employees are provided “significant” time off and the companies have offered a fair contract that includes a considerable wage increase.

After the SMART Transportation Division, or SMART-TD, the nation’s largest rail union, rejected the contract in a record turnout vote last week, the group’s president urged further negotiations.

“SMART-TD members with their votes have spoken, it’s now back to the bargaining table for our operating craft members,” SMART-TD President Jeremy Ferguson said in a statement then.

“This can all be settled through negotiations and without a strike. A settlement would be in the best interests of the workers, the railroads, shippers and the American people,” he added.

Immediate reactions on Congress intervening

One of the unions whose membership turned down the new freight rail contract said it was “disappointed by and disagrees with” Biden’s call for Congress to pass legislation to end the labor dispute.

The Brotherhood of Maintenance of Way Employes Division of the International Brotherhood of Teamsters (BMWED) said in a news release Tuesday that congressional intervention “both denies Railroad Workers their right to strike while also denying them of the benefit they would likely otherwise obtain if they were not denied their right to strike.”

The union reiterated workers’ calls for better paid sick leave policies in a new contract, saying the president and Congress should “act swiftly by passing any sort of reforms and regulations that will provide paid sick leave for all Railroad Workers.”

The tentative deal, if enforced, would give rail workers an additional personal leave day.

Pelosi said on Tuesday that the House would take up legislation to avert a rail strike as soon as Wednesday morning.

“Tomorrow morning, we will have a bill on the floor,” she said outside the White House after meeting with Biden and the other top four congressional leaders: Democratic Sen. Chuck Schumer, Republican Sen. Mitch McConnell and Republican Rep. Kevin McCarthy.

“It’s not everything I would like to see,” Pelosi said, adding that she would’ve liked to see the rail workers get more paid sick leave.

Schumer confirmed that the Senate, too, would get the bill on the floor soon — and he said he had agreement from McConnell.

“Leader McConnell I agreed we’d try to get it done ASAP,” Schumer said.

Neither he nor Pelosi answered questions or said whether they thought they had the votes to pass the legislation. At least one senator, Florida Republican Marco Rubio, wrote on Twitter that he opposed it because it “doesn’t have the support of the rail workers.”

McCarthy said outside the White House that thought legislation would pass.

He didn’t miss an opportunity to blame Biden for the deal falling apart, though. He called it another example of the White House going back on its word, after calling the negotiation a “win” just a month ago.

“It’s unfortunate that this is how we’re running our economy today,” he said.

Biden told ABC News’ Mary Bruce at the White House on Tuesday that he was “confident” in avoiding a strike.

“Congress, I think, has to act to prevent it. It’s not an easy call, but I think we have to do it. The economy’s at risk,” he said.

What a railroad strike could mean for the economy

A potential strike could lead to $2 billion a day in lost economic output, according to the Association of American Railroads, which lobbies on behalf of railway companies.

“No one benefits from a rail work stoppage — not our customers, not rail employees and not the American economy,” AAR President and CEO Ian Jefferies said in a statement Monday night. “Now is the appropriate time for Congress to pass legislation to implement the agreements already ratified by eight of the twelve unions. A clear pattern of ratified agreements has been established and Congressional action to prevent a work stoppage in this manner is appropriate.”

“A national rail strike would severely impact the economy and the public,” the NCCC said last week.

Rail is critical to the entire goods side of the economy, including agriculture, manufacturing, retail and warehousing. Freight railroads are responsible for transporting 40% of the nation’s long-haul freight and a work stoppage could endanger those shipments.

Moody’s Analytics chief economist, Mark Zandi, said that a railroad strike would be “economically costly,” and that a freight shutdown would roil supply chains and put upward pressure on U.S. goods inflation, making price problems temporarily worse.

The main channel for a strike to boost inflation is through the higher cost of transportation, particularly for agriculture, Zandi said. Corn, wheat and soybeans are the primary agriculture commodities that use rail.

A strike would also affect shipments of ethanol, potentially leading to higher gas prices, according to Zandi.

Trucking freight rates, which are still elevated above pre-pandemic levels, could also be pushed higher. Zandi said that the American Trucking Association estimates that a rail work stoppage would require 500,000 more trucks and 80,000 more drivers to fill the gap — an untenable number.

More immediately, however, Zandi said a strike would not have a material impact on holiday sales. Inventories of Christmas goods are ample and the major shipping of goods from ports to warehouses for the season is long over.

“Getting goods from warehouses to homes is done by truck,” Zandi said. “Perhaps some trucks would be diverted to help move goods typically done by rail, but this should not be a significant factor for Christmas.”

Local rails, though, could see disruptions should a rail strike occur — leaving commuters in a lurch. Freight companies own and operate many of the tracks across the country and in the event of a strike, local trains that run on those tracks would be forced to cancel trips.

But some Amtrak trains and commuter rails that run along the Northeast Corridor wouldn’t be affected by this. Amtrak owns some of its tracks, and they are not involved in the ongoing negotiations. In addition, local rail that own and operate their own tracks would not be affected — such as Trinity Railway Express in Dallas and Bay Area Rapid Transit in San Francisco.

Why Congress is involved in potential rail strike

All labor disputes in the railway and airline industries — which are seen as critical to the U.S. economy, stretching across major industries from energy to agriculture — are governed by a 1920s-era federal law known as the Railway Labor Act, or RLA.

Congress enacted that law after decades of sometimes violent worker strikes and when Americans had grown dependent on many industries, particularly farming and manufacturing.

Under the RLA, if the parties in the rail labor dispute do not reach agreement on a new contract, the railroads can either impose their own work rules or employees can strike — or both.

At that point, the RLA would no longer set the terms of behavior.

Congress, acting with authority from the Constitution’s commerce clause, has not voted to end a railroad strike since April 1991 — less than 24 hours after a walkout. At the time, lawmakers approved a joint resolution — with President George H. W. Bush being roused from his bed in the middle of the night to sign the bill — that forced the parties in the dispute into a 65-day binding arbitration process.

Had those workers not approved of the terms in arbitration, Congress mandated that less generous solutions from the Presidential Emergency Board, acting as a third party, be accepted.

ABC News’ Adam Carlson, Cheyenne Haslett and Lauren Peller contributed to this report.

Copyright © 2022, ABC Audio. All rights reserved.

Woman sues Kraft over Velveeta mac and cheese preparation time

Amazon

(NEW YORK) — A woman in Florida has sued Kraft Heinz Foods Company, claiming the time it takes to make its microwaveable cup of Velveeta macaroni and cheese is longer than what the claims on the label indicate.

Amanda Ramirez filed a $5 million class action lawsuit against the company earlier in November over the “ready in 3 1/2 minutes” claim on the packaging of Velveeta Shells & Cheese cups.

“Consumers are misled to expect the Product will be ready for consumption in a shorter amount of time than it really takes to prepare,” the lawsuit reads. “Defendant sold more of the Product and at higher prices than it would have in the absence of this misconduct, resulting in additional profits at the expense of consumers.”

In the suit, Ramirez claims that the “3 1/2 minutes” phrase on the packaging refers to the cooking time only.

“According to the directions on the back of the packaging, there are four steps in preparing the product,” the suit reads. “First, consumers must ‘REMOVE lid and Cheese Sauce Pouch.’ Next, they must ‘ADD water to fill line in cup. STIR.’ Third, ‘MICROWAVE, uncovered, on HIGH 3-1/2 min. DO NOT DRAIN.’ Finally, they should ‘STIR IN contents of cheese sauce pouch.’ Defendant then notes that ‘CHEESE SAUCE WILL THICKEN UPON STANDING.’ “

“Consumers seeing ‘ready in 3½ minutes’ will believe it represents the total amount of time it takes to prepare the Product, meaning from the moment it is unopened to the moment it is ready for consumption,” the suit continues. “However, the directions outlined above show that 3-and-a-half minutes is just the length of time to complete one of several steps. The label does not state the Product takes ‘3½ minutes to cook in the microwave,’ which would have been true.”

Ramirez claims in the suit that the mac and cheese products are “sold at a premium price, approximately no less than $10.99 for eight 2.39 oz cups, excluding tax and sales,” which she said are priced “higher than similar products represented in a non-misleading way and higher than it would be sold for absent the misleading representations and omissions.”

“Good Morning America” has reached out to Kraft Heinz for comment on the lawsuit. In previous comments to other publications, the company has stated: “We are aware of this frivolous lawsuit and will strongly defend against the allegations in the complaint.”

Ramirez sued “individually and on behalf of all others similarly situated,” which indicates this could lead to a class action settlement for consumers.

“The members of the class Plaintiff seeks to represent are more than 100, because the Product has been sold with the representations described here from thousands of stores in the States covered by Plaintiff’s proposed classes,” the suit states.

The suit is seeking at least $5 million in damages, “including statutory and punitive exclusive of interest and costs.”

A West Palm Beach-based law firm filed the suit with Ramirez, according to the documents, along with Sheehan and Associates, a New York law firm led by Spencer Sheehan, who has brought hundreds of lawsuits against other popular grocery products such as Pop-Tarts, NPR first reported.

The Pop-Tarts lawsuit claimed that the product’s packaging was “misleading because the label gives consumers the impression the fruit filling only contains strawberries as its fruit ingredient.” A federal judge in New York dismissed the suit in April, stating that “no reasonable consumer would see the entire product label, reading the words ‘Frosted Strawberry Pop-Tarts’ next to a picture of a toaster pastry coated in frosting, and reasonably expect that fresh strawberries would be the sole ingredient in the Product.”

Copyright © 2022, ABC Audio. All rights reserved.

Rejected contracts, White House involvement: A timeline of a potential rail strike

Micha Pawlitzki/Getty Images

(WASHINGTON) — Hundreds of thousands of rail workers stand on the brink of a nationwide strike that would paralyze the U.S. supply chain and passenger rail service ahead of the busy holiday season.

“Let me be clear: a rail shutdown would devastate our economy,” President Joe Biden said on Monday. “Without freight rail, many U.S. industries would shut down.”

Biden asked Congress to pass a law that imposes the terms of a tentative agreement reached in September but was rejected by several unions.

Still, the fate of a potential deal between rail workers and companies remains uncertain, especially if Congress fails to impose the tentative agreement. Four of 12 unions have already voted down the agreement and those four unions represent the majority of unionized rail workers.

A nationwide strike is expected unless the contract is ratified by each of the 12 rail unions, since all of the unions have vowed not to cross the picket line in the event of a work stoppage.

Unions have said rail employees are seeking improvements to working conditions, since workers do not receive paid sick days. The unions have accused rail companies of penalizing workers for taking time off for medical reasons and holding the nation’s economy hostage to ensure a favorable deal.

The National Carriers’ Conference Committee, or NCCC, which represents the nation’s freight railroads in national collective bargaining, has said rail employees are provided “significant” time off and the companies have offered a fair contract that includes a considerable wage increase.

Here’s a timeline of how the U.S. arrived at the precipice of a rail shutdown and what to expect as a deadline nears in the coming weeks:

July 15 – As rail unions and companies struggle to reach an agreement on the terms of a new contract, Biden signs an executive order that creates a presidential emergency board.

The board’s goal is to issue guideline recommendations for an agreement between the two sides in order to avert a potentially devastating rail strike.

Aug. 16 – The presidential emergency board issues recommendations for a compromise agreement between the unions and rail companies.

The recommendations include a 24% raise from 2020 to 2024 and bonus increases. The union’s demand for a new time-off policy, however, is omitted.

Sept. 14 – Rail workers and companies prepare for a potential strike that could cost $2 billion a day in lost economic output, according to the Association of American Railroads, which lobbies on behalf of rail companies.

Freight railroads are responsible for carrying 40% of the nation’s long-haul freight and a work stoppage could jeopardize these shipments.

Sept. 15 – Rail companies and unions reach a tentative labor agreement after 20 consecutive hours of negotiations brokered by U.S. Secretary of Labor Marty Walsh.

The tentative agreement “balances the needs of workers, businesses, and our nation’s economy,” Walsh said.

The agreement improves the time-off policies at the rail companies, which are a key sticking point in the negotiations, according to a statement from the two largest unions, the Brotherhood of Locomotive Engineers Trainmen, or BLET, and the SMART Transportation Division, or SMART-TD.

Oct. 11 – A union representing about 12,000 rail workers votes down the tentative contract that was brokered by the White House, raising the possibility of an eventual strike.

The Brotherhood of Maintenance of Way Employees Division of the Teamsters, or BMWED, rejects the tentative contract due to frustration with compensation and working conditions, particularly a lack of paid sick days, BMWED President Tony Cardell says in a statement.

“Railroaders do not feel valued,” Cardell says. “They resent the fact that management holds no regard for their quality of life.”

The National Carriers’ Conference Committee, or NCCC, the group representing the freight railroad companies, expresses “disappointment” in the decision to reject the contract.

Oct. 27 – A second union rejects the White House-brokered deal, elevating the likelihood of a nationwide strike.

The vote by the Brotherhood of Railroad Signalmen, a union representing 6,000 workers, centers on the lack of paid sick days, according to a statement from Brotherhood of Railroad Signalmen President Michael Baldwin.

The NCCC expresses disappointment over the union vote.

The tentative contract “included the largest wage package in nearly five decades, maintained rail employees’ platinum-level health benefits, and added an additional day of paid time off,” the NCCC says in a statement.

Nov. 21 – The nation’s largest rail union votes down the tentative contract brokered by the White House, dramatically escalating the likelihood of a strike.

SMART-TD, which represents about 28,000 conductors, narrowly rejects the contract in a vote that garnered record turnout, the union says.

The second-largest rail union, made up of engineers, votes in favor of the contract, splitting the top rail unions.

Nov. 28 – Biden asks Congress to intervene and avert a potential strike by forcing the workers’ unions to accept a White House-brokered deal as a December deadline approaches.

In a statement, Biden touts himself as a “pro-labor” president but says the larger economic implications outweigh those concerns.

“I am reluctant to override the ratification procedures and the views of those who voted against the agreement. But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal,” he says.

He calls on Congress to quickly pass legislation to adopt the White House-brokered deal reached in September.

Outgoing Speaker Nancy Pelosi later says in a statement that the House will soon take up such legislation and will not modify the agreed-upon terms.

Nov. 29 – Biden tells ABC News he’s “confident” the U.S. will avert a rail strike.

“Congress, I think, has to act to prevent it,” he says. “It’s not an easy call, but I think we have to do it.”

Dec. 4 – By the end of the week that concludes on Dec. 4, House lawmakers are expected to take up a bill that adopts the tentative agreement brokered by the White House.

If passed, the bill will be sent to the Senate, where it faces uncertain prospects as the chamber is split 50-50 between the parties. Most legislation requires 60 votes to overcome a filibuster.

Dec. 9 – A strike deadline looms on Dec. 9, when unions could move forward with a coordinated work stoppage.

Additional reporting contributed by Morgan Winsor, Sam Sweeney, Sarah Kolinovsky, Amanda Maile, Zunaira Zaki, Trish Turner, Ahmad Hemingway and William Kim

Copyright © 2022, ABC Audio. All rights reserved.

How China’s zero-COVID policy threatens the US economy

Matt Anderson Photography/Getty Images

(NEW YORK) — Historic protests across China over its zero-COVID policy battered U.S. stocks on Monday, highlighting a close link between the contentious Chinese measures and domestic economic conditions that could help determine whether the U.S. enters a recession.

Residents in isolation in some regions say they’ve gone without sufficient food or medical care. Meanwhile, protests flared up after a fire on Thursday in an apartment building in the northwest city of Urumqi that killed at least 10 people, as some alleged that lockdowns obstructed the rescue of victims, while government officials denied any such impact.

Tension over COVID lockdowns in the world’s second-largest economy coincides with a precarious U.S. economic outlook.

An aggressive series of interest rate hikes from the Federal Reserve aim to dial back sky-high inflation by slowing the economy and slashing demand. But the approach risks tipping the country in a downturn and putting millions out of work. Plus, ongoing disruption from the Russia-Ukraine war has exposed vulnerability in economies across the globe, including the U.S, experts said.

COVID lockdowns in China have clogged supply chains in the manufacturing stalwart, extending pandemic-era bottlenecks that have contributed to inflation, analysts told ABC News. Meanwhile, the zero-COVID policy has stagnated the Chinese economy, hurting spending among Chinese customers and in turn pummeling U.S companies that depend on it, they said.

“When consumers are locked down in these different cities, it’s a gut punch to the U.S. economy,” Dan Ives, a managing director of equity research at Wedbush, an investment firm, told ABC News. “It has reached a fork in the road.”

Here’s what you need to know about how China’s zero-COVID policy heightens the risk of a U.S. recession:

Zero-COVID policy contributes to US inflation

A key threat to U.S. economic performance is inflation, which remains highly elevated and owes in part to Chinese lockdowns.

Sky-high price hikes stem from the pandemic, when millions across the globe facing lockdowns replaced restaurant expenditures with couches and exercise bikes. But the surge in demand for goods far outpaced supply, as COVID-related bottlenecks slowed delivery times. When demand exceeded supply, prices skyrocketed.

Some supply bottlenecks have eased but others remain, including China’s zero-COVID policy and its related lockdowns.

“The main effect of the zero-tolerance policy in China is interrupting some supply chains,” David Dollar, a senior fellow at the Brookings Institution focused on U.S.-China economic relations, told ABC News.

“We still import a lot from China and those problems in supply chains means the products are not here and that contributes a little bit to inflationary pressure,” he added.

For instance, China’s zero-COVID policy has led to major iPhone shortages heading into the holidays, according to a report released by Ives on Monday. Shortages have reached as low as 35% of typical holiday inventory in some stores, causing overall iPhone demand to outstrip supply by a ratio of 3 to 1, he found.

The iPhone shortage is the “poster child” of a larger trend, Ives told ABC News. The zero-COVID policy continues to reduce the supply of goods from China by an estimated 10% to 20%, he said.

To be sure, analysts disagree about the extent to which supply shortages have contributed to inflation, as opposed to a flood of stimulus payments that juiced demand.

“There’s definitely some linkage but I would not exaggerate it,” Dollar said.

Zero-COVID policy hurts Chinese consumers and U.S. companies

In addition to clogging up supply, the Chinese lockdowns have suppressed consumer demand in the country, causing slowdowns at U.S. companies that operate a significant portion of their business in China.

Holiday spending during a weeklong National Day break last month fell 56% compared to pre-pandemic levels, Bloomberg reported. Overall, China’s gross domestic product grew 3.9% over three months ending in September, well below 4.9% growth seen over the same period last year.

“People are locked down at home a lot of the time, so they’re not out spending money,” said Dollar, of the Brookings Institution.

“If China were growing well, it’d be importing more from the U.S. and contributing to the profits of U.S. companies that operate there,” he added. “That’s all not happening this year.”

Sluggish consumer demand in China contributed to the market sell off on Monday in response to civil unrest over the zero-COVID policy, Dollar said.

As of Monday afternoon, shares in Apple fell nearly 3%.

“A lot of big American companies listed in New York have serious business in China,” he said. “If there’s civil and political unrest, if the Chinese economy is slowing down, that creates uncertainty for a lot of American businesses.”

“The market hates uncertainty,” Dollar added.

Copyright © 2022, ABC Audio. All rights reserved.

Congress will try to stop national railroad strike as Biden urges lawmakers to act

Florian Roden / EyeEm/Getty Images

(WASHINGTON) — President Joe Biden on Monday asked Congress to intervene and avert a potential strike of the nation’s railway workers — which could upend huge parts of the economy that depend on freight to move goods — by forcing the workers’ unions to accept a deal negotiated earlier this year.

In a statement, Biden described himself as a “proud pro-labor” president and said his decision was a difficult one.

But he said the larger economic considerations outweighed those concerns.

“I am reluctant to override the ratification procedures and the views of those who voted against the agreement. But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal,” he said.

He asked Congress to quickly pass legislation to adopt the tentative deal between the rail companies and employees that was reached in September and brokered by the White House.

If a deal is not reached — or forced by Congress — then a strike could begin after the Dec. 9 deadline. Outgoing Speaker Nancy Pelosi said in a statement Monday night that the House will soon take up such legislation and won’t modify the agreed-upon terms from September.

Like Biden, she said, “We are reluctant to bypass the standard ratification process for the Tentative Agreement — but we must act to prevent a catastrophic nationwide rail strike, which would grind our economy to a halt.”

The tentative contract included a 24% compounded wage increase and $5,000 total in lump-sum payments.

Pelosi praised certain elements of that deal but said, “Democrats are continuing to fight for more of railroad workers’ priorities, including paid sick leave.”

Sen. Bernie Sanders, I-Vt., a member of the Democratic caucus, has said his colleagues should do more for workers.

The two largest unions had initially highlighted how the tentative agreement included “wage increases, bonuses, with no increases to insurance copays and deductibles” and improved time-off policies, which had become a sticking point.

While eight of the 12 rail unions then went on to formally ratify the agreement, four rejected it — including the largest in the nation, with 50.8% of its workers voting against the deal.

Some of the workers’ groups who rejected the agreement cited frustration with compensation and working conditions, particularly a lack of paid sick days.

Because all of the rail workers have vowed not to cross the picket line in the event of a stoppage, the objections of four of the 12 unions ensures a strike unless there is a last-minute change in negotiations or congressional intervention.

Biden said Monday he was calling for Congress to act on advice of his secretaries of labor, agriculture transportation, who “believe that there is no path to resolve the dispute at the bargaining table and have recommended that we seek Congressional action,” according to his statement.

In urging Congress to ratify the deal between the rail companies and workers, however, Biden also warned lawmakers not to try and change the terms on their own. 

“Some in Congress want to modify the deal to either improve it for labor or for management. However well-intentioned, any changes would risk delay and a debilitating shutdown. The agreement was reached in good faith by both sides,” he said.

A strike would “devastate our economy,” he said, noting that “the holiday season” was no time for that outcome.

What a railroad strike could mean for the economy

A potential strike could lead to $2 billion a day in lost economic output, according to the Association of American Railroads, which lobbies on behalf of railway companies.

“No one benefits from a rail work stoppage — not our customers, not rail employees and not the American economy,” AAR President and CEO Ian Jefferies said in a statement Monday night. “Now is the appropriate time for Congress to pass legislation to implement the agreements already ratified by eight of the twelve unions. A clear pattern of ratified agreements has been established and Congressional action to prevent a work stoppage in this manner is appropriate.”

“A national rail strike would severely impact the economy and the public,” the National Carriers’ Conference Committee, or NCCC, the group representing the freight railroad companies, said last week.

Rail is critical to the entire goods side of the economy, including agriculture, manufacturing, retail and warehousing. Freight railroads are responsible for transporting 40% of the nation’s long-haul freight and a work stoppage could endanger those shipments.

Moody’s Analytics chief economist, Mark Zandi, said that a railroad strike would be “economically costly,” and that a freight shutdown would roil supply chains and put upward pressure on U.S. goods inflation, making price problems temporarily worse.

The main channel for a strike to boost inflation is through the higher cost of transportation, particularly for agriculture, Zandi said. Corn, wheat and soybeans are the primary agriculture commodities that use rail.

A strike would also affect shipments of ethanol, potentially leading to higher gas prices, according to Zandi.

Trucking freight rates, which are still elevated above pre-pandemic levels, could also be pushed higher. Zandi said that the American Trucking Association estimates that a rail work stoppage would require 500,000 more trucks and 80,000 more drivers to fill the gap — an untenable number.

More immediately, however, Zandi said a strike would not have a material impact on holiday sales. Inventories of Christmas goods are ample and the major shipping of goods from ports to warehouses for the season is long over.

“Getting goods from warehouses to homes is done by truck,” Zandi said. “Perhaps some trucks would be diverted to help move goods typically done by rail, but this should not be a significant factor for Christmas.”

Local rails, though, could see disruptions should a rail strike occur — leaving commuters in a lurch. Freight companies own and operate many of the tracks across the country and in the event of a strike, local trains that run on those tracks would be forced to cancel trips.

But some Amtrak trains and commuter rails that run along the Northeast Corridor wouldn’t be affected by this. Amtrak owns some of its tracks, and they are not involved in the ongoing negotiations. In addition, local rail that own and operate their own tracks would not be affected — such as Trinity Railway Express in Dallas and Bay Area Rapid Transit in San Francisco.

Why Congress is involved in potential rail strike

All labor disputes in the railway and airline industries — which are seen as critical to the U.S. economy, stretching across major industries from energy to agriculture — are governed by a 1920s-era federal law known as the Railway Labor Act, or RLA.

Congress enacted that law after decades of sometimes violent worker strikes and when Americans had grown dependent on many industries, particularly farming and manufacturing.

Under the RLA, if the parties in the rail labor dispute do not reach agreement on a new contract, the railroads can either impose their own work rules or employees can strike — or both.

At that point, the RLA would no longer set the terms of behavior.

Congress, acting with authority from the Constitution’s commerce clause, has not voted to end a railroad strike since April 1991 — less than 24 hours after a walkout. At the time, lawmakers approved a joint resolution — with President George H. W. Bush being roused from his bed in the middle of the night to sign the bill — that forced the parties in the dispute into a 65-day binding arbitration process.

Had those workers not approved of the terms in arbitration, Congress mandated that less generous solutions from the Presidential Emergency Board, acting as a third party, be accepted.

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Elon Musk attacks Apple for allegedly threatening App Store removal

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(NEW YORK) — Elon Musk, the billionaire entrepreneur who owns Twitter, attacked Apple on Monday in a series of tweets hammering the tech giant for allegedly decreasing the amount of ads it displays on Twitter and threatening to remove the platform from its App Store.

“Apple has mostly stopped advertising on Twitter,” Musk tweeted. “Do they hate free speech in America?”

In a post addressed to the Twitter account of Apple CEO Tim Cook, Musk asked: “What’s going on here?”

The broadside against Apple arrives after a slew of major companies, including General Motors and Pfizer, have announced a pause of advertising on Twitter. Some of the companies have said they need time to evaluate their advertising presence on Twitter as the company pursues a new direction under Musk.

Apple did not respond to a request for comment.

In addition, Musk said Apple had threatened to remove Twitter from its App Store.

“Apple has also threatened to withhold Twitter from its App Store, but won’t tell us why,” Musk posted.

Terms of use posted on Apple’s website include the prohibition of services that “post objectionable, offensive, unlawful, deceptive, inaccurate, or harmful content.”

Since he acquired Twitter last month, Musk has made significant changes. He fired top executives and cut the company’s 7,500-person workforce in half, while reinstating some formerly suspended accounts such as that belonging to former President Donald Trump.

He also revamped Twitter’s subscription service, Twitter Blue, allowing users to access verification if they pay a monthly fee of $8. The service was suspended after it gave rise to a flood of fake accounts impersonating public figures and brands.

Musk, who said he overpaid for the platform at the purchasing price of $44 billion, faces pressure to boost the company’s revenue. Earlier this month, he said that the company is losing $4 million each day.

In remarks on Monday, Musk also took aim at a 30% fee charged by Apple for digital sales made by apps hosted in its App Store that reach $1 million in revenue.

“​​Did you know Apple puts a secret 30% tax on everything you buy through their App Store?” Musk posted.

In recent years, Apple faced a lawsuit from gaming company Epic over the 30% fee alleging that the practice reflects an abuse of Apple’s monopoly power. Last September, a federal judge said Apple was not acting as a monopolist, but ordered the company to allow in-app links that direct users to make purchases outside of the app that circumvent the 30% fee.

Court proceedings resumed earlier this month after both sides appealed portions of the ruling.

For years, Apple has defended the fee it charges for sales made in its App Store as a reasonable rate that does not indicate the use of monopoly power on the part of the company.

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Kim Kardashian ‘re-evaluating’ her relationship with Balenciaga amid ad scandal

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(NEW YORK) — Kim Kardashian has broken her silence on Balenciaga’s recent ad scandal.

“I have been quiet for the past few days, not because I haven’t been disgusted and outraged by the recent Balenciaga campaigns, but because I wanted an opportunity to speak to their team to understand for myself how this could have happened,” she wrote on social media Sunday, Nov. 27.

Kardashian has worn Balenciaga to high-profile events like the Met Gala in the past, and walked in the luxury brand’s couture show at Paris Fashion Week earlier this summer.

Kardashian’s post comes a week after Balenciaga was criticized for its advertisements featuring children posing with the company’s plush bear bags, which wear BDSM-inspired harnesses.

One photo featured a child standing on a bed with one of the plush bear bags, surrounded by other purses and accessories, which included what appeared to be a chain leash as well as a Balenciaga branded dog collar choker.

The reality star, businesswoman and mom to North, 9, Saint, 6, Chicago, 4, and Psalm, 3, continued, “As a mother of four, I have been shaken by the disturbing images. The safety of children must be held with the highest regard, and any attempts to normalize child abuse of any kind should have no place in our society — period.”

“I appreciate Balenciaga’s removal of the campaigns and apology. In speaking with them, I believe they understand the seriousness of the issue and will take the necessary measures for this to never happen again,” she concluded.

The SKIMS founder added that she is “currently re-evaluating my relationship with the brand.” Kardashian said she would base her future relationship with the brand on its willingness to accept accountability, as well as its actions to protect children.

The Spanish luxury brand previously issued an apology for the ads on its Instagram on Nov. 22, writing, “We sincerely apologize for any offense our holiday campaign may have caused. Our plush bear bags should not have been featured with children in this campaign. We have immediately removed the campaign from all platforms.”

In a follow-up statement on Monday, Balenciaga added, “We strongly condemn child abuse; it was never our intent to include it in our narrative. The two separate ad campaigns in question reflect a series of grievous errors for which Balenciaga takes responsibility.”

“The first campaign, the Gift collection campaign, featured children with plush bear bags dressed in what some have labelled BDSM-inspired outfits. Our plush bear bags and the Gift collection should not have been featured with children. This was a wrong choice by Balenciaga, combined with our failure in assessing and validating images. The responsibility for this lies with Balenciaga alone,” the brand continued.

“The second, separate campaign for Spring 2023, which was meant to replicate a business office environment, included a photo with a page in the background from a Supreme Court ruling ‘United States v. Williams’ 2008 which confirms as illegal and not protected by freedom of speech the promotion of child pornography. All the items included in this shooting were provided by third parties that confirmed in writing that these props were fake office documents. They turned out to be real legal papers most likely coming from the filming of a television drama,” Balenciaga said.

The company added, “The inclusion of these unapproved documents was the result of reckless negligence for which Balenciaga has filed a complaint. We take full accountability for our lack of oversight and control of the documents in the background and we could have done things differently.”

Balenciaga’s holiday campaign photographer, Gabriele Galimberti, also issued a statement on Nov. 23.

“I am not in a position to comment Balenciaga’s choices, but I must stress that I was not entitled in whatsoever manner to neither chose the products, nor the models, nor the combination of the same,” Galimberti wrote in the caption of an Instagram post. “As a photographer, I was only and solely requested to lit the given scene, and take the shots according to my signature style. As usual for a commercial shooting, the direction of the campaign and the choice of the objects displayed are not in the hands of the photographer.”

Galimberti also claimed he had “no connection with the photo where a Supreme Court document appears,” referring to a separate earlier ad for a purse, in which a Supreme Court ruling on child pornography laws could be seen.

“That one was taken in another set by other people and and was falsely associated with my photos,” he said.

Balenciaga has since filed a lawsuit against the North Six production company, as well as set designer Nicholas Des Jardins, over the Spring 2023 ad campaign.

According to court documents filed with the New York State Supreme Court for the County of New York on Friday, Balenciaga is seeking “redress for extensive damages defendants caused in connection with an advertising campaign Balenciaga hired them to produce” and accuses North Six and Des Jardins of “malevolent or, at the very least, extraordinarily reckless” conduct.

“As a result of Defendants’ misconduct, members of the public, including the news media, have falsely and horrifically associated Balenciaga with the repulsive and deeply disturbing subject of the court decision. Defendants are liable to Balenciaga for all harm resulting from this false association,” the fashion house said in its court filing.

Balenciaga is seeking $25 million in damages from North Six and Des Jardins.

North Six has not yet commented publicly on the lawsuit. A source close to North Six told ABC News’ Good Morning America that the production company handled logistics for that shoot, including catering, shoot permitting, location booking and crew and equipment management, but did not have creative control or input in the ad campaign and was not on set during final set arrangements.

A representative for Des Jardins told the Washington Post on Monday that the Supreme Court documents seen in the earlier ad campaign “were obtained from a prop house that were rental pieces used on film [and] photo shoots.”

“Everyone from Balenciaga was on the shoot and was present on every shot and worked on the edit of every image in post production,” said Gabriela Moussaieff, Des Jardins’ agent, who claimed Des Jardins was “being used as a scapegoat,” according to the Post.

Moussaieff added that the set designer is currently hiring legal representation.

Good Morning America has reached out to North Six and Moussaieff for comment on the lawsuit.

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Thanksgiving Day 2022 marks record consumer spending

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(NEW YORK) — Shoppers spent a record $5.29B this Thanksgiving, according to Adobe Analytics — a figure up 2.9% year-over-year.

Adobe Analytics’s report on record spending may be surprising to some, as the economy is at an inflation level not seen in the last 40 years, and ongoing fears of a recession.

Big discounts on toys and electronics enticed shoppers, according to Adobe Analytics. Mobile shopping — purchases made through smartphones — accounted for 55% of online sales, an all-time record for Thanksgiving Day since 2012.

Black Friday, which occurs the day after Thanksgiving and is considered the kickoff to the holiday shopping season, is expected to bring in $9M online Friday.

Deep discounts on toys, computers and electronics are expected. Notable discounts are expected for clothing, appliances and TVs, but Adobe predicts the best deals for these categories will be over the weekend.

Top-selling items in the 2022 holiday season

The top-selling toys so far include Squishmallows, Roblox, Paw Patrol, Hot Wheels, Cocomelon and L.O.L. Surprise Dolls.

The top gaming consoles sold so far include the Nintendo Switch, the Xbox Series X, and PlayStation 5.

And the most popular video games include God of War Ragnarök, FIFA 23, Madden 23, and Call of Duty: Modern Warfare II.

Other hot sellers are mostly technology: Apple Airpods, Instapots, smart televisions, digital cameras and gift cards.

Holiday spending despite economic uncertainty

Days before the 2022 midterm elections, roughly half of Americans said either the economy or inflation was the most important issue in their vote for Congress, making bread-and-butter financial issues by far the most dominant, according to an ABC News/Ipsos survey.

Although there has been a slew of recent layoffs at tech companies, the labor market remains fairly robust. While the jobs added each month have fallen over the second half of this year, they remain strong, keeping the unemployment rate below 4%.

 

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