(NEW YORK) — Amazon and Starbucks teamed up to launch a new cashier-less cafe in midtown Manhattan that opens to the public on Thursday.
The new concept store combines a traditional Starbucks pickup cafe with the so-called “Just Walk Out Shopping” experience of an Amazon Go market, allowing customers to order their coffee concoctions, pastries and sandwiches ahead of time on the Starbucks app and see the status of their order on a digital screen when they arrive.
Customers can then directly take items off the shelf to add to their Amazon Go virtual cart or put them back on the shelf to remove from their virtual cart. A customer will be charged for their items automatically when they leave the Amazon Go market, after using the Amazon app, Amazon One payment method or credit card to enter the store.
The coffee shop and market also feature a lounge and individual workplaces, expandable tables, power outlets and USB ports for those who want to work in the cashier-less cafe.
“The new Starbucks Pickup with Amazon Go is designed to provide our customers with an experience that delivers convenience and connection in an effortless way,” Katie Young, the senior vice president of global growth and development at Starbucks, said in a statement.
“Our goal with this new store concept is to give our customers the ability to choose which experience is right for them as they go through their day, whether it is utilizing the Starbucks and Amazon apps to purchase food and beverages on the go, or deciding to stay in the lounge for the traditional third place experience Starbucks is known for,” Young added.
The Seattle-based companies said they plan to open a second location in the New York Times Building next year, and a third one in New York City soon to meet “evolving customer preferences for convenience, higher levels of mobile ordering and contactless pay, and reduced time waiting in lines,” according to a joint statement Thursday.
The initiatives come as the service industry notably struggles to hire staffers in the wake of COVID-19-related shocks, but also as millennial and Gen Z shoppers have increasingly driven demand for unattended commerce.
The store also opens amid the backdrop of new unionization efforts emerging at both Amazon and Starbucks.
(NEW YORK) — The pandemic has slowed down the supply chain in many sectors, but Campbell’s CEO says he expects the company’s products to be fully available this holiday season.
Mark Clouse, CEO of Campbell’s Soup Company told “Good Morning America” a week ahead of Thanksgiving, that the company’s efforts are the result of “the amazing work of our teams on the front lines and plants and logistics and sales teams.”
“You’ll have all of your holiday favorites on the shelves ready to go. They’ve worked hard to do it and, you know, I would say plan early, but I think we’re in great shape going into the holidays,” he said.
But availability isn’t the only concern for consumers — paying more at checkout has also been a burgeoning issue nationwide.
After a full year into the pandemic, the Economic Research Service for the U.S. Department of Agriculture predicted the cost of food from grocery stores would rise 1-2% this year. The latest Consumer Price Index Summary from the Bureau of Labor Statistics found that the food-at-home index increased 1% over the month as all six major grocery store food group indexes continued to rise.
“Food-at-home” is defined by the U.S. Department of Agriculture as grocery store or supermarket food purchases.
“There’s also been a significant amount of inflation that we’ve seen over the last several months,” Clouse said. “We use every tool we’ve got to keep price affordable. We know how important it is, especially for this time of year and through holiday celebrations so we’ve worked hard to keep the prices reasonable but there has been an increase in price.”
The index for other food at home — not including meat, poultry fish or eggs — “rose 1.2% over the month, its largest monthly increase since April 2020, near the onset of the pandemic,” the BLS report stated. “Cereals and bakery products rose 1% in October following a 1.1% increase the prior month. The index for nonalcoholic beverages rose 0.8 percent in October, the index for dairy and related products rose 0.2%, and the index for fruits and vegetables advanced 0.1%.”
Clouse continued: “Inflation, I would expect to continue to see as we move forward into ’22, but count on us to be doing everything we can to find ways to keep the prices reasonable and affordable, especially through the holiday season.”
To help offset the rising production costs that could be passed on to consumers, Clouse said Campbell’s has relied on “a combination of bringing in a lot of new workers into our facilities as well as the teams performing very well.”
“I would expect as we go into ’22 you’re going to see steady improvement on that front and we’re expecting as we get into the new year to be fully back in supply on most of our products,” he added.
As shoppers head to the store before Thanksgiving, Clouse said “I’m hopeful for everybody that you have a wonderful happy Thanksgiving. My advice is get online, get your recipes, figure out those ingredients you need for your dishes, get out early to the store and get them ready to go.”
(NEW YORK) — When Kara Moore, a mom of three, returned to the workforce last year after nine years as a stay-at-home mom, she struggled to find a job.
Moore, 42, who holds a bachelor’s degree and spent nearly a decade working in corporate America, eventually took a part-time job with a local school district.
“The job wasn’t even a fit, it was just out of necessity that I took it,” Moore, of Delta, Pennsylvania, told “Good Morning America,” noting that a part-time role worked better for her financially because it meant she did not have to pay for child care.
Around six months into that job, the coronavirus pandemic struck the United States and Moore said her role was eliminated.
While home and unemployed, Moore, a single mom who had at the time recently separated from her husband, signed up to work with Instacart, a grocery delivery service.
Moore says she is now making nearly five times what she did in her school district job. And since she can set her own schedule, she does not have to put her children in daycare.
“If I was working in an office, corporate-style job, I would be paying for daycare and I wouldn’t have been able to afford it,” she said. “Now I’m home every night with my daughters. I’m able to take them to sports and be home with them for homework. I can take off if my kids are sick.”
When Moore signed on with Instacart, she joined a growing number of women who have recently jumped into the gig economy, an umbrella term that applies to all people who effectively work as their own bosses, whether on app-based platforms or as entrepreneurs and freelancers.
At Uber, the number of women who earn on the app has increased nearly 80% since the beginning of the year, while the number of men increased by about 40%. On Uber Eats, more than 40% of delivery drivers in the U.S. are female, and that share is growing, a company spokesperson told ABC News.
At Instacart, nearly 70% of its shoppers identify as women, and nearly half say they have children living at home, according to the company.
DoorDash, a technology that connects consumers with their favorite local and national businesses, says 58% of delivery workers on its platform are female and that the flexibility to design their own schedule is a top reason they choose DoorDash.
“In the past year, more women than men are coming to DoorDash to make up for lost income and to cover expenses,” said Elizabeth Jarvis-Shean, the company’s vice president of communications and policy. “When you think about the pandemic and the disproportionate impact on women, it makes a lot of sense that a flexible schedule that allows them to set their own hours is something that can be appealing.”
Since the start of the pandemic, around 3.5 million moms of school-age children have left active work, shifting into paid or unpaid leave, losing their job or exiting the labor market altogether, in many cases because of the demands of caregiving duties according to the U.S. Census Bureau.
“Women are still in a lot of cases predominantly responsible for a lot of care in the home and in families with children,” said Isabel Soto, director of labor market policy at the American Action Forum, a policy institute. “The gig economy allows you to make your own hours, set your own rates of pay and own your work in a way that the traditional work structure doesn’t allow you to do, so it makes sense that it’s attractive to women.”
A reflection of what’s broken in the labor market
The shift for women into the gig economy is as much about opportunity as it is a reflection of what’s broken in the labor market, according to Shelly Steward, director of the Aspen Institute’s Future of Work Initiative.
“When we’re in a crisis of child care and job quality — too many jobs do not pay enough and do not allow basic levels of flexibility — women will turn to gig work,” said Steward. “We do not have enough good jobs that allow people to balance different commitments or that allow flexibility of scheduling. We do not have an adequate system of child care. We do not pay [child] care workers enough and we do not ensure that care is provided to people and families who need it.”
Jackie Poole, 50, of Colorado, has for the past three years worked a full-time job and also delivered for DoorDash in order to help cover the costs of caring for her 15- and 12-year-old sons.
Poole, a single mom, is not alone as the majority of female DoorDash workers use the platform to earn additional income, according to the company.
I get aggravated sometimes that I have to work a second job to make extra income.
“I get aggravated sometimes that I have to work a second job to make extra income,” said Poole. “But on the other hand, I am so thankful and grateful to work where you don’t have to report to anybody, you can work [the job] on your terms and it can accommodate you.”
Shari Stephens, a mom of two from Rochester, Michigan, said she would not have been able to support her family during the pandemic had she not restarted her career two years ago as a freelance marketing expert.
Through her freelance work on the online platform Upwork, she is now able to set her own schedule and set her own income, two things she said she struggled with in previous corporate jobs.
Had she been in a corporate job during the pandemic, Stephens said she likely would have had to quit because of the demands of her caregiving duties.
“We would have lost everything,” said Stephens. “Because I was working at home and could do homeschool with my kids and still have finances coming in, we didn’t have to make some of those tough choices that I know so many mothers had to.”
Gig economy not a fix for women, some experts say
Though the gig economy works for many women, some experts, including Steward, say it should not be seen as a cure-all for the ways in which the traditional labor market has historically left women behind.
“It’s not a solution to those problems,” said Steward, adding that gig work is something women are, “forced into, because there are no other options.”
Often, when women step out of the workforce — to raise kids, for example — they often return to lower pay and career stagnation, a pay gap known as the “motherhood wage penalty.” Some experts worry the same will happen to women choosing the gig economy now because of caregiving demands.
Tiffany Stockton, a mother of two in Kentucky, left the corporate world when she became a mom. When she tried to rejoin the workforce, she said she was not able to find a job that was both well-paying and matched her skill set.
Frustrated, she started as a delivery person for Uber Eats, where 41% of delivery people are female, according to an Uber spokesperson.
“Employers wouldn’t hire me for the higher-level positions they had,” she said. “It was a big catch-22 and I just kind of threw in the towel and said, ‘Fine, I’m going to become an independent contractor and take control of my own work.'”
Stockton, whose husband has a full-time, salaried job with benefits, said she enjoys the work, but does think about what is next and the difficulties she may face if she tries again to return to the traditional workforce.
“I haven’t been in that corporate world for so long I would likely have to start at the bottom again, go through all of the rungs as I climb the ladder again,” she said. “And for now, the corporate world really isn’t designed for the mom that has kids at home.”
Likewise, Moore said she also worries her job delivering for Instacart does not offer a clear career path or benefits like retirement savings, but for now, it works.
“It’s a little bit on the backburner for me,” Moore said of planning for her future. “For right now, I don’t have to worry about how we’re going to get food or whether we can stop for a soft drink on the way home from a doctor’s appointment, and those were concerns before.”
Many women-focused policy groups, including the AAUW, are calling for more protections for gig workers, from health insurance to retirement savings plans.
Soto, of the American Action Forum, said she predicts that as the gig economy continues to grow, there will be more options that give gig workers more workplace protections, like benefits that are portable, meaning they are tied to the employee and not the employer.
Some companies have started offering some benefit options on their own. Instacart, for example, offers a comprehensive workplace insurance plan for all shoppers, and discounts to other services, like assistance with filing taxes.
The company also employs in-store shoppers that are employees of Instacart with access to benefits like paid sick time and a retirement plan, according to a company spokesperson.
In other cases the benefits a gig worker receives may depend on where they live. In California, for example, state lawmakers sought to require companies that employ drivers through apps to classify them as employees in order to get minimum wage and benefits .A ballot measure, Proposition 22, that passed in November keeps rideshare and related gig workers classified as independent contractors, but the legal battle over that measure continues in court.
Both Uber and DoorDash, which backed Proposition 22, say the majority of their drivers want to stay as independent contractors because of the flexibility and independence it provides, according to the companies.
And in a different approach, Uber has started offering support to its female drivers trying to get back into the workforce. After seeing the spike in women on the app this year, Uber partnered with Dress for Success to give drivers access to the organization’s coaching, networking and professional development services.
Some experts who question the sustainability of the gig economy for women say the onus still should not be on women to have to go outside the traditional labor market to make their careers work.
“I would shift the responsibility from working women and put it towards policymakers, business leaders, people in positions of power to change things,” said Steward. “To recognize that we don’t have enough good jobs, and we don’t have enough jobs that allows people to balance different commitments in life and we don’t have a basic care infrastructure that provides and values caretaking.”
“If we address those problems, then women will not be in a position of needing to find any means of earning a little bit of extra income at the hours that work for them as they balance so many different things in their lives,” she said.
(LOS ANGELES) — The iconic Staples Center in Los Angeles will change its name to the Crypto.com Arena this Christmas, marking the end of an era for the stadium and becoming perhaps the latest signpost of cryptocurrency’s push toward the mainstream.
The name change is “recognizing these technologies will be at the forefront of powering the future of culture, creativity and entertainment in Los Angeles,” stadium operators said in a statement Wednesday, as cryptocurrency trading has surged among individual investors throughout the pandemic.
The 20,000-seat venue has been called the Staples Center, after the office supply chain, since opening its doors in 1999.
The venue has gained national prominence after hosting major events such as the 2000 Democratic National Convention, 19 of the last 21 Grammy Awards shows and concerts from global superstars including Beyonce and Taylor Swift. It is also home to the NBA’s Los Angeles Lakers and Clippers, as well as the NHL’s Los Angeles Kings and the WNBA’s Los Angeles Sparks.
Details on how much Crypto.com, a Singapore-based crypto trading platform and non-fungible token marketplace, paid for its new namesake stadium in Los Angeles were not released. The deal was brokered by sports and live entertainment giant AEG Global Partnerships, which owns and operates the arena.
Starting on Christmas Day, when the Lakers host the Brooklyn Nets, the stadium will unveil its new logo and internal signage. All external signage will be replaced by June.
“Known as the Creative Capital of the World, the city of Los Angeles and the people who call it home have always been pioneers, pushing the boundaries and innovating as the undeniable global leaders of culture and entertainment,” Crypto.com co-founder and CEO Kris Marszalek, said in a statement Wednesday. “We’re very excited about partnering with AEG and investing long term in this city, starting with Crypto.com Arena in the heart of downtown, and using our platform in new and creative ways so that cryptocurrency can power the future of world class sports, entertainment and technology for fans in LA and around the world.”
Crypto.com also recently added actor Matt Damon as a spokesperson as it seeks to ramp up brand recognition in the U.S.
“This partnership represents the fastest-growing cryptocurrency platform and the biggest sports and live entertainment company in the world converging to drive the future of sports and live entertainment,” said Todd Goldstein, the chief revenue officer at AEG. Goldstein added that it marks “an exciting new chapter in the history of our company and our respective industries.”
The name change echoes trends seen elsewhere in the U.S., as earlier this year Venmo and PayPal announced they would start letting users buy and sell crypto on their apps.
(LOS ANGELES) — The Staples Center is getting a new name before the new year.
Arena owner AEG announced Tuesday a new 20-year partnership with Singapore-based cryptocurrency platform, Crypto.com. Beginning December 25, the Staples Center will be known as Crypto.com Arena.
The arena first opened in 1999 and has been called the Staples Center ever since. It is home to several professional sports teams including the NBA’s Lakers and Clippers, the WNBA’s Sparks, and the NHL’s Kings.
The name change comes just in time for the NBA’s annual Christmas showcase between the Lakers and the Brooklyn Nets.
Crypto.com says the December name change will unveil a new logo and interior signage but fans can expect to see the exterior sings to change by June 2022.
(NEW YORK) — Amazon will pay a $500,000 settlement related to California’s “right-to-know” labor law after state regulators alleged the retail giant failed to adequately notify warehouse workers and local health agencies of COVID-19 case numbers.
“As our nation continues to battle the pandemic, it is absolutely critical that businesses do their part to protect workers now — and especially during this holiday season,” California Attorney General Rob Bonta said in a statement. “That’s why California law requires employers to notify workers of potential workplace exposures and to report outbreaks to local health agencies.”
Bonta said the judgement, which remains subject to court approval, will help ensure Amazon meets the state’s requirement for workers.
“Bottom line: Californians have a right to know about potential exposures to the coronavirus to protect themselves, their families, and their communities,” Bonta added. “This judgment sends a clear message that businesses must comply with this important law. It helps protect us all.”
California’s so-called “right-to-know” law, AB 685, requires that employers notify workers of COVID-19 cases at their worksites, provide employees with information on coronavirus-related benefits and protections, share their disinfection and safety plans and report COVID-19 cases to local health agencies.
The settlement requires Amazon to update COVID-19 notification policies and take further specific actions to help workers, according to Bonta’s office. It also requires Amazon to notify its tens of thousands of warehouse workers in California of new COVID-19 cases in their workplace and pay $500,000 toward enforcement of California’s consumer protection laws.
Barbara Agrait, an Amazon spokesperson, told ABC News the settlement is solely related to a technicality specific to California state law involving employee coronavirus-related notifications. She said no problems were identified with Amazon’s protocols for notifying employees who might have been in close contact with an affected individual.
“We’re glad to have this resolved and to see that the AG found no substantive issues with the safety measures in our buildings,” Agrait said in a statement. “We’ve worked hard from the beginning of the pandemic to keep our employees safe and deliver for our customers — incurring more than $15 billion in costs to date — and we’ll keep doing that in months and years ahead.”
She added that Amazon remains focused on being transparent with local health authorities. Moreover, Agrait said Amazon supports worker vaccinations and the company has hosted more than 1,800 free on-site vaccination events at Amazon facilities across the U.S.
Last October, Amazon released an analysis of data on all 1,372,000 Amazon and Whole Foods Market frontline employees across the U.S. employed from March 1 to Sept. 19, 2020. The company said that 19,816 employees had tested positive or been presumed positive for COVID-19 during that time.
(NEW YORK) — Lovers of all things chocolate, dessert and Reese’s have another thing to be thankful for just in time for the holidays.
On Monday, a new Reese’s Thanksgiving Pie was announced. The sweet treat is the largest peanut butter cup ever, with a 9-inch diameter and weighing 3.4 pounds. That’s a lot of chocolate and peanut butter.
“When you bring together friends and family for Thanksgiving dinner, no table spread is complete without dessert,” said Bo Jones, senior associate brand manager at Reese’s, said in a press release. “At Reese’s, we wanted to create a dessert that everyone wants a piece of. You can thank us later.”
Social media erupted with comments ranging from people volunteering to taste test to remarks about the pie’s 7,680 calorie count. The brand notes it contains 48 servings.
Hershey’s made only 3,000 of the pies, which were available on its website for $44.99 each. All of the pies sold out within a matter of hours, according to the brand’s Facebook page.
Hershey’s, which owns the Reese’s brand, unveiled its new seasonal flavors in September, which included a new peanut brittle Reese’s peanut butter cups flavor for the 2021 holiday season and the Reese’s Peanut Butter Cups Yardstick, a super-sized pack with 18 full-size Reese’s Peanut Butter Cup packs.
(NEW YORK) — The United Autoworkers Union announced it has reached a third tentative agreement that now heads to local unions for a ratification vote that could end the ongoing strike of thousands of John Deere workers.
Results of the latest vote are expected to come in on Wednesday, a union rep told ABC News, after the tentative deal was reached late last Friday. The strike will continue through the ratification vote.
The work stoppage includes employees at the agricultural machinery giant across 12 facilities in three states and just crossed the one-month mark after commencing on Oct. 14, when workers overwhelmingly rejected a contract offer from the company that would have given immediate 5% or 6% wage raises, among other things.
By a much closer margin — 55% against and 45% in favor — UAW workers rejected a second tentative agreement earlier this month that would have guaranteed an immediate 10% wage increase as well as improved retirement benefits to new employees and more.
Many have pointed to the ongoing strike and negotiations as a signpost of the new, post-pandemic labor movement that gives workers an apparent upper hand as major companies have reported struggles to find staff and record-high numbers of workers are quitting their jobs.
The Labor Department said just last week that a new record-high number of employees — representing some 3% of the total workforce — quit their jobs in September, while job opening figures also hover near record highs. Meanwhile, new unionization efforts are emerging at major companies including Amazon and Starbucks.
Details on the latest contract agreement were not immediately released by the union or John Deere, but the UAW said it includes “modest modifications.”
“John Deere and Company has made a last, best and final offer to the UAW negotiating team that includes modest modifications to the last tentative agreement presented for ratification on Nov. 2,” the UAW said in a statement.
“As a result, the UAW will present the Company’s offer for ratification and, as has been the case throughout the bargaining process, will support the outcome as determined by our members,” the statement added, saying the strike continues and voting information will be provided by local unions to members.
In a statement earlier this month after the union rejected the second tentative agreement, Marc A. Howze, the chief administrative officer for John Deere, said, “Through the agreements reached with the UAW, John Deere would have invested an additional $3.5 billion in our employees, and by extension, our communities, to significantly enhance wages and benefits that were already the best and most comprehensive in our industries.”
“This investment was the right one for Deere, our employees and everyone we serve together,” Howze added. “Even though it would have created greater competitive challenges within our industries, we had faith in our employees’ ability to sharpen our competitive edge.”
John Deere has also called the second, rejected agreement “groundbreaking” on its website, saying it would allow the workers to “share in our current and future success through wages and benefits that are not only the best in our industry — they are groundbreaking.”
The company did not immediately respond to ABC News’ request for comment on the latest negotiations Monday.
The first strike in more than three decades at John Deere comes after the company reported earning a record-high $4.68 billion during the first nine months of the 2021 fiscal year, more than double the $1.99 billion reported during the same time last year.
John Deere’s chairman and CEO John May, meanwhile, earned compensation of some $15.58 million in fiscal year 2020, according to a company SEC filing. This would make the ratio of the CEO’s total compensation to a median employee’s total compensation in 2020 approximately 220 to 1, the SEC filing states.
A GoFundMe page started to support the workers while they are on strike has garnered some $158,591 in a little over three weeks, from more than 3,500 donors.
(WASHINGTON) — White House National Economic Council Director Brian Deese acknowledged that “inflation is high and it’s affecting Americans in their pocketbook and their outlook,” but promised the administration is working to address the rise in costs in both the short and long term.
“That concern actually underscores why it’s so important to move forward on the Build Back Better bill that Congress is considering,” Deese said in an interview Sunday with George Stephanopoulos on This Week, making the case for President Joe Biden’s nearly $2 trillion social spending bill still being debated in Congress.
“This bill is actually going to address the core costs that American families are facing in child care, in housing, in health care,” he added.
Pressed by @GStephanopoulos what Biden admin can do in the short term to address inflation, National Economic Council director Brian Deese says “we have to finish job on COVID.”
As inflation continues to plague the U.S., a new ABC News-Washington Post poll paints a problematic picture for the president on the economy as a whole: 70% of Americans say it is in bad shape, and more than half — 55% — disapprove of Biden’s handling of the economy.
“Inflation is high and it’s affecting Americans in their pocketbook and their outlook,” White House National Economic Council director Brian Deese tells @GStephanopoulos, says Build Back Better bill would address “core costs” American families are facing. https://t.co/MPVhQ6Wmjrpic.twitter.com/Tq4hSGKxi7
With the holidays rapidly approaching and prices climbing by more than 6% in the last 12 months, Stephanopoulos pressed Deese on what the administration can do now to offer relief to families.
“I know you’re hoping to pass it, but even if it does pass, it’s going to take a while for the benefits to kick in. So what can Americans expect in the short term? Is inflation going to get worse before it gets better?” Stephanopoulos asked.
“We have to finish the job on COVID. We know that the more that people feel comfortable getting out into the economy, going to movies rather than buying television at home, working in the workplace, the more we can return a sense of normalcy to our economy,” Deese said, adding that the administration will also tackle the supply chain crunch felt across the globe with the bipartisan infrastructure bill Biden will sign into law Monday.
“It’s the first time that a president is actually delivering on a bipartisan infrastructure bill, and while a number of those pieces will be longer term, there are things that will go into effect right away to try to get money out to help. For example, upgrade our ports, upgrade our airports, upgrade our roads,” Deese said.
“We’re going to work without delay to get that money working for the American people,” he added.
The new ABC News-Washington Post poll does also have some good news for the president on his agenda, as 63% support for the $1 trillion infrastructure bill passed by Congress that Biden will sign into law Monday, and 58% support the social spending bill.
Despite the strong public support for the social policy initiative, the White House is still facing pushback from Republicans and some Democrats, who worry pumping more money into the economy could worsen the inflationary woes currently facing the country.
Deese pushed back, pointing to economic analyses that show the measures will decrease inflation, not add to it, and arguing the bill is fully paid for.
“Frankly, it’s been sometime in Washington since we’ve done something that’s fiscally responsible.”
“You say it’s fully paid for, but the Congressional Budget Office still hasn’t weighed in and certified that it actually is fully paid for,” Stephanopoulos pressed.
“We’re confident this bill, as it moves through the process, is going to be fully paid for, and not only that, it’s actually going to reduce deficits over the long term,” Deese replied.
“We’ve already seen the independent Joint Committee on Taxation, as well as the Treasury Department, look at the tax components of this bill and say, not only are they enough to offset the investments in this package, but actually over the long term, they will reduce the deficit by trillions of dollars because we’re making permanent changes to the tax code,” he said.
Asked about West Virginia Democrat Sen. Joe Manchin’s suggestion that the bill should be delayed due to inflation concerns, Deese remained optimistic that there would be progress this week and said Manchin’s worries actually make the case for taking action now.
“We’re confident that this bill is going to come up in the House this week, that it will get a vote it will pass, and it will move on to the Senate,” he said. “And those concerns, which we understand and we share, those concerns actually underscore why we need to move out on this bill.”
(NEW YORK) — Americans across the country are seeing higher prices at the mall, grocery store and gas pump, causing new pain for their pocketbooks right as the holiday shopping season is set to commence.
Inflation has risen at its highest rate in three decades, data released by the Labor Department earlier this week indicates, as consumer prices soared by 6.2% compared to the same period last year. This is the biggest one-year jump seen in the government’s consumer price index since 1990.
As inflation tightens its grip on the economy, the Federal Reserve has begun walking back previous assurances that it will be a temporary, post-pandemic blip. Economists at Goldman Sachs warned in a research note last week that inflation is “likely to get worse before it gets better,” and could persist well into next year.
Many Americans now are too young to remember the pain and uncertainty inflation wreaked on the country in the 1970s, a period economists dub as “The Great Inflation,” when wages and prices snowballed and the purchasing power of savings dwindled before a painful correction that led to a recession and double-digit unemployment rates in the early 1980s.
A generation later and under very different circumstances, prices are again surging at a rapid clip. While economists say policymakers now are much better-equipped to respond to inflation than the last time it struck the U.S., consumers are already feeling the pressure — particularly those with limited means to absorb higher prices for essentials.
Here is what Americans should know about inflation, why it is so high right now and when they can expect relief.
What is inflation?
“Basically, inflation measures the rate of increase in consumer prices,” Itay Goldstein, a professor of finance and economics at the University of Pennsylvania’s Wharton School of Business, told ABC News. “At the end of the day, it measures the extent to which the cost of living is higher.”
The Federal Reserve, America’s central banking system, defines inflation as the “increase in the prices of goods and services over time.”
“Inflation cannot be measured by an increase in the cost of one product or service, or even several products or services,” the Fed states. “Rather, inflation is a general increase in the overall price level of the goods and services in the economy.”
Policymakers evaluate changes in inflation by monitoring several different price indexes. One of the most commonly used barometers of inflation is the Consumer Price Index, which is released by the Labor Department each month and measures the average change over time in the prices paid by consumers for a market basket of goods and services.
The CPI has surged by 6.2% since last October, according to DOL data. The so-called “core index,” or measure for all items except the more volatile food and energy indices, rose 4.6% over the last 12 months, the DOL’s data indicates. This represents the largest one-year increase since August 1991.
“Inflation means that your dollar won’t stretch as far,” Laura Veldkamp, a professor of finance at Columbia Business School, told ABC News. She used Christmas presents as an example, saying that if you wanted to buy a sweater as a gift last year for $100, this year, that price might be closer to $105.
If the prices of some goods and services increases and the prices of others fall, but the overall prices that consumers pay for the bundle of goods and services does not increase, then this is not referred to as inflation.
What causes inflation, and why is it so high right now?
Inflation is determined by the interaction of total demand (aggregate demand) and total supply (aggregate supply) in the economy. If total spending in the economy exceeds the total amount that the economy can produce, then production cannot increase but instead prices will rise.
“When you have a higher demand, the price tends to go up. When you have lower supply, the price also tends to go up,” Goldstein told ABC News. “At the end of the day, the price is a combination of these forces.”
But monetary policies also affect inflation, he said. Keeping interest rates low and injecting a lot of money into financial markets — actions the Fed took to help buoy the economy during the health crisis — can also be linked to the high inflation we are now seeing, according to Goldstein.
Stimulus checks boosted total demand, and at the same time the ability to supply goods and services have been restricted by the pandemic. While the impact of stimulus money on inflation is now waning, many of the other factors that created these imbalances between supply and demand are persisting, Goldstein said.
“People feel that they have money to spend, they want to spend it on things that they haven’t done in the last year,” Goldstein said. “You basically have limits on supply at the same time that you have an increase in demand, and that certainly pushes prices up.”
Veldkamp also stressed the impact that the supply chain issues have on driving up prices. Using the Christmas sweaters metaphor again, Veldkamp added, “Let’s say those Christmas sweaters are stuck on a boat somewhere, then the few sweaters that are here, lots of people want them.”
“So, stores can charge more for them, because they’re scarce,” she explained.
Costs of doing business have also risen during the pandemic, Veldkamp noted, as companies had to spend more to make it safe to do business while COVID-19 spread.
“Lastly, workers are asking for higher wages,” Veldkamp said. “Which may be perfectly justified, but it does make the cost of doing business higher. Say if a restaurant waitstaff wants a 5%, 10% raise, those restaurants are going to have to pass some of that additional cost to their customers, otherwise they won’t turn a profit.”
The economic phenomenon known as the “wage-price spiral” can develop when prices increase and then workers ask for higher wages — which can then lead to further increases in the prices of goods and services, and these can lead to a further increase in wages and so on. In this manner, inflation can become a self-fulfilling prophesy of sorts. This ever-intensifying wage-price spiral characterized the U.S. economy in the ’70s, ultimately resulting in double-digit inflation.
How does the rise in inflation affect consumers?
If consumers’ wages increase with the rise in prices, they should be able to continue purchasing the same amounts of goods and services as usual. This will not be true for all consumers, however, meaning some may struggle to purchase what they used to.
“Your dollar doesn’t go as far, so it’s going to be a little bit harder to buy all the things on your list with the same amount of money,” Veldkamp said. “And that sounds pretty bad, but at the same time, wages are rising, and returns rise with inflation, too.”
Goldstein reiterated that the effect of inflation on consumers is that “when prices go up, people will have to pay more for whatever they want, and as a result, they can afford less.”
He also mentioned the wage-price spiral to show how inflation “might get out of control.”
“What could happen is everyone has to pay more, so they go back and start demanding increases in wages,” he said. “And if wages start to go up, then the whole process can get additional amplification and kind of like a snowball eventually gets very tough to control — and then it becomes very difficult to bring things back.”
How does inflation impact the stock market?
Stocks are a claim on the future earnings of firms, so in principle, firms should be able to raise their prices in line with inflation so their earnings should not decrease.
Historically, however, inflation has been linked to negative impacts in the stock market. One reason for this is that inflation restricts the ability of the Federal Reserve to take action. After stricter policies defeated the spiraling inflation in the U.S. in the early 1980s, the Fed has been able to ease monetary policy following stock market crashes and adverse events such as the Global Financial Crisis in 2008 and the COVID-19 pandemic. When inflation is increasing, however, then the Fed no longer has as much freedom to implement expansionary monetary policy, and when the Fed contracts its expansionary policies, this can decrease stock prices.
Inflation is also often accompanied by uncertainty, which can be bad for the stock market. Investors do not know how long it will last and do not know what to expect from monetary policy, meaning they might be less likely to invest in it.
In the near-term, investors will likely see higher returns on stocks in times of inflation, Veldkamp said, driven by prices increasing.
Goldstein warns, however, that, once inflation starts rising, the Fed will have “no choice but to increase rates abruptly.”
“And when this happens, this will tend to have a negative effect on the stock market,” he said.
What can the government do to reduce inflation?
The Federal Reserve will likely raise interest rates and ease the pandemic-era expansionary monetary policies that injected liquidity into financial markets, according to Goldstein, though he added that this is a “tough balance” as the economy still teeters toward a recovery.
“On the one hand, you want to provide stimulus to the economy and to markets to get over the crisis,” he said of the Fed. “But on the other hand, you don’t want to overdo it, so that things don’t overheat and cause inflation.”
Echoing Goldstein’s sentiments, Veldkamp told ABC News, “We’re probably going to see some interest rate rises.”
“So, if somebody hasn’t already refinanced their mortgage, now would be the time to do that,” she added. “We will probably see the Federal Reserve boost interest rates, because that’s their primary tool to constrain inflation, and what that does is it encourages people to save their money.”
But Goldstein warns that “the government cannot do a whole lot” when it comes to inflation.
Policies that have been tried in the past around the world, such as instituting price caps, can quickly backfire, Goldstein said, because they can bring about a whole new set of issues when the government intervenes like that in the economy.
In the short-term, anything the Biden administration — which operates independently of the Fed — can do to help ease the supply-chain bottlenecks will also help with keeping prices of goods down.
Veldkamp said that less government spending is the “traditional remedy to bring down inflation,” though adds that is not what we’re seeing happening at the moment with Biden’s proposed $1 trillion infrastructure bill.
This bill can help reduce inflationary pressures, however, “if that infrastructure helps to reduce the cost of doing business,” Veldkamp added.
“If fixing the potholes means that fewer delivery trucks are blowing out tires and things get to where they need to go on time — things run more smoothly,” she added. “If they can reduce the cost of doing business, they can bring down inflation.”
How can people protect themselves from the impacts of inflation?
“When you are dealing with inflation, you have to think about how you protect your investments,” Goldstein said. Just keeping money in your bank account could hurt, he said, “because you’re not getting compensated for the inflation.”
Some people choose to invest in the stock market, but as Goldstein mentioned, the stock market can be a bit of a mixed bag “because there could be overall macroeconomic implications that will push the stock market as a whole down.”
Veldkamp said her advice for Americans is: “Don’t leave your money in cash.”
“The value of cash is going to get eroded,” she said. “You want to look for, at the very least, a savings account that offers some interest. You might want to ask about money market mutual funds, those are financial products that are usually really safe, but give you a little bit more interest.”
“Things are getting more expensive, but if you protect the money that you have by putting it in interest-bearing accounts, you should do just fine, because your money will grow even faster than the price level is growing,” Veldkamp added.
“On the flip side, anybody who’s got a mortgage should be loving inflation,” Veldkamp said “If you owe somebody something, then inflation is eating away at the value of that debt, it should get easier and easier to pay back that loan.”
Will the inflation we’re seeing now be temporary?
In short, only time will tell.
In past months, policymakers including Fed Chair Jerome Powell have stressed that the inflationary pressures are expected to be “transitory” in the wake of the pandemic.
In a press conference earlier this month, however, Powell said that “supply constraints have been larger and longer lasting than anticipated.”
Powell said that “the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, specifically the effects on supply and demand from the shutdown, the uneven reopening and the ongoing effects of the virus itself” and stressed that the Fed’s tools “cannot ease supply constraints.”
Still, Powell said that he believes “our dynamic economy will adjust to the supply and demand imbalances, and that as it does, inflation will decline.”
“Of course, it is very difficult to predict the persistence of supply constraints or their effects on inflation,” Powell said. “Global supply chains are complex; they will return to normal function, but the timing of that is highly uncertain.”
Goldman Sachs economists, in their research note warning inflation will get worse before it gets better, said their core view remains that the underlying supply-demand imbalances will work themselves out as Powell has said.
“But it is now clear that this process will take longer than initially expected, and the inflation overshoot will likely get worse before it gets better,” the researchers warned.
The Goldman Sachs team said they expect the process of supply chain disruptions easing, inventories being rebuilt and the lingering impacts of pandemic-era fiscal boosts fading to “start by the second half of next year and to extend into 2023.”
Veldkamp told ABC News that she is only “modestly” concerned about inflation spiraling out of control like what was seen in the 70s.
“I do think it’s a possibility, I’m watching out for it,” she said. “At the same time, I think our central bankers know a lot more about how to contain inflation than they did in the 1970s. Economics has evolved a lot since then, and so I have confidence in the professionals running our monetary system, that they’re going to work hard to promote that.”
Goldstein echoed Veldkamp’s sentiments, saying that he doesn’t think the “nightmare scenario” of what happened in the ’70s is a likely outcome at this point.
“A lot has been learned from the past and how to deal with those situations,” he said. “And I think the Fed is ready to act, and if they see it is getting to that point, they can very quickly raise rates, and I think that will likely help.”
