Business

(NEW YORK) — Wildfire smoke bathed New York City’s front-line workers in fumes, atmospheric rivers forced hundreds of thousands of California homes into darkness, and hurricane Idalia battered tourism in Florida.

Natural disasters nationwide in 2023 focused attention on the life-or-death stakes of climate change but also underscored a grave risk of a different type: economic distress.

A landmark report released by the federal government last month put a price tag on extreme weather events, saying they impose nearly $150 billion in costs for the United States each year.

Those losses fall disproportionately on low-income and historically marginalized people, worsening inequality, the Fifth National Climate Assessment found.

While the economic consequences of climate change became more clear this year, the response from companies, economic policymakers and private investors was mixed, analysts told ABC News.

The largest climate legislation in the nation’s history, the Inflation Reduction Act, or IRA, helped unleash a wave of clean energy projects and record sales of electric vehicles, some experts said.

However, a backlash against environmental, social and governance investing, or ESG, brought a decline in financing for funds focused on those issues. Meanwhile, the U.S. produced a record amount of oil, even though the burning of fossil fuels makes up a key driver of climate change, experts added.

“There are reasons to be both optimistic and pessimistic,” Glenn Rudebusch, a former economist at the Federal Reserve, told ABC News. “Policymakers have made some slow, halting progress. But progress has been made.”

This year marked the first since the IRA took effect, offering tax credits meant to incentivize private investment in clean energy, such as wind and solar, and, in theory, boost U.S. production of renewables.

Roughly 280 clean energy projects representing $282 billion of investment were announced over the measure’s first year, Goldman Sachs found in a report in October. In all, the study said, such projects created about 175,000 jobs.

New initiatives included a battery manufacturing plant in Georgia, a solar complex in Alabama and the expansion of a wind turbine facility in Colorado, American Clean Power, an industry group representing green energy companies, said in a report last December.

“The uptake has been vastly greater than what the Biden White House anticipated,” Robert Stavins, a professor of energy and economic development at Harvard University, told ABC News.

Alongside the growth of its clean energy industry, however, the U.S. set a record for oil output this year. As of December, the country was on pace to increase its supply of oil by an average of 1.4 million barrels per day, according to the International Energy Agency, a government group.

The added supply puts downward pressure on gasoline prices but worsens climate emissions.

“This transition is rapidly accelerating on the renewable side, but there’s a stubborn entrenchment of fossil fuel production,” Dave White, director of the Global Institute of Sustainability and Innovation at Arizona State University, told ABC News. “This is a tension playing out in the U.S. energy sector.”

The surge of investing in clean energy also came alongside a sharp decline of ESG financing, a major source of private-sector funds for some green businesses.

Prominent Republican politicians, such as Florida Gov. Ron DeSantis, have assailed ESG as “woke” capitalism that prioritizes liberal goals over investor returns.

Some on the left have questioned the rigor of such funds, warning that they establish insufficient standards for companies seeking to qualify.

Funds worldwide categorized as “responsible investing” received $68 billion of net new deposits in 2023 through November, according to data from financial firm LSEG Lipper. That amount had fallen dramatically from $158 billion for all of 2022 and $558 billion for all of 2021.

“Over the course of 2023 we really saw a culmination of the backlash against ESG,” Robert Jenkins, global head of investment and wealth for LSEG Lipper, told ABC News. “This is not going to be helpful broadly for the world to reach [climate] goals.”

However, Jenkins added, the criticism has spurred a shift toward more sophisticated criteria for evaluating the environmental impact of a given business and assembling funds that reflect the values sought by investors.

“Good evolutionary things are happening when we look at this space,” Jenkins said.

Looking ahead, the analysts centered their attention on the 2024 presidential election. The outcome of that contest could ultimately propel green investment and galvanize corporate action, or reverse some of the recent progress, some experts said.

“It really requires another election to see where things are going,” Rudebusch said.

 

 

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(LOS ANGELES) — With the minimum wage in California increasing to $20 an hour for fast food workers in 2024, some Pizza Hut franchisees say they’re preparing to eliminate jobs as well as delivery options for customers.

As first reported by ABC News Los Angeles station KABC, two major Pizza Hut franchisees with restaurants in Orange, Los Angeles, Riverside, San Bernardino and Ventura counties are planning layoffs that would impact 1,200 workers.

The mass layoffs would also reportedly impact another 800 workers at Pizza Hut locations in Sacramento, Central California, Southern Oregon, and the Reno-Tahoe area, according to KABC.

The cuts would eliminate the franchisees’ delivery services for customers in those locations, they said. Customers will instead have to rely on services like Uber Eats or DoorDash.

“Pizza Hut is aware of the recent changes to delivery services at certain franchise restaurants in California,” a company spokesperson said Thursday. “Our franchisees independently own and operate their restaurants in accordance with local market dynamics and comply with all federal, state, and local regulations, while continuing to provide quality service and food to our customers via carryout and delivery.”

The chain, which is owned by Yum! Brands, said access to delivery would continue to be available via the Pizza Hut mobile app, website and phone ordering.

Other fast food companies including KFC and Taco Bell did not immediately respond to ABC News’ request for comment.

The wage legislation, AB 1228, which was signed into law by California Gov. Gavin Newsom in late September, is the catalyst for this decision by operators, the franchisees say.

The new law goes into effect in April and will boost minimum wage to $20 per hour for fast food workers, $4 more than the state minimum wage of $16 that will be effective Jan. 1.

Other fast food companies, including McDonald’s and Chipotle, previously said the new law would impact the respective chains’ operating costs and could potentially change menu pricing for customers.

Although a decision has not been made official, Chipotle CEO Jack Hartung said on a November earnings call that the pricing at the popular fast-casual Mexican restaurant would have to change “to take care of the dollar cost” and cover the new margins.

“We are definitely going to pass this on. We just haven’t made a final decision as to what level yet,” he said.

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(NEW YORK) — Amazon will begin displaying advertisements in movies and TV shows on its Prime Video streaming service next month, the company said in an email to subscribers this week viewed by ABC News.

Customers will be offered an ad-free alternative for an additional $2.99 per month, the company added.

“This will allow us to continue investing in compelling content and keep increasing that investment over a long period of time,” the company said. “We aim to have meaningfully fewer ads than linear TV and other streaming TV providers.”

The notice to customers follows an announcement in September setting out plans to add advertisements to video content on Prime in early 2024.

The ads will be introduced in the U.S., U.K., Germany and Canada in early 2024, followed by France, Italy, Spain, Mexico, and Australia later in the year, the company said in the announcement.

The move at Amazon comes amid an industrywide shift toward the inclusion of advertisements across major streaming services.

Netflix — the most popular streaming service worldwide — made headlines last year when it launched a subscription tier with advertisements for $6.99 per month.

Max, which launched an ad-supported tier in 2021, offers the option for $9.99 per month.

A Prime Video subscription costs $8.99 per month, or customers access the service as a complimentary offering along with the company’s Prime membership service.

The introduction of advertisements in Prime video content will take place on Jan. 29, the company said.

Prime Video is often one of the top two drivers of customer sign-ups for the company’s Prime membership service, Amazon CEO Andy Jassy said on an earnings call last month.

“We also have increasing conviction that Prime Video can be a large and profitable business in its own right,” Jassy said.

Last year, Amazon closed its $8.5 billion acquisition of MGM, a decades-old Hollywood movie studio. As part of the deal, the company acquired global TV rights to the “Lord of the Rings” franchise.

The company debuted an initial season of “The Lord of the Rings: The Rings of Power” in September 2022 and a second season of the fantasy series is forthcoming.

 

 

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(NEW YORK) — Consumer spending grew solidly this holiday season, rebuking concerns of a slowdown and reinforcing positive signals about the U.S. economy as it approaches the end of a tumultuous year.

Buying among shoppers rose 3.1% over the holidays compared to the same period last year, according to data released on Tuesday by Mastercard SpendingPulse, which measures in-store and online purchases from Nov. 1 to Dec. 24 across all forms of payment. The data is not adjusted for inflation.

Robust spending during the holidays appears to have dispelled concern among some economists of a decline. Their fears centered on a drop-off in pandemic-era savings and a rise in borrowing rates for consumer loans such as credit cards.

But a significant reduction of inflation over the past year has delivered some relief for consumers. Strong hiring and resilient wage growth have bolstered shoppers, who account for nearly three-quarters of U.S. economic activity.

“This holiday season, the consumer showed up, spending in a deliberate manner,” Michelle Meyer, chief economist at the Mastercard Economics Institute, said in a statement.

“The economic backdrop remains favorable with healthy job creation and easing inflation pressures, empowering consumers to seek the goods and experiences they value most,” Meyer added.

Spending over the holidays surged fastest at restaurants, where buying amounted to 7.8% growth compared to the same period last year, Mastercard SpendingPulse data showed. The expansion of spending also grew markedly in apparel, which saw a 2.4% rise.

Purchases of electronics and jewelry, however, shrunk compared to the same stretch of 2022, the data showed.

Retail sales grew at a breakneck pace online, surging more than 6%. By contrast, the data showed, in-store purchases grew at a sluggish pace of 2%. The majority of purchases took place in person, resulting in the 3.1% overall growth rate, Mastercard SpendingPulse said.

The rush of holiday shopping aligns with a burst of optimism among observers following robust sales on Black Friday.

Consumers spent a record $9.8 billion online on Black Friday, which marked a 7.5% increase over the year prior, according to Adobe Analytics.

Shopper visits, a metric used to assess in-person sales, rose 4.6% compared on Black Friday compared to a year ago — a rate that nearly doubled the average overall increase in foot traffic this year up to that point, retail data firm Sensormatic Solutions said.

A host of key economic indicators marked a good omen for consumers as they entered the holiday season. The unemployment rate stood near a 50-year low, wage growth outpaced inflation and savings remained resilient for upper- and middle-income households.

The U.S. economy grew at an annualized pace of 4.9% over three months ending in September, more than doubling growth in the previous quarter, a government report in October showed.

Still, some warning signs threw the fate of the holiday retail season into doubt.

Credit card debt climbed to a record high in the third quarter of 2023, surging nearly 5% from the previous quarter and leaving a growing share of borrowers late on payments, a Federal Reserve report last month showed.

The growing debt emerged alongside a spike in borrowing costs for loans from credit cards to mortgages that stem from interest rate hikes at the Federal Reserve.

Since last year, the Fed has raised its benchmark interest rate at the fastest pace in more than two decades, seeking to slash price hikes by slowing the economy and reducing consumer demand.

But the central bank may soon reverse its policy of raising rates, according to a forecast released after the Fed’s meeting earlier this month.

Inflation has fallen significantly from a peak of about 9% last summer but remains more than a percentage point higher than the Fed’s target.

Members of a decision-making committee at the Fed expect to reduce rates next year amounting to three quarter-point cuts, the central bank said.

Speaking at a press conference in Washington, D.C., Fed Chair Jerome Powell cautioned that the exact course of interest rates remains unclear.

“Inflation has eased from its highs and this has come without the significant increase in unemployment. That’s very good news,” Powell said.

“But inflation is too high, ongoing progress in bringing it down is not assured, and the path is uncertain,” he added.

 

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(NEW YORK) — Greg Iwinski, a late-night TV writer, walked off the job this year amid a dramatic surge of workers going out on strike — and he says the trend made its presence felt at the bargaining table.

“The ammunition that a company has, whether it’s an automaker or a TV studio, is telling you that a strike won’t work — your collective action won’t help,” Iwinski, who helped broker an agreement that delivered significant pay increases for 11,000 Hollywood writers, told ABC News.

A slew of contract breakthroughs over the course of 2023 dispelled that notion, Iwinski said. “If you hold out long enough, you will break them and win,” he said.

The Alliance of Motion Picture and Television Producers, or AMPTP, which negotiated on behalf of the TV studios, did not immediately respond to ABC News’ request for comment.

Iwinski was among more than 500,000 workers who went out on strike nationwide in 2023, nearly tripling the figure recorded over the same period a year earlier, according to data through the end of October from Cornell University’s School of Industrial and Labor Relations shared with ABC News.

The sharp escalation in worker protests arose from widespread dissatisfaction with sluggish wage gains, which in many cases had failed to keep up with rapid price hikes, experts told ABC News.

Emboldened by a tight job market and growing approval of unions, workers took a step that often frightens employees concerned about losing their livelihoods, they added.

“This is a demonstration of the anger that American workers have about their position in the economy,” Erik Loomis, a labor professor at the University of Rhode Island and author of “A History of America in 10 Strikes,” told ABC News.

“We’re in an era where people are seeing the strike as a tool once again,” Loomis added, noting that the number of workers on strike this year was last seen in the early 1980s.

Labor militancy will continue in 2024 since worker disaffection remains, experts added, though the potential for fewer contract disputes at large unions could result in a decline in the number of workers walking off the job.

Over a four-decade period beginning in the late-1970s, wages largely flattened, increasing 0.2% per year on an inflation-adjusted basis for a typical worker, a Harvard Business Review analysis found.

The cumulative effects of sluggish wage growth collided with sky-high inflation in recent years, leaving workers frustrated over diminished spending power, Johnnie Kallas, project director of Cornell University’s Labor Action Tracker, told ABC News.

“The root cause is the pent up pressure of long-term wage stagnation,” Kallas said. “That has really come home to roost.”

This year, that upswell of anger coincided with contract disputes involving some of the nation’s largest unions.

SAG-AFTRA, a union representing roughly 160,000 actors, went out on strike for nearly 120 days, culminating in a 3-year contract that raised wages by roughly 14%.

The United Auto Workers, a union representing 150,000 employees at major car markers, ended a weekslong strike after a set of agreements that delivered a roughly 25% raise over a 4-year period.

Roughly 75,000 health care workers at Kaiser Permanente won major wage gains after a work stoppage, as did thousands of TV writers like Iwinski.

While the number of workers on strike increased significantly this year, the total work stoppages remained roughly flat. Through Dec. 20, there were 405 strikes in 2023 compared with 407 strikes over that same period a year prior, according to Cornell University’s Labor Action Tracker.

The major uptick in striking workers this year owes in part to the incidental confluence of contract deadlines at large unions, Thomas Kochan, an emeritus management professor at the Massachusetts Institute of Technology, told ABC News.

“Some of it is contingent because we did have a significant number of larger contracts,” Kochan said, acknowledging that the scale of work stoppages could ebb next year.

Still, the certainty of some strikes, as well as the credible threat of others, should deliver workplace improvements for workers, Kochan added.

“It’s clear that rank-and-file workers are prepared to strike,” Kochan said.

Potential workplace disputes dot next year’s calendar, even if few approach the size of the high-profile confrontations of 2023.

Contracts covering 60,000 film and television crew workers are set to expire in July; while an agreement concerning 220,000 postal workers will come up for renewal in September 2024, according to an analysis from the pro-worker outlet Labor Notes.

“I don’t know if we’ll see the same number of high-profile strikes next year but I think we’re still going to see a lot of strikes,” Lynne Vincent, a professor of industrial and labor relations at Syracuse University, told ABC News.

“2023 set the stage that things are different,” Vincent added. “That conversation will continue in 2024.”

 

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(NEW YORK) — Inflation is falling toward normal levels, according to fresh data released Friday from the Federal Reserve’s preferred measure, the Personal Consumption Expenditures price index.

The information is the latest in a string of good news for price increases, but a major disruption of global trade could threaten that progress, some experts said.

Attacks on ships along a key route through the Suez Canal have forced freight companies to divert deliveries, sharply escalating shipping costs and risking higher prices for everything from oil to electronics to furniture, they said.

“If this continues, we’re going to see increased shipping costs stacked onto the price of goods,” Rob Handfield, professor of operations and supply chain management at North Carolina State University, told ABC News.

“Just when we see inflation under control, hopefully this won’t be another force to increase it again,” Handfield added.

Other experts, by contrast, downplayed the implications for prices, saying the shipping industry could weather the fallout with little effect on U.S. consumers.

Since October, Yemen-based Houthi militias have launched over 100 attacks targeting at least 10 merchant vessels, according to a statement from the Pentagon.

Indicating the significance of the disruption, the U.S. launched an international task force this week aimed at safeguarding the area from such attacks.

The Houthis have targeted commercial ships traveling through the Red Sea as they approach the Suez Canal, which the U.S. Naval Institute says facilitates roughly 12% of global shipping traffic.

Major shipping companies MSC, Maersk and Hapag-Lloyd, as well as British oil giant BP, have responded to the attacks by diverting their ships to alternative routes.

Freight re-routed from the Suez Canal typically travels around the southern tip of Africa, extending the length of the trip by roughly 30%, Jason Miller, a professor of supply-chain management at Michigan State University, told ABC News

The increased travel time has strained the supply of ships, since longer routes mean fewer ships are available to carry goods at any given time, Miller said. That bottleneck, he added, has driven up short-term rates known as spot prices, which companies negotiate for the transport of their goods.

“We’re starting to see those spot prices increase very rapidly,” Miller said.

Prices have reached as high as $10,000 for a 40-foot container ship, up from roughly $2,400 last week, CNBC reported on Thursday.

The disruption holds significant implications for oil prices, since the Suez Canal is an important shipping route for crude oil coming from the Middle East, experts said.

Oil prices play a direct role in the price of gasoline and factor indirectly into costs associated with the delivery of goods.

The price of Brent Crude oil, a key industry metric, has risen about 3% this week.

The crisis in the Red Sea could also increase prices for a range of consumer products imported from countries in Southeast Asia, such as India and Vietnam, since those goods travel through the Suez Canal, some experts said.

Top products imported to the U.S. from India so far this year include solar panels, bed linens, wooden furniture, shrimp and honey, according to U.S. census data reviewed by ABC News.

“This could trigger a domino effect that will push prices up eventually,” Christopher Tang, a professor at the UCLA Anderson School of Management, who focuses on supply chains, told ABC News.

Still, some experts cautioned that the trade disruption could ultimately have little or no effect on U.S. prices.

The high-traffic holiday season is nearly over, Miller said, meaning those products have already been shipped. Plus, he added, imported goods make up only 11% of U.S. consumer spending, citing data from the San Francisco Federal Reserve.

“This could have a very minor impact,” Miller said.

Even so, the experts acknowledged that the outcome of the conflict in the Red Sea remains unclear. A wider regional war could intensify the potential effect on prices, while a speedy resolution of the Houthi attacks could ease the inflation risk, they said.

“It’s too early to make a prediction of how this plays out,” Miller said. “There’s just so much uncertainty.”

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(NEW YORK) — While we welcome the new year, we’ll also be welcoming an increase in the cost of mailing letters and packages.

Starting Jan. 21, the U.S. Postal Service will increase stamp prices from 66 cents to 68 cents for letters weighing one ounce or less.

Package shipping costs are also slated to increase by nearly six percent, with Priority Mail Express costs going up by 5.9 percent, Priority Mail increasing 5.7 percent, and Ground Advantage going up 5.4 percent.

The price hikes, the fifth increase in two years, are part of the Postal Service’s ten-year ‘Delivering for America’ plan to raise rates and recover from plunging profits – a projected $160 billion loss over the next ten years.

Some of the cost-cutting measures have already translated into slower deliveries, while the increased prices will more significantly affect residents in the non-contiguous states and territories, like Alaska and Hawaii. Those areas will see an increase of more than nine percent, prompting lawmakers like Alaska Sen. Dan Sullivan to ask Postmaster General and USPS CEO Louis DeJoy to reconsider the plan.

“No state, including Alaska, should be punished by our own federal government because of geography,” Sullivan said in part in a statement Tuesday. “These hikes have the potential to severely negatively impact Alaskans – already reeling from inflation – who are more reliant on the USPS for basic goods and services than other Americans.”

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(NEW YORK) — Workers at a Wells Fargo branch in New Mexico voted to form a union late Wednesday, becoming the first employees at a U.S. megabank to unionize.

Employees at an Albuquerque location favored unionization by a margin of 5-3, establishing a small outpost for organized labor at a company that operates more than 4,000 branches and employs over 225,000 workers in the U.S.

The union breakthrough arrives as Wells Fargo faces a wider labor campaign. Two branches, one in Daytona Beach, Florida, and another in Atwater, California, have filed petitions for union representation that could trigger balloting, according to information from the National Labor Relations Board shared with ABC News.

In response to ABC News’ request for comment, a Wells Fargo spokesperson said the company opposes unionization but acknowledged that the decision lies with employees.

“We respect our employees’ rights to vote for union representation,” the spokesperson said. “At the same time, we continue to believe our employees are best served by working directly with the company and its leadership.”

The spokesperson pointed to a five-employee branch in Bethel, Alaska, which withdrew a petition for unionization ahead of a vote scheduled for Thursday.

“We are pleased with this development and look forward to continuing to directly engage with our employees,” the spokesperson said.

The Communication Workers of America, the union that’s organizing Wells Fargo employees, did not immediately respond to ABC News’ request for comment.

Seven worker complaints over alleged illegal anti-union activity carried out by Wells Fargo remain under review at the NLRB, the government agency said in a statement to ABC News.

The charges cover a range of claims alleging illegal retaliation, discipline and alteration of the terms of employment, the NLRB said. The complaints span five Wells Fargo facilities in Texas, Iowa, Arizona and California.

At a store in Salt Lake City, Utah, Wells Fargo settled over a union-related worker complaint, agreeing to not engage in coercive statements, surveillance or interrogation, the NLRB said.

In a statement last month about two of the worker complaints, the Communication Workers of America criticized Wells Fargo for the alleged conduct.

“We are organizing a union to build a better Wells Fargo for workers and customers, yet the bank continues to try to resist change,” the CWA said.

“Rather than join us in our efforts to address the toxic culture that has led to scandal after scandal and cost the bank billions of dollars in fines, Wells Fargo has chosen to break the law by attempting to silence us,” the union added.

When asked about worker complaints of illegal anti-union conduct during a Senate hearing earlier this month, Wells Fargo CEO Charles Scharf reaffirmed the company’s opposition to unionization and defended its freedom to discuss the subject with workers.

“We believe it’s best that we have a direct relationship with those employees, and we do intend to exercise our right to speak with them to make sure they make an informed decision,” Scharf said.

The union drive at Wells Fargo comes amid an uptick in labor campaigns this year, including efforts involving employees at some of the nation’s largest companies, such as Starbucks and Amazon.

Workers filed nearly 2,600 petitions for union representation in 2023, marking an increase of 3% from the previous fiscal year, the NLRB said in October.

Charges filed by workers over illegal anti-union activity rose 10% in 2023 compared to the same period last year, the NLRB added.

The nascent unionization at Wells Fargo aligns with a surge in organizing across the labor movement, Harry Katz, a professor of collective bargaining at Cornell University, told ABC News.

“It’s further evidence of the growing interest in unionization, even among workers that haven’t traditionally been organized in the U.S.,” Katz said.

Katz cautioned, however, that the workers could face difficulty reaching an agreement with Wells Fargo on new terms for the workplace. All of the thousands of Starbucks workers across more than 300 unionized stores, for instance, remain without a single union contract.

“Even if you unionize, it doesn’t mean you have bargaining power,” Katz said. “But this is still noteworthy.”

 

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(NEW YORK) — Breakfast foods maker General Mills, the brand behind familiar cereals like Cheerios, Lucky Charms and Wheaties, may not be a consumer favorite anymore as the company experiences slowing sales and increasing price hikes.

In the company’s latest quarterly financial report, General Mills’ CEO Jeff Harmening blamed the drop on “stronger-than-anticipated value-seeking behaviors,” meaning that people are finding cheaper alternatives to high-priced cereals.

The pandemic turned around what had until then been a steady slide in cereal sales, as everyone ate breakfast at home. During 2020, General Mills reported a 5% boost in sales, but sales in 2021 fell 8.7% and nearly a further 4% last year.

General Mills also raised its prices in order to offset pandemic-related supply chain issues and inflation.

Now that Americans are once again out and about, and as a result making breakfast choices outside the cereal aisle, they’re less inclined to pay premium prices for their usual cereal. Instead, sales of cheaper generic store brands spiked 20%.

General Mills has now forecast that the company’s sales may not be able to return to its usual volume until next summer, at the soonest.

On top of tepid consumer demand for the brand-name cereals, shoppers are becoming increasingly aware of how much bang they are actually getting for their buck.

“Many brands are shrinking the size or weight of their products and charging the same price,” smart shopping expert Trae Bodge told ABC News’ Good Morning America.

She encouraged shoppers to always check and compare unit prices when selecting items off the shelf at a grocery store.

“‘Shrinkflation’ is a term used to describe implicitly increasing the price of an item by slightly decreasing the amount or quantity in a package,” Steve Reed, an economist at the Bureau of Labor Statistics, previously told ABC News.

While the Bureau of Labor Statistics (BLS) doesn’t have any evidence on why this occurs, or insight into seller strategies, Reed said, “the conventional explanation would be that consumers may not notice small decreases in size or quantity, or react less negatively to them compared to an explicitly higher price.”

The BLS does attempt to compute for shrinkflation, however, in its Consumer Price Index, which measures what consumers pay for everyday goods and services and is often used as an inflation barometer, according to Reed.

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(NEW YORK) — Drugstore chain Rite Aid has accepted a ban of its use of facial recognition software for five years due to false accusations stemming from the technology that disproportionately affected people of color, the Federal Trade Commission said.

The retailer failed to impose reasonable precautions in its deployment of facial recognition, resulting in thousands of false-positive matches with customers accused of shoplifting and other inappropriate behavior, a legal complaint from the FTC said.

Acting on false-positive alerts, employees followed consumers around its stores, searched them, accused them of wrongdoing in front of friends and family, and called the police to remove them, the complaint said.

The company also chose not to inform customers of its use of facial recognition and discouraged employees from doing so, the FTC said.

“Rite Aid’s reckless use of facial surveillance systems left its customers facing humiliation and other harms, and its order violations put consumers’ sensitive information at risk,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement.

“Today’s groundbreaking order makes clear that the Commission will be vigilant in protecting the public from unfair biometric surveillance and unfair data security practices,” Levine added.

In a statement, the company said it was “pleased to reach an agreement” with the FTC. However, Rite Aid added: “We fundamentally disagree with the facial recognition allegations in the agency’s complaint.”

“Rite Aid’s mission has always been and will continue to be to safely and conveniently serve the communities in which we operate,” the company said.

In all, Rite Aid collected tens of thousands of images of individuals, many of which were low-quality, the complaint said, noting that the activity took place between 2012 to 2020.

Mistakes made by the company’s technology included false matches with an image collected thousands of miles away, as well as an incorrect positive result flagged at dozens of stores nationwide, the complaint added.

Rite Aid violated the terms of a 2010 agreement reached with the FTC after a finding that the company had failed to protect sensitive financial and medical information, the agency said.

The FTC issued a warning earlier this year that the company would be closely monitoring issues around the collection of data tied to individuals’ physical characteristics, the agency said.

In addition to complying with the five-year ban, Rite Aid said it will impose safeguards for future use of its surveillance systems.

Those safety measures include deleting photos previously collected by its facial recognition software, informing customers when their physical characteristics are entered into a store database and providing notice to customers about use of the technology at a given location.

 

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