(NEW YORK) — Sam Altman is stepping down from his role as CEO of OpenAI, the company announced on Friday.
The departure follows a review process undertaken by the company’s board of directors, OpenAI said.
This is a developing story. Please check back for updates.
Copyright © 2023, ABC Audio. All rights reserved.
(NEW YORK) — Members of the United Auto Workers voted to ratify a contract with General Motors, making it the first of the Big 3 U.S. carmakers to formally conclude a weekslong labor dispute that brought tens of thousands of autoworkers to picket lines and risked major economic disruption, balloting results posted online by the union showed.
Employees at General Motors voted to ratify the labor contract by a relatively narrow margin of about 55% to 45%, affirming a deal that top union officials touted as historic but a sizable minority of workers rejected, returns showed.
Soon afterward, Stellantis employees represented by the UAW voted to approve their agreement. A tentative agreement at Ford appears headed for ratification. The votes at Stellantis and Ford appear to have approved their respective agreements by a larger margin than the contract with General Motors, according to vote tallies posted online by the UAW on Friday.
The tentative deals reached with the Big 3 included a record 25% raise over four years, as well as significant improvements for pensions and the right to protest the closure of plants.
But the agreements fell short of some ambitious demands made by UAW President Shawn Fain at the outset of the strike in September. Initially, the union called for 40% wage increases over the four-year duration of the contract as well as a four-day workweek at full-time pay.
If union members had voted down the agreement, more than 50,000 employees at General Motors represented by the UAW would have potentially relaunched their strike against the company.
Ultimately, the deal with General Motors received majority support from union members at dozens of workplaces spanning from Michigan to Texas to Pennsylvania. However, the agreement appeared to elicit disapproval from many longtime workers, returns indicated.
A major GM plant in Spring Hill, Tennessee, which employs more than 2,000 workers building the company’s Cadillac and Acadia vehicles, voted down the contract by a margin of 56% to 44%, the results showed.
A thousand-employee transmission plant in Toledo, Ohio, which experienced a layoff of about 200 workers amid the strike, voted against the contract by a nearly identical margin, according to the results.
After reaching tentative agreements with each of the Big 3 automakers late last month, Fain touted the set of contracts as a victory not only for autoworkers but also for the broader working class.
President Joe Biden also praised the deals. Addressing UAW members at a car plant in Illinois last week, Biden described tentative contracts reached at General Motors, Ford and Stellantis as model agreements that he hoped would fuel a wave of unionization across the auto industry.
“I’m a little selfish,” Biden said. “I want this type of agreement for all auto workers.”
Copyright © 2023, ABC Audio. All rights reserved.
(NEW YORK) — When Harry and Jen Appel lost their home in Big Pine Key, Florida, to Hurricane Irma in 2017, they thought their insurance policies would cover the cost to repair and they’d rebuild in the same location.
The couple showed ABC News’ meteorologist Rob Marciano the spot where their home used to be, now an empty lot covered in sea lavender and some shards of their former life.
“If we would have got paid by insurance the right amount of money, it would have been a you would have been standing in a new house,” Harry Appel said. “Insurance was tough — that was worse than a storm.”
In September 2017, Hurricane Irma barrelled across the Atlantic with winds reaching 185 miles per hour — the strongest hurricane ever recorded in the Atlantic Ocean, according to the National Oceanic and Atmospheric Administration.
The Category 4 storm ravaged the Appel’s dream home, along with much of the region, leaving those hit hardest by the storm to contend with an insurance market already struggling to cover its claims.
Since moving into their home in Big Pine Key in 2015, the Appels paid into premium homeowner insurance policies — the National Flood Insurance Program provided by the Federal Emergency Management Agency.
“A week afterward, the guy came up from Texas — the underwriter for flood insurance for FEMA — and he came up and he looked at the house and for him to write a check on the spot for this entire policy, which was amazing. And at that point, I really felt better,” Harry Appel said.
Harry Appel told ABC News that FEMA paid out the $110,000 flood policy, but when the private insurance company responsible for the Appels’ wind coverage came to assess the damage, they claimed the damage had only been done by flooding, so the company wasn’t liable.
“We were entitled to this money,” Jen Appel said. “This was a contractual obligation that they did not live up to and it should have been paid.”
Home insurance isn’t mandatory by law, but banks often require homeowners to get insurance as a condition of a mortgage.
“The insurer’s goal is to collect more in premiums than they pay out in claims,” said Ben Keys, University of Pennsylvania Wharton School of Business professor of real estate and finance. “We’re seeing higher costs of materials, higher costs of labor, and those are growing faster than inflation.”
In recent decades, the intensity of some hurricanes has exploded, fueled by the warming seas, according to experts.
“We’re having more disasters, we’re having more costly disasters, and importantly, more people live in harm’s way,” Keys said. “So any individual disaster now leads to more payouts coming from the insurers — and they’re recognizing that these costs are rising quickly, not just because of inflation, and they’re reacting accordingly.”
2023 marked the most “billion dollar disasters” on record for the United States, with 25 climate-related disasters, according to NOAA.
As these events have gotten more costly, some of the largest private insurance companies, like Farmers, have left states like Florida entirely.
Still, other companies have gone insolvent due to the increasing cost of claims, leaving a market with fewer options for residents to choose from.
Three-fourths of Florida’s 21.5 million residents live in coastal counties, according to the Insurance Information Institute, and it was Hurricane Andrew in 1992 that first exposed the vulnerabilities of the private insurance market in the state.
In the aftermath of Andrew, Florida created a last-resort state-run program called Citizens Property Insurance Corporation with the mission of insuring homeowners who can’t otherwise find coverage.
“We’ve seen a number of large insurers go belly up, and in response, we’ve seen a lot of homeowners who are now dependent on the state’s public insurance plan. So Citizens Property Insurance is now the largest homeowner’s insurer in the state,” Keys said. “And what that points to is a private insurance market that’s simply not working.”
Florida is just one of 32 states and the District of Columbia that offers a state-run FAIR (Fair Access to Insurance Requirements) plan. Another of the 32, Louisiana, is struggling with some of the same issues.
Keys explained that sea level rise and more severe flooding after storms, “have continued to drive up costs for homeowners in that state.”
Tammy and Charles Guillory and their daughter Caylee lived inside the cramped quarters of an RV parked in their driveway for two years during the height of the COVID-19 pandemic after their home was hit by Hurricanes Laura and Delta in 2020.
“Some days I didn’t know how we was gonna make it, but we made it,” Tammy Guillory said. “It was hard.”
After the one-two punch of the hurricanes, just six weeks apart, the Guillorys turned to their insurance companies to pay out their policies.
“We did what we were supposed to do on our end of the bargain,” Tammy Guillory said. “Now it’s time for them to do what they are supposed to do.”
To have their policy paid, the Guillorys had to take their unmet claim to the courts.
They won their case, but the insurer appealed, so the family had to wait even longer.
“I was a client of this company for over 20 years with no missed payments — nothing,” Charles Guillory said. “But when it’s time for us to be able to receive, we have to go through this, and I don’t think it’s right.”
Attorney Michael Cox represented the Guillorys, along with hundreds of similar cases in the area.
“When you have this massive catastrophe, I think the insurance companies came in and they know statistically that most people will just walk away with the mistreatment — and they did,” Cox said. “Most people won’t fight like Charles and Tammy fought. They stood up for themselves and they were willing to go all the way to bat with this company.”
While the Guillorys eventually won their case, the story across the state doesn’t always have a happy ending.
Louisiana still has the third highest insurance premiums in the country, according to III. The market has been deteriorating since the state was hit by record hurricane activity in 2020, causing upwards of $23 billion in damage.
In the aftermath of the disasters, 12 insurers were declared insolvent because of their losses during that time and another 12 voluntarily withdrew from the state.
Over the last two years, Louisiana’s state-run insurance plan — Louisiana Citizens Property Insurance Corp. — more than tripled the number of policies it carries, from 35,000 to 128,000, according to the Louisiana Department of Insurance.
“The drama in Louisiana was that the state insurance regulator increased premiums by 65% earlier this year for the state-run plan,” Keys said. “And that was a recognition that they simply didn’t have enough capital on hand to weather an even moderate storm.”
The state government approved a $45 million fund in February of this year to help stabilize the market.
Insurance Commissioner Jim Donelon says it’s a first step to court companies to come back to the state.
“That’s a balance between the obligation we have to make insurance available, to attract companies and the obligation we have to make them responsive and fair with their policyholders,” Donelon said.
Reinsurance often creates another kink in the chain.
“Reinsurance is most easily thought of as insurance for insurance companies,” Keys explained. “So insurance companies are going to take on risky policies from homeowners all over the country, and they’re going to have a portfolio of risk, and they’d like to protect themselves from the worst case scenarios.”
As natural disasters become more costly around the country, the cost to stay for reinsurers is also increasing.
“They have a lot of influence in the decisions that insurers make,” Keys said. “They have invested heavily in climate modeling and they have some of the best data and the best models out there. And because this is the only business that they do, they have a lot of money at stake.”
As insurance issues continue across the Gulf Coast, some have looked to fortifying their homes to withstand these powerful storms as a possible solution.
At the University of Miami, researchers are testing how to fortify homes with their hurricane simulator, showing us that the way homes are built could be one key to reversing the insurance market retreat.
“Insurance companies, as well as reinsurance, rely heavily on numerical models,” UMiami assistant scientist Milan Curcic said. “How likely is it that certain areas will experience wind of this threshold, flooding of this level, and so on.”
While some can afford to fortify their homes and choose to self-insure, Keys said those who can’t should “shop around” for policies.
As for the Appels, they settled for a fraction of their policy payout after two years of litigation and being forced into escrow with their bank.
They now live in their bed and breakfast and have given up on rebuilding their home.
“When we don’t have a mortgage here, there will be no insurance here,” Jen Appel said. “So I’m joining the ranks with self-insuring, really self-insuring — don’t just say you’re going to self-insure. You better have a bankroll.”
While Harry is ready to move away, Jen says she doesn’t want to go.
“The only reason we’re still here is because I don’t want to go,” Jen Appel said. “But I didn’t go through all that to get to this point where I haven’t enjoyed any of it.”
Copyright © 2023, ABC Audio. All rights reserved.
(NEW YORK) — Thousands of Starbucks employees nationwide are set to walk off the job on Thursday in the largest work stoppage in the five-decade history of the company, the union representing the workers said in a statement to ABC News.
Employees at hundreds of unionized stores will call on Starbucks to bargain labor contracts that would set conditions at those workplaces, such as pay, benefits and staffing levels, Starbucks Workers United said.
Since 2021, the union has organized more than 360 stores employing roughly 9,000 workers. But the union and Starbucks have yet to reach an agreement on a labor contract at any of the stores.
The strike will coincide with “Red Cup Day,” an annual promotion that brings many customers to the company’s stores for a free holiday-themed reusable cup.
Workers at stores in 30 cities, including New York and Philadelphia, walked off the job a day early on Wednesday and will remain on strike through Thursday, the union said.
Moe Mills, a Starbucks employee who works at a store in St. Louis, told ABC News that they plan to participate in the strike because the company has refused to bargain with the union over staffing decisions tied to the sales uptick associated with promotional events like “Red Cup Day.”
The store where Mills works typically brings in about $8,000 in sales each day but promotional events add at least an additional $3,000 in revenue, which amounts to a nearly 40% increase in business, Mills said.
Starbucks, however, leaves staffing levels unchanged on promotional days, leading to overworked employees and unsatisfied customers, Mills added.
“It’s degrading and embarrassing to work in stores that are so short staffed on promotional days that we give customers poor service,” Mills said. “When customers spend $10 or $12 on a drink, they shouldn’t have to wait 45 minutes or get a lukewarm drink when it should be hot.”
Mills said their store unionized in August 2022 but Starbucks representatives have only attended one bargaining session, which they walked out of after 15 minutes.
“Starbucks is promoting that it’s bargaining in good faith but that’s not what we’re experiencing,” Mills said.
In a statement to ABC News, a Starbucks spokesperson faulted the union for a failure to make progress in contract negotiations, noting that the walkout would involve a fraction of the company’s overall workforce.
“We are aware that Workers United has publicized a day of action at a small subset of our U.S. stores this week. We remain committed to working with all partners, side-by-side, to elevate the everyday, and we hope that Workers United’s priorities will shift to include the shared success of our partners and working to negotiate union contracts for those they represent,” the company spokesperson said.
“Despite escalating rhetoric and recurring rallies demanding contracts, Workers United hasn’t agreed to meet to progress contract bargaining in more than four months,” the spokesperson added.
The company pointed to two union contracts reached with United Steelworkers this summer and progress on a draft contract with the Teamsters as proof of its commitment to settling union agreements.
The single-day strike will draw attention to the labor campaign and direct public pressure at Starbucks, Art Wheaton, a labor professor at the Worker Institute at Cornell University, told ABC News.
Federal labor law requires Starbucks to bargain in good faith with the unionized workers but does not mandate that the company agree to a contract, Wheaton added.
“Starbucks has to continue to bargain but it never has to say, ‘yes,'” Wheaton said. “The workers have 350 stores that they’ve unionized and exactly zero labor agreements.”
“The strike can raise awareness and help boost union morale,” he said. “To get a contract you need solidarity events that get the membership engaged and the community engaged.”
The walkout is set to arrive less than two weeks after Starbucks announced that it would raise the hourly pay of U.S. retail employees by 3% at the outset of next year.
The minimum pay raise falls short of the annual pace of inflation, which stands at 3.2%.
In addition to the pay increase, Starbucks will reduce the minimum number of days an employee must work in order to qualify for paid vacation benefits, the company said.
Alex Yeager, a worker at a Starbucks store in Albany, New York, who belongs to the union, previously told ABC News in a statement that he expects the company to provide the raises to nonunion stores only.
“Once again, Starbucks is responding to our bargaining demands, but they’re implementing them in nonunion stores and denying these new benefits to workers in stores that are unionizing or already voted to join the union,” Yeager said.
A labor board judge ruled in September that Starbucks had illegally provided previous pay increases and benefits to nonunion employees without offering them to unionized workers. Bloomberg Law first reported on the ruling.
In a statement to ABC News, Starbucks rebuked the union’s allegation that the raises would only be provided to workers at non-union stores.
“All union-represented stores will receive annual wage increases consistent with our practice of providing yearly wage increases,” Starbucks said. “Wherever we can quickly and broadly improve partner benefits and perks we have and always will.”
“Starbucks has adhered to long-standing legal obligations, which require the company to differentiate between unionized or organizing partners and partners in all other stores,” the company added.
Copyright © 2023, ABC Audio. All rights reserved.
(NEW YORK) — Delivering on long-awaited improvements, the Department of Education will soon release a streamlined version of its widely used college financial aid form, known as the FAFSA, to less than 20 questions that could take some people just 10 minutes to fill out, officials told ABC News.
The new Free Application for Federal Student Aid, which was reviewed exclusively by ABC News ahead of its launch date, will go live by Dec. 31, according to the Department of Education.
The current application includes over 100 questions and hasn’t been significantly updated since the Reagan administration, but it has been under review for the last two years after Congress passed bipartisan legislation calling for it to be improved.
Education Department officials said the overhaul is an attempt to make the form more approachable so that more low-income and middle-income families can apply for and receive the college financial aid they qualify for — which the complicated, burdensome questions on the current FAFSA can be a barrier to.
“The new FAFSA is going to be streamlined, simplified, faster, and it’s going to be easier than ever for students to get the help that they need to pay for college,” Department of Education Undersecretary James Kvaal said in an interview.
“The FAFSA is the first step in that journey for most students, and the form is going to be easier to fill out,” he said.
The new application has been pared down to the fewest number of questions possible, officials who worked on the redesign said, and it pulls from information the government already has through the IRS to automatically input family income details.
The form will range from 18 questions, which could take about 10 minutes, to around 50 questions for more complicated financial situations, which could take around an hour, the Education Department officials estimated.
Those improvements to the form’s accessibility, as well as changes to the formulas to allow more students to qualify for financial aid, will ultimately result in 610,000 new Pell grants being awarded to students from low-income households, the Department of Education predicted.
Pell grants are given to low-income students that do not need to be repaid, unlike a loan.
“A lot of students who are eligible for Pell grants never fill out the FAFSA, or they fill it out and are asked for supporting documentation like a tax return and fall out of the process,” Kvaal said.
“So we think by simplifying the form, we are actually going to make it a lot easier for students to get those Pell grants and pay for college,” he said.
More than one million students are enrolled in college and eligible for a Pell grant but haven’t applied for one, Department of Education surveys have found.
The bureaucratic barriers that can be created by FAFSA have long been a thorn in the side of advocates attempting to get more aid to the students who need it, said Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, a nonprofit that serves financial aid employees at schools around the country.
“We know the No. 1 barrier that students and families cite for not attending college is affordability — that it’s too unaffordable,” Draeger said.
“The entryway to all of that is the FAFSA, and so we want to make this form accessible to as many students and families as we can,” he said.
Draeger and other advocacy groups were hoping to see the Department of Education roll out the new form earlier in the academic year, in line with the October launch date for the FAFSA in recent years, giving families a chance to take advantage of the promised improvements in the college application process for the 2024-2025 school year.
“Generally speaking, the earlier we can get financial aid information to students and families, the earlier they can start to plan for how they’re gonna pay for college,” Draeger said.
Students who already applied to schools under early decision processes, for example, might not now be able to use the new form to apply for their financial aid packages.
But for young people applying for colleges with later deadlines, including in January, the new form will still be available to them in time, Draeger said.
The downside to submitting aid forms later, however, is that it can mean there’s less money available from the institutions and that families have less time to plan their finances.
“Our advice would be to do your FAFSA as soon as possible,” Draeger said.
Copyright © 2023, ABC Audio. All rights reserved.
(NEW YORK) — Chris Josephs wakes up each morning, opens his laptop, and combs through last night’s stock trades.
Josephs, who lives in Santa Monica, California, is not keeping an eye on his own portfolio. Instead, the 20-something tech entrepreneur has spent years intensely following the stocks that are bought and sold by people on the other side of the country — members of the United States Congress.
“It all started off as infuriating,” he said. “You’re like, ‘what the, wait, how are they allowed to do it when other Americans can’t?’”
As long as a trade is reported within 45 days, there’s no law preventing members of the House or Senate from trading stocks, even if the bills they pass or committees they sit on could influence a company’s stock price.
Outraged at first, Josephs says he decided to get in on the action. He moved out West and with a handful of friends launched the app Autopilot.
Autopilot allows users to follow a politician’s trades and then copy them, automatically buying or selling that same stock a lawmaker does at whatever dollar amount they’d like. After less than a year, the company says it has users dedicating tens of millions of dollars to copy the trades certain politicians make.
“The reason why we initially set out with the politicians is because they were killing it,” Josephs told ABC News. “They were making a lot of money.”
In 2012, President Barack Obama signed the STOCK Act, banning members of Congress from trading with nonpublic information, meaning details they glean in their work that are not available to the general public.
But members can still trade. For example, a hypothetical lawmaker could vote for an infrastructure bill and then buy stock in a concrete company. Or they could sit on the Armed Services Committee and legally trade in the stock of defense contractors that receive sizable government contracts.
Josephs is part of a growing online community that’s begun posting on social media the trades members of Congress make, in an effort to show the American people what winners and losers lawmakers pick.
The most well-known name in that movement is the account Unusual Whales. The person behind the account spoke with ABC News [but asked that his name not be used], disguising his face and voice out of fear of blowback from the politicians whose trades he dissects and then publishes on his website and social media accounts that have gained millions of followers.
“One thing people always say is that members are very good at picking stocks, that’s often assumed…but to be quite frank, members were also quite good at avoiding losses,” he told ABC News in his first television interview.
He pointed ABC News to the collapse of Silicon Valley Bank (SVB) and the regional banking crisis. He tracked trades showing several members of Congress, who sit on the House and Senate committees that regulate the financial industry, who sold SVB and other bank stocks before they experienced their sharpest decline.
“I can’t know the intent, if that was what they were aiming to do,” he told ABC News. “But many of the members who were trading banking stocks during that time performed very, very well.”
Annual reviews of the trades of 535 members of the House and Senate, compiled by the Unusual Whales account, have found lawmakers’ stock portfolios consistently beat the S&P 500.
Several members of Congress who actively trade stocks and spoke with ABC News, but declined to be identified, said they never trade with nonpublic information. Some said their trades are made through financial advisers and often without their knowledge. Others said that trading stocks shouldn’t be banned because doing so would cut off a financial source that some politicians use to supplement their income.
ABC News found one trade, made by Victoria Kelly, the wife of Rep. Mike Kelly, R-Pa., which has been under investigation by the House Ethics Committee for more than two years.
A report by the Office of Congressional Ethics (OCE) alleges, in 2020, Victoria Kelly purchased between $15,000 and $50,000 worth of stock in Pennsylvania steel producer Cleveland-Cliffs Inc. She did that, the OCE alleges, after her husband, the congressman, learned the Trump Commerce Department had agreed to open a probe into foreign competitors of the company, which would have impacted the company’s stock price.
But according to investigators, Victoria Kelly bought the stock before that move was made public. The report alleges there is “substantial reason to believe” that stock was purchased with “confidential information.”
Lawyers for the congressman say there’s no evidence the congressman had “any involvement whatsoever in Mrs. Kelly’s decision” to buy the stock and the congressman’s office has said the purchase was Victoria Kelly’s attempt to “show her support” for the struggling company.
The ethics committee opened an investigation into the trade in October 2021. It is ongoing.
When asked by ABC News about the allegations, Rep. Kelly said he was “not going to comment,” citing the pending investigation.
ABC News also found other members of Congress whose trades are under scrutiny, like former Speaker of the House Nancy Pelosi, D-Calif., who has reported millions of dollars in trades over the years, many made by her husband, a financier.
Chris Josephs estimates roughly $10 million in user money on his app Autopilot is specifically dedicated to copying the trades Pelosi discloses on official congressional forms.
In a statement, Pelosi’s office told ABC News she has “no prior knowledge or subsequent involvement in any transactions made by her husband” and was “fully supportive” of Democrat-led efforts last year to ban congressional stock trading.
But those efforts failed. And now there are renewed calls to ban members of Congress from trading stocks altogether.
Earlier this month, Rep. Abigail Spanberger, D-Va., who has long championed a bill to ban her colleagues from trading stocks, called on Speaker Mike Johnson to take action on the issue.
There is also a similar bill backed by Rep. Matt Gaetz, R-Fla., a hardline House conservative, and Rep. Alexandria Ocasio-Cortez, D-N.Y., a fervent progressive.
“We have access to sensitive information,” Ocasio-Cortez told ABC News. “And to think that a [member of Congress] could then purchase individual stock and make bets and trades and personally benefit from that is, I think, in direct conflict with the spirit of public service that we’re here to do.”
Then, there’s the bipartisan duo from Colorado of Rep. Ken Buck, a Republican, and Rep. Joe Neguse, a Democrat, who, with 19 other Republicans and Democrats, signed a letter in May pushing congressional leaders to do something about stock trading.
“[Congressional stock trading] appears to be unethical, and it is wrong fundamentally and American people know it’s wrong,” Buck told ABC News in a rare joint interview, alongside Neguse.
“The American people expect members of Congress to be serving the American people. And the American public. And not their stock portfolios,” Neguse added.
But, despite public pressure, all the proposed bills to ban congressional stock trading have stalled in various House and Senate committees.
“Welcome to Congress,” Buck replied when asked by ABC News about the lack of progress.
“It has taken longer than we certainly would have liked, but we’re going to continue to push forward,” Neguse added, saying he remains optimistic. “More and more members have joined in this effort than perhaps ever before.”
Chris Josephs is less optimistic.
“I don’t think they’ll ban it. I think it’s all a smokescreen. I genuinely don’t think they’ll do it, because it doesn’t benefit them,” he said before turning to his laptop to watch the trades come through.
Copyright © 2023, ABC Audio. All rights reserved.
(WASHINGTON) — Consumer prices rose 3.2% in October compared to a year ago, cooling significantly from the previous month and exceeding economist expectations. The data indicates progress in the Federal Reserve’s fight to reduce inflation.
The results mark a half-percentage-point decline from the annual inflation increase shown in September, according to data released Tuesday by the government’s Bureau of Labor Statistics.
Inflation has fallen significantly from a peak of about 9% last summer. But progress in the fight against rapid price increases had stalled in recent months.
Economists expected a decline in inflation last month largely due to a fall in gas prices as the busy summer travel season gave way to an autumn slowdown.
Over a four-week period beginning at the start of October, gas prices fell nearly 8%, according to AAA data reviewed by ABC News.
Progress shown in the price-hike data, however, lagged for a separate key metric: core inflation, which omits volatile food and energy prices.
Core inflation rose 4.0% in October compared to a year ago, falling slightly from the rate demonstrated over the previous month.
The latest data arrived roughly two weeks after the Federal Reserve left interest rates unchanged. The central bank left open the possibility of an additional rate hike this year but opted to first assess the economy as previous rate increases take greater hold.
“Inflation has been coming down but it’s still running well above our 2% target,” Fed Chair Jerome Powell said at a Nov. 1 press conference in Washington, D.C. “Given how far we have come, along with the uncertainties and risks we face, the committee is proceeding carefully.”
Once bemoaned as a source of recession worries, the U.S. economy has become a wellspring of good news, with blistering growth, robust hiring, and consumers more readily opening their wallets for everything from concert tickets to bar tabs.
The strong performance, however, complicates the fight to dial back inflation, posing a quandary for the Fed.
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. In theory, the economy should eventually falter as it becomes more expensive for businesses and consumers to borrow. But the economy has so far resisted a cooldown.
Gross domestic product data released late last month showed that the U.S. economy expanded at a 4.9% annualized rate over three months ending in September. That breakneck pace more than doubled growth over the previous quarter and reinforced other recent indicators of sturdy performance.
The U.S. economy’s resilience, and consumer spending over the past year amid a decline of inflation, suggest that rapid price increases had resulted from the insufficient supply of goods and the disruption of the Russia-Ukraine war, Mark Zandi, chief economist at Moody’s Analytics, said Sunday on X.
“As these supply shocks fade, so does inflation, without a recession,” Zandi said.
However, a rapid rise in U.S. government bond yields over recent weeks has elevated long-term borrowing costs for consumers seeking mortgage loans, and for corporations pursuing funds to expand their businesses.
Those added borrowing expenses could slow the economy, Powell said at the press conference earlier this month.
“Higher treasury yields are showing through to higher borrowing costs for households and businesses, and those higher costs are going to weigh on economic activity,” Powell said.
Meanwhile, credit card debt climbed to a record high in the third quarter of 2023, surging nearly 5% from the previous quarter and suggesting that some of the economic growth may have been driven by consumer debt, economists previously told ABC News.
The mixed economic picture creates significant uncertainty but the status of the Fed’s inflation fight remains clear, Powell said, noting that the task will require a further slowdown in price increases.
“The process of getting inflation sustainably down to 2% has a long way to go,” Powell said. “We remain strongly committed.”
Copyright © 2023, ABC Audio. All rights reserved.
(WASHINGTON) — House Speaker Mike Johnson says he has a plan to keep the government open, at least for now. But if the rest of Washington doesn’t agree, a sizable portion of the federal government will grind to a halt come Saturday morning at 12:01 am EST — just in time for Thanksgiving and the winter holidays.
While there is plenty of reason to think a shutdown might not happen — at least not until January — here’s what would happen next if Johnson’s plan falls apart:
National parks and federal museums could close during one of the busiest times of the year
The most immediate impact of a government shutdown ahead of the Thanksgiving holiday would be the eventual closure of federally run museums and parks during one of the most popular times for tourists to visit.
The National Park Service oversees some 425 areas across the country, including parks like Yosemite and Rocky Mountain National Park, as well as historic monuments and other sites. It’s not immediately clear when each site would run out of money with it being possible that some locations can use leftover money to carry them through a few days.
According to the agency’s shutdown plan, open-air sites will mostly remain accessible to the public if the government runs out of money. But it’s likely that in other places visitors could find locked gates, closed visitor centers and shuttered restrooms as thousands of park rangers are sent home without pay.
The only work done by NPS will be to preserve and protect land, such as responding to fires or criminal activity.
A closure would be particularly problematic for tourists in Washington, D.C., where a network of federally run museums and the Smithsonian’s National Zoo are supposed to remain free and open to the public every day of the year except Dec. 25.
Thanksgiving and that holiday weekend is among the busiest times for the museums.
A closure can hurt local economies, too, where food vendors and shops depend upon holiday foot traffic. In Utah and Arizona, the governors have promised to use state money to keep their parks open in the event of a shutdown to spare local businesses from losing customers.
A shutdown could snarl airline travel, particularly if it lasts into December
If the government shuts down, 3.5 million federal workers will have to go without pay. Many of them, including some 50,000 airport security officers and 13,000 air traffic controllers, will be required to come to work anyway because their jobs are considered crucial to the nation’s security.
Federal contract jobs will dry up, too, forcing lower-income workers like janitors, security guards and food servers to be laid off by their private employers until the government reopens. Lawmakers will continue to get paid, although their staff won’t.
Criminal proceedings will continue in court, reliant on federal workers willing to show up without pay, although civil proceedings will be delayed.
In the last shutdown that stretched into 35 days under President Donald Trump, trash piled up around Washington and federal workers began calling in sick, including at airports resulting in long lines for travelers nationwide. Union officials say that without pay, many of these workers couldn’t afford to pay for child care or to fill their gas tanks to get to work.
If there is a silver lining to the timing of this latest shutdown threat, it’s that many federal workers aren’t scheduled to miss their first paycheck until after Thanksgiving, around late November or early December. And because federal workers qualify for back pay, it’s possible Congress can resolve any last-minute hiccups before federal workers — including airline employees — feel the crunch.
On the other hand, contractors don’t qualify for back pay and could immediately feel the impact of lost pay. In the last shutdown, food banks saw a surge in needy families because of lost pay.
And, if a shutdown drags into December, it’s possible that airline and other essential federal workers will begin calling in sick a soon as they miss their first paycheck, either out of protest or financial necessity.
Social Security, Medicare and Medicaid payments will continue but services could be slow
While government shutdowns are a big deal impacting every thing from border security to military pay, they actually only affect 27% of total federal spending that is up for debate every year in Congress.
These annually funded programs, known as the government’s “discretionary spending,” include disaster-relief money that might help a community rebuild after a tornado and food aid for moms and their infants. The nation’s military and space programs also are paid for through this pot of money.
But the biggest portion of federal spending is considered “mandatory” and will actually remain untouched, including payments by Social Security, Medicare and Medicaid.
While government officials say these payments generally won’t be affected, some related services could become slow such as receiving replacement cards and benefit verification services.
The U.S. Postal Service, which uses its own revenue stream, is not affected by a lapse in government funding.
Copyright © 2023, ABC Audio. All rights reserved.
(NEW YORK) — The holidays are fast approaching and as people prepare to pick out the perfect pine to decorate for Christmas, some growers are warning the holiday staple could be in short supply.
Some Christmas tree farms that have been holiday fixtures for decades said they won’t be open this season.
Shamrock Christmas Tree Farm owner Joe Shipman told ABC News’ Good Morning America that a major shipment of the most popular Fraser Christmas trees was canceled for his Long Island business due to the shortages.
“Our first trailer load of trees would come in — these bins would be full with trees, various sizes, and you can see there are no trees here,” he said while showing off the empty bins.
For the first time in 30 years, Shipman said they’ll have to take this holiday season off.
“We didn’t want to open just partial and have people come in and be disappointed,” Shipman said. “We felt the right decision was to close the farm this year, let the field get a little bit bigger, give us time to source some trees for next year.”
Another Christmas tree farm, Christmas Town in Louisiana, told GMA they will be closed for the 2023 season as well because the farm “suffered extensive damage due to drought and heat.”
Experts say several factors could be contributing, including drought and the Canadian wildfires, but also believe there will still be plenty of options.
Marsha Gray, executive director of The Real Christmas Tree Board, told GMA that “there’s nothing more frustrating to a farm or retail location than [when] they don’t have the inventory that they want or need for a season.”
“It really is not the story nationwide and we have a really good supply of trees,” she said.
Copyright © 2023, ABC Audio. All rights reserved.
(WASHINGTON) — Economists expect fresh data on Tuesday to show that inflation cooled last month, in large part due to a decline in gasoline prices.
The data, set to be released by the federal government’s Bureau of Labor Statistics, would cheer policymakers and households bedeviled by inflation that stands well above the Federal Reserve’s target rate.
The consumer price index will have increased 3.3% over the year ending in October, forecasters predicted. The results would mark a nearly half-percentage-point decline from the annual increase shown the previous month.
While inflation has fallen significantly from a peak of about 9% last summer, progress in the fight against rapid price increases has stalled in recent months.
Economists attribute the anticipated decline in inflation last month largely to a fall in gas prices as the busy summer travel season gave way to an autumn slowdown.
Over a four-week period beginning at the start of October, gas prices fell nearly 8%, according to AAA data reviewed by ABC News.
Progress shown in the price-hike data, however, is expected to lag for a separate key metric: core inflation, which omits volatile food and energy prices.
Core inflation is expected to have risen 4.1% in October compared to a year ago, matching the rate demonstrated over the previous month.
The latest data is set to arrive roughly two weeks after the Federal Reserve left interest rates unchanged. The central bank left open the possibility of an additional rate hike this year but opted to first assess the economy as previous rate increases take greater hold.
“Inflation has been coming down but it’s still running well above our 2% target,” Fed Chair Jerome Powell said at a Nov. 1 press conference in Washington, D.C. “Given how far we have come, along with the uncertainties and risks we face, the committee is proceeding carefully.”
Once bemoaned as a source of recession worries, the U.S. economy has become a wellspring of good news, with blistering growth, robust hiring and consumers more readily opening their wallets for everything from concert tickets to bar tabs.
The strong performance, however, complicates the fight to dial back inflation, posing a quandary for the Fed.
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. In theory, the economy should eventually falter as it becomes more expensive for businesses and consumers to borrow. But the economy has so far resisted a cooldown.
Gross domestic product data released late last month showed that the U.S. economy expanded at a 4.9% annualized rate over three months ending in September. That breakneck pace more than doubled growth over the previous quarter and reinforced other recent indicators of sturdy performance.
The U.S. economy’s resilience, and consumer spending over the past year amid a decline of inflation, suggest that rapid price increases had resulted from the insufficient supply of goods and the disruption of the Russia-Ukraine war, Mark Zandi, chief economist at Moody’s Analytics, said Sunday on X.
“As these supply shocks fade, so does inflation, without a recession,” Zandi said.
However, a rapid rise in U.S. government bond yields over recent weeks has elevated long-term borrowing costs for consumers seeking mortgage loans, and for corporations pursuing funds to expand their businesses.
Those added borrowing expenses could slow the economy, Powell said at the press conference earlier this month.
“Higher treasury yields are showing through to higher borrowing costs for households and businesses, and those higher costs are going to weigh on economic activity,” Powell said.
Meanwhile, credit card debt climbed to a record high in the third quarter of 2023, surging nearly 5% from the previous quarter and suggesting that some of the economic growth may have been driven by consumer debt, economists previously told ABC News.
The mixed economic picture creates significant uncertainty but the status of the Fed’s inflation fight remains clear, Powell said, noting that the task will require a further slowdown in price increases.
“The process of getting inflation sustainably down to 2% has a long way to go,” Powell said. “We remain strongly committed.”
Copyright © 2023, ABC Audio. All rights reserved.