NerdWallet's Smart Money Podcast - Money News: How UAW Strike Could Affect Workers — and Car Costs

Episode Date: September 13, 2023

Nerds explain this week’s personal finance news, with a focus on labor unrest as the United Auto Workers union prepares to strike. In Smart Money’s new weekly personal finance news roundup, hosts Sean Pyles and Anna Helhoski take a look at recent developments in the world of money and then go in-depth on an issue that could be important to your life — and your bottom line.  Today’s topics include rising home prices, the latest statistics on household wealth and debt, the rise in poverty from 2021 and 2022, and high-yield savings accounts. Plus, Sean and Anna take a deep look at the United Auto Workers' (UAW) threatened strike against the three largest automakers: Ford, General Motors and Stellantis. Learn what the workers want and what it could mean for your car shopping prospects if their demands aren’t met. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Helhosky. And this is our new weekly personal finance news roundup, where we take a look at recent developments in the world of money and then go in-depth on an issue that's important to your life and your bottom line. Yes, we are hoping that this weekly news show will give you, dear listener, a sense of what's happening in business and finance and how it applies to you. In a few minutes, we're going to take a deeper look at the latest in labor strife, with members of the United Auto Workers, or UAW, set to strike this week if they can't agree on a contract with the big three U.S. automakers. We'll look at what

this means for the labor movement and what it could potentially mean for any of you looking to buy a car. So first, a few money headlines from the last few days. Anna, you are not a homeowner, right? Oh no, I am still paying exorbitant rent to live in New York City. Okay, that's what I thought. Well, for us homeowners, there's a little bit of good news in the housing market. Home prices rose in July with the median existing home price up almost 2% to $406,700, according to the National Association of Realtors. Those figures came after a five-month year-over-year decline. And of course, we've been watching that decline since early last year after the Fed started raising interest rates. That's not a huge bump, but I and my home equity will take what I can get. That's a pretty interesting development and one that apparently most people aren't aware of. Fannie Mae, the mortgage giant, just released its Home Purchase Sentiment Index,

and consumer confidence in the housing market is basically at the same level it's been since the start of the year, which is to say it's not great. 66% of respondents said it was a good time to sell a home, but only 18% said it's a good time to buy a home. I'm guessing those 7% mortgage rates aren't doing the market any favors right now. You are correct, Sean, and you kind of need people to think it's a good time to buy a home before you're able to actually sell it to them. All right, well, here's another nod to the Federal Reserve, which is out with its second quarter look at, quote, financial accounts of the United States. And its latest statistics showed that household wealth topped $154 trillion. That's trillion with a T. Part of that is because the stock market has recovered somewhat this year. And part of it is what we just talked about,

which is a boost in property values. That just does not square with what people say to pollsters. Yeah, but if you look at the most recent consumer confidence indices from the University of Michigan, they've been up significantly from the same time last year. And we'll get the latest figures on that this Friday. Yeah, and a lot of the nation's big banks are backing off of predictions of a recession. Goldman Sachs lowered its probability from 20% to 15% just last week. And as of last month, JPMorgan Chase says it no longer expects a recession this year. We should note, though, that the Fed study I mentioned earlier also shows that household debt was up by almost 3%. That is something to watch.

And the Census Bureau released the latest figures on poverty in America, and the poverty rate jumped to 12.4% in 2022, up from 7.8% in 2021. That's in large part due to the expiration of programs put in place during the pandemic. Well, if you're among the lucky ones feeling the effects of all that household wealth, and some of it is liquid, you might be looking at ways to get some sort of return on your money. The stock market continues to bob and weave, but as we've been talking about on the show pretty much all year, high-yield savings accounts can be a good bet these days. Banks and credit unions are offering returns of 4% or more,

and the new record rate for this kind of account is now 5.33% at Blue Peak Credit Union. 5.33%. And is that open to anyone who wants to bank there? It is. But Sean, you can get high yield accounts of 5% or more at many different banks and credit unions these days. So just do some research, including at nerdwall.com and put your money to work for you. The national average for savings accounts, according to the FDIC, is just 0.43%. So you can definitely do better than that if you're willing to move some money around.

And one tip here, if rates keep moving up, sometimes whatever bank you've got your high yield account with will bump up to a new interest rate, but won't automatically give you that new rate. So you might have to call them up and say you want that new higher rate and they'll give it to you.

Even if you're going from, say, 4% to 4.75%, that can be worth it if you're putting a decent amount of money into that account. All right, that's what we saw and heard over the past week in Money News. Let us know what we missed and send us the headlines you've seen and want to hear more about. And now on to our in-depth look at what's happening with members of the United Auto Workers Union threatening to strike as early as this week. Ana, I don't know if you have any plans to buy an American-made car in the near future, but you might want to pay attention to what's happening with the UAW this week. Yeah, I for one remain content with the Subaru I bought in 2015, so I'm not anticipating taking on a new auto loon anytime soon. But even if you, like me, don't have any new car plans,

you still may be interested in what's happening in the auto industry and the latest in the wave of labor strikes we've seen over the past few years. That's right. The labor movement is heating up, and we've seen several big strikes this year in the U.S., about 270 actions across more than 400 locations, according to Cornell University's Labor Action Tracker. The biggest strikes have included 160,000 Hollywood actors, 11,500 film and TV writers, more than 1,700 hotel workers in Los Angeles, and 1,700 nurses in New Brunswick, New Jersey. A strike by UPS workers was averted this summer, but another big one is on the horizon. So, Ana, tell us what's going on with the UAW. Well, nearly 150,000 workers are preparing to strike as soon as Friday. The UAW's current contract expires at 11.59 p.m. on the 14th, and a strike is looking increasingly likely at all the big three auto manufacturers,

Ford, General Motors, and Stellantis. UAW members have already voted to approve a potential strike, and negotiations are continuing. The union has rejected all contract proposals from the companies, and union president Sean Fain told workers in a Facebook Live video that none of the proposals constituted a fair contract. And a strike entails a complete work stoppage. That means any employees involved in the strike will have to stop working entirely in order to pressure their employer to meet their demands. That can impact a company's bottom line and can

make the company look bad in the public eye. You might remember the 11th hour deal struck by Teamsters and UPS over the summer that prevented what would have been a massive strike. Those negotiations led to higher pay, better protections, and more job opportunities for UPS workers. With that in mind, Anna, what are some of UAW's demands? A few different things. They want double-digit pay raises, protections for temporary workers, more paid time off, cost of living allowances, secure pensions, and for retirees, healthcare and increased pay. They also want protection for temporary workers and the elimination of any payment tiers. Finally, they're bargaining for a shorter work week, 32 hours versus the current 40 hours. The union

argues that the big three have seen record profits over the last decade, which means they should provide more for their employees. I gotta say that 32-hour work week sounds pretty nice. Doesn't it? So we know what workers want and how a strike pressures employers to negotiations, but why is it important for consumers to know? What impact would a UAW strike have on the rest of us? Right. So if a strike does happen, it will deeply impact the auto industry, which has already been struggling in the last few years due to supply chain disruptions, high prices, and low inventories. For anyone who hasn't tried to buy a car in the last few years, they've been really expensive and that is proving to be sticky. Inflation overall

has been coming down across several categories, but it's taken longer for the auto industry to bounce back in terms of inventory and price for both new and used cars. There are a few different reasons that new cars became so expensive. This includes higher interest rates, worker shortages, and supply chain restrictions that led to material shortages. In particular, a superconductor shortage that significantly slowed down manufacturing of new cars. Scarce supply of new cars meant higher demand, and therefore higher prices for used cars too. S&P Global says the superconductor shortage has been resolving, but a strike could throw a wrench in some of that price deflation.

That's right, Sean. A strike would halt all domestic production, which would decrease the vehicle output for the big three. That decline in manufacturing would lead to more than $5 billion in economic losses, according to Anderson Economic Group. On a consumer level, it would likely mean higher prices for cars. And since higher prices of cars increase the cost an insurer would have to cover, consumers could also expect it to get more expensive to insure their recently purchased vehicles. With all that in mind, the best thing consumers can do is shop around for

cars and insurance. There's not really much else to do. And even with comparison shopping, consumers are unlikely to find any great deals either. But I do want to remind listeners that while there may be some costs and inconveniences that result from a strike, you can't have manufacturing without workers. And what these workers want are improved pay and working conditions so they can continue to do their jobs. That's hard to argue with. And it's also pretty financially difficult for workers to be on strike. It really is. However, the UAW has amassed a fund to pay about $500 per week to workers, as well as provide medical benefits. And that's projected to last up to about 11 weeks. The last time the UAW went on strike was in 2019 during bargaining with GM, and it lasted about six weeks. The last time the UAW went on strike was in 2019 during bargaining with GM,

and it lasted about six weeks. It's still not 100% certain that UAW will strike, but we'll be keeping an eye on it. So in addition to the potential UAW strike and the other strikes we mentioned earlier, are there any others on the way, Anna? There are a few different potential large-scale strikes to watch, including 11,000 city service workers in Los Angeles and more than 26,000 American Airlines flight attendants. So we'll have to wait and see what happens there. That's it for this week's Money News. We always welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373.

That's 901-730-NERD. Or send us a voice memo at podcast at nerdwallet.com. And remember to follow, rate, and review us wherever you're getting this podcast. Today's episode was produced by Tess Vigeland and edited by Rick Vanderkneife. Kevin Tidmarsh mixed our audio. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

And with that said, until next time, turn to the nerds.