Deep Dive
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On the program today, more economic data than you can shake a stick at. But, you know, fun from American public media. This is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Tuesday today, 13 August. Good as always to have you along, everybody.
This is a week rich with economic data, not perhaps exciting to you. Catnip, though, to those of us whose job it is to try to figure out where this economy is going. And I should say that by data, I mean actual, you know, quantifiable data, about which more in just a second. But also, there is a more subjective side to the economic news of the day. And it comes to us from the National Federation of Independent Business and its monthly Small Business Optimism Index.
The good news is that the index rose more than two points in July. Small businesses are the most optimistic they've been since February of 2022. The less good news is that optimism is still below the long-term average. So Marketplace's Kristen Schwab called some business owners today to see what's what. The first question I had for Nicole Panetteri was simply, how are you feeling? I am not sure.
Penetary owns two boutiques in New York City called The Brass Owl and The Tiny Owl, ones for women, ones for kids. This year, she had strong Mother's Day sales, but this summer has been one of her worst. And that's even accounting for 20%.
2020. She's constantly strategizing. For instance, she stopped carrying some hand-poured candles because inflation and tariffs have hiked costs for her suppliers. Customers are not really accustomed to paying $40 for a candle.
There's a lot of focus on how consumers have been experiencing once-in-a-lifetime inflation. Well, business owners are too. Holly Wade, executive director of the NFIB Research Center, says a quarter of owners surveyed said inflation is their biggest problem. So for most small business owners, this is an environment that is
incredibly new, very stressful, and they're having to figure it out as they go along. It seems there's been a bit of a lag in how long it's taken business owners to get used to rising prices. Overall, optimism has increased, though it's still below average. There was a not-so-distant time when business owners felt above average. December 2021, when consumers were spending like crazy. And
Shane Gottwals, who owns a chain of bookstores in Georgia, says as a business owner, you just can't expect that party to last forever. There's been a kind of honeymoon period. I mean, there's just so much spending. He says customers have adjusted to price increases and... People still seem to be gung-ho on small business. And he says business, all things considered, is quite good.
I'm Kristen Schwab for Marketplace. All right. I promised actual data. Data? There is plenty of it coming the next couple of days. Housing starts, retail sales, the Consumer Price Index. Things kicked off this morning, though, with the Producer Price Index, the change in prices at the wholesale level. Compared to a year ago, those prices were up just 2.2 percent through July. That's down from 2.7 percent at the last reading.
Our slice today is what is behind a whole bunch of that cooling. The price of services, as in really the price of workers, which actually declined for the first time since March of last year. Marketplace's Kaylee Wells has more on what that means.
Whether this is good news depends on who you ask, says Gary Broad. He's managing partner of the firm Deep Knowledge Investing. Labor costs went down, which sounds great if you're running a business, not so great if you're a wage earner. Because a decline in labor costs means a decline in jobs or wages or both. But Broad says a little of that is a necessary evil after the pandemic economy. As prices went up,
workers said, we need to be paid more. As they were paid more, that made prices go up more. And so that's where you get that wage price spiral from.
But while it might be an uncomfortable shift for workers, it could lead to some economic relief down the line because... The Fed will be pleased with that number. Mike Shedlock is an economic writer and founder of the site MishTalk. He says it might be the news that homebuyers and other borrowers have been hoping for. This, I believe, will lead to the Fed cutting interest rates in September.
All of this sounds like a big deal, but don't get too excited, says Allison Schrager, a senior fellow at the Manhattan Institute. It's not totally surprising, and honestly, it might not be that meaningful. Schrager says, remember, we're talking about a 0.2 percent decline after months of steady increases. I don't think it really tells us a lot about wages, particularly one month of data. So it could be a blip. Schrager says if the blip turns into a trend, that's when she'll get concerned.
I'm Kaylee Wells for Marketplace. On Wall Street today. Hey, so you remember last week, right? All the wailing and gnashing of teeth. Yeah, today was very much not that. We'll have the details when we do the numbers. If you add up all the debt of all the countries on this earth, $91 trillion is where you would wind up.
And more than a third of that $91 trillion comes from just one country. I'm looking at you, Uncle Sam. The United States alone owes a stunning $35 trillion. It's a pile of red ink so big the International Monetary Fund says it's putting the entire global economy at risk. But honestly, it's hard to even imagine, right, what a number like $91 trillion or even $35 trillion looks like.
So we sent Marketplace's Stacey Venick-Smith on a quest of sorts to help us figure it out.
$35 trillion. That is a really hard number to get your head around. So I decided to employ a time-honored journalistic device, break the number down so we can visualize it. So say you had $35 trillion actual dollar bills and you put them end to end, starting from Earth. How far up would they reach? Like maybe the moon? That's one small step for man, one...
Yeah, we're going to need a bigger leap. It only takes about 2.5 billion bills to get to the moon. That's billion with a B. Our debt has boldly gone where no human has gone before. Like it's bigger than Earth. That is like intergalactic. Well, intra. Yeah, these are big numbers. Peter Blair Henry is an economist at Stanford's Hoover Institution, and he agreed to join us on our trip through the solar system.
Our debt track.
Our $35 trillion in debt is so huge, it breezes past Mars, which is 150 million miles away, but just $1.5 trillion bills. It passes Jupiter, a measly $5 trillion lengths away, sails past Saturn, sails past Uranus to arrive at Neptune. Neptune is $28 trillion bills away.
We have reached the last official planet in our solar system and the U.S. still has more debt. $7 trillion still in our pocket. Chip. That would almost get us to Pluto.
Now, keep in mind, a dollar bill is just over six inches long and 35 trillion of them would almost reach Pluto. I had to run this by my economist co-pilot because I was stunned. No phasers needed. Yeah, the best way to deal with huge numbers like that
is to think about ratios. What really matters is how big is the debt relative to the size of the economy. In other words, the U.S.'s practically Pluto debt isn't a problem as long as it's generating practically Pluto money. The trouble is, it's not. The U.S. is only making Neptune money. Our economy produces about $30 trillion worth of stuff a year.
And our debt, remember, is $35 trillion. As your debt ratio rises, your finances are just getting tighter and tighter. And the danger is that at some point, your creditors look at your debt situation and say, oh my gosh, you are not going to be able to pay me. And those creditors start demanding higher interest rates when they lend money. Your borrowing costs go up dramatically.
And that can lead to a financial crisis. For the U.S., those borrowing costs were really low for a long time. It could basically borrow money for free because people were so confident the U.S. would pay it back. The size of the debt didn't seem to matter.
But as that debt has ballooned, lenders have started demanding higher interest rates from the U.S. We've hit a turning point. At least I believe that. Ken Rogoff was chief economist at the International Monetary Fund. He now teaches at Harvard. This is the biggest thing that's happened in the global economy in the last five or 10 years. Rogoff says that's because the U.S. has practically Pluto debt. So even a small jump in interest rates gets Galactic overpowered.
real fast. The interest payments that we have to make on U.S. debt have soared. I think the interest payments alone is the equivalent of our military budget. That would be almost a trillion dollars the U.S. is paying every year just in interest. That's a trillion dollars that we can't spend on roads or health care or the economy.
Our debt isn't just big, it is draining our resources. People got this idea, it was just free. Don't worry about what your debt is. That's the big change that's happened in the world, is it's, you know, a bucket of cold water on this idea that debt doesn't matter. Rogoff says if another global crisis like COVID hits and the U.S. needs to spend a lot of money fast, borrowing could get even more expensive. And that gets risky.
It could even destabilize the economy. And nobody could really step up to save the day because almost every other major economy is in intragalactic debt, too. Rogoff says debt can be a great tool, but it should not be a free-for-all. You want to use debt for a rainy day, but, you know, you don't want to just declare every day a rainy day. On Neptune, it apparently rains diamonds.
But until we can get our hands on those, reining in the debt isn't that complicated, says Rogoff. It just requires Congress to make some tough decisions and work together. In other words, our best bet may be those diamonds on Neptune. I'm Stacey Vanek-Smith for Marketplace. According to the Kaiser Family Foundation, about 12 percent of adults in this country have taken a GLP-1 drug.
That's a class of new obesity medications like Ozempic and Monjaro that suppress appetite. Researchers say GLP-1 users eat about 20 to 30 percent fewer calories every day than they used to and that they are especially averse, those people are, to unhealthy snacking, potato chips, candy soda, that kind of thing.
And you can see where this is going, right? The companies that make those chips and candy and soda are alarmed. Marketplace's Matt Levin has more on how the snack industry and the Ozempic Revolution are coexisting.
The only semi-indulgent thing I can see in Cindy's refrigerator is half of the Italian chicken sandwich she couldn't finish for lunch. The rest of the fridge is basically healthy, boring proteins. So yeah, so I have my protein shakes that are always in the fridge. Cottage cheese, Greek yogurt. Cindy is a 43-year-old dental hygienist. She doesn't want her last name shared because of medical privacy concerns. Right.
When she started the GLP-1 Wagovi in March of last year, Cindy weighed 225 pounds. She's lost 70 pounds since then. Her pantry is about as tempting as her fridge. It's pretty boring. More protein shakes. Meat sticks, chomps. These are a lifesaver. Chomps are basically the health-conscious version of a Slim Jim.
Cindy says she'll still snap into junk foods every now and then, but the way GLP-1s work, they make you feel full very quickly and for a very long time. I don't mindlessly eat anymore. I don't, if I do want something that might be
Not a good food. I might have a bite of cake and that's it. I don't need more of it. I don't need another slice. Being on a GLP-1 has trimmed Cindy's food budget by about $200 a month. That's a problem for the food and beverage industry. A recent Morgan Stanley analysis predicts GLP-1s will reduce the consumption of sweets, baked goods, and salty snacks by 3% over the next 10 years. So snack makers are trying to adapt.
Nestle, maker of Kit Kats and Haagen-Dazs, is planning a GLP-1-friendly frozen food line called Vital Pursuits with protein-infused pasta and sandwiches. And just south of San Francisco at the Mattson Food Laboratory, a team of lab co-wearing chefs and chemists are chopping onions and measuring out spices in an industrial-sized kitchen. Mattson is a food research and development company that helps big food brands create new products.
This lab is the birthplace of White Castle's frozen jalapeno cheese sliders and Annie's pizza-flavored cheesy rice with hidden vegetables. Senior food scientist Amanda Sinrod is throwing a more GLP-1-friendly snack on the grill. A chicken strip. So think of a packaging like a cheese stick, but instead it's chicken, which has a higher protein content and produces a little bit more versatility in a grab-and-go snack.
Grilled chicken strips packaged like string cheese is one of the snacks Mattson has developed after surveying GLP-1 users on how their tastes have changed. Barb Stuckey is chief innovation officer. You have to understand that a consumer who might have been able to eat a four-ounce portion of snack is now looking for a one-and-a-half-ounce portion.
Stuckey says snack companies can still make money off smaller portions if they package and market it the right way. Think about all those snack packs for nuts and cheeses you see in the grocery store. But smaller portions are the easy part. The hard part is losing those reliable pretzel and potato chip eaters. We do hear people saying, I'm still missing the crunchy, but the crunchy they want to get from apples or they want to get from cucumbers or carrots or
I mean, that's like a sea change in behavior. Mattson has developed what they call snack concepts tailored for GLP-1 users. A freeze-dried chicken and tomato soup less than half the size of a cup of noodles aimed at helping with nausea, a common GLP-1 side effect.
Powdered drink mixes infused with protein and fiber, nutrients GLP-1 users often miss. And of course, the portable grilled chicken strips packaged like string cheese. Okay, I'm going to open one of these guys up. Yes, this smells like grilled chicken. Yeah, that's good. It's grilled chicken.
It was good. And whether you're on GLP-1s or not, probably easier on your stomach than those White Castle sliders. I'm Matt Levin for Marketplace. Coming up. Basically, this is a really thick, heavy, goopy, crude oil. Not great, but hey, at least it's close. First, though.
Sure, why not? Let's do the numbers. Dow and Dow's rules up 408 points, 1%, 39,765. The NASDAQ increased 407 points. That is 2.4%, hence the really happy music. Finished at 17,187. The S&P 500 added 90 points, 1.7%, ended things at 5434. I told you it wasn't last week, right?
Now we're just talking about brands adapting to the Ozempic era, so let us check out some snack foods, shall we? Frito-Lay is a subsidiary of PepsiCo, which gained a half percent. Tootsie Roll Industries, which is actually a company, elevated eight-tenths percent today. Coca-Cola, you heard of them, fizzed up four-tenths percent. General Mills pocketed about 1.3 percent. Bond prices were up. Yield on the 10-year T-note. Get this. Any guesses? Come on. 3.85 percent. You're listening to MarketPool.
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This is Marketplace. I'm Kai Risdahl. I say this with no expectation that you would have. But had you been listening in on Home Depot's earnings call this morning, you'd have heard a version of the word uncertainty at least seven times. Consumer uncertainty, to be clear, and Home Depot says it is going to affect sales for the rest of the year.
of the year. The company said customers are deferring the big renovation projects that it thrives on, both because interest rates are making those projects expensive to finance, of course, and because consumers are kind of unsure about the economy as a whole.
So, is this a Home Depot problem or is it an economy as a whole problem? Marketplace's Stephanie Hughes has that one. A lot of Home Depot shoppers are homeowners who've gotten wealthier in the past few years because their home values have shot up. And this earnings report shows that even they are worried.
Says Stephen Zicone, a research analyst at Citibank. So it feels like you're seeing more widespread weakness amongst the consumer. I think that's what's really new within the last couple of months. And when consumers spend less because they're concerned the economy might not do so well, that can actually cause the economy to not do so well.
Anibhan Basu is the chief economist for Associated Builders and Contractors, a trade group. This loss of confidence can produce its own business cycle, and it's not a good business cycle, and that's what the Home Depot folks are talking about. Professional builders are feeling this too. Shiloh Travis designs, builds, and renovates houses in Austin. He spends a lot of money at Home Depot. In the past eight months, he's had two clients postpone big projects indefinitely because of concern about interest rates.
He's also just seeing a kind of hesitancy in the market overall. I think that there is a general uneasiness about the future of life in general.
And this makes him feel a bit uneasy as a business owner. Like I'm literally right now considering whether I'm going to have to downsize one of my staff. Travis is dealing with the same macroeconomic uncertainties that Home Depot is. For his part, he says when he was younger, he would have done what he had to do to bring in more work. But he says now that he's approaching 50, he's a little more hesitant to take risks. And that means he's not sure if growing his business is the prudent thing to do. I'm Stephanie Hughes for Marketplace.
This is, with a few urban mass transit exceptions, a car-centric economy. And as such, we all have something of a love affair with oil. Love-hate, sometimes, sure. But mostly it's a romance that's really an international love story, where our neighbor to the north plays a starring role, accounting for a growing share of the crude that the United States imports. And it's a romance that's really an international love story.
Channeling her inner Nora Ephron today. Marketplace's Elizabeth Troval has the story.
If Canadian crude and U.S. refineries were in a rom-com, Canadian crude would be the boy next door. The one U.S. refiners overlooked while they were courting Latin American oil back in the late 80s and early 90s. So you can think of Venezuela, Mexico. This was back when the world thought we were running out of oil, says Kevin Byrne with S&P Global Commodity Insights.
The Gulf Coast refineries were looking for security of supply. A lot of these refiners entered into long-term joint venture agreements with the suppliers to get access to security of that heavy barrel supply. Big money was put into refining capacity catered to that heavy Latin American oil, which is more expensive to refine into diesel or gasoline. You need the ability to reach higher temperatures, and you need to have specially designed facilities that can handle that as well.
And so those joint ventures led to an expansion in U.S. refining capacity to process heavy barrels, first in the Gulf Coast region in the early 90s, and that continued through to the early 2000s. Those refineries had really invested in their relationship with heavy Latin American oil. But
But as we entered this century, millennia, we saw that kind of slow down. A lot of those deals were rolling off and the Latin American supply began to slow. And even though we saw fracking and horizontal drilling transformed the Permian Basin in West Texas into one of the most significant oil producing regions in the world, the oil there was just not as compatible with the expensive new U.S. refineries, says Brian Kellogg with the University of Chicago.
All of that capacity was built before the shale boom started. And all of a sudden we had all this really nice light sweet crude available in the U.S. So we're now in this position where we have these very high tech refineries that can process the really heavy crude. We needed to get that heavy crude from somewhere else.
Think about the oil sands or tar sands of Alberta. Basically, this is like really thick, heavy, goopy, crude oil. And Chuck Mason with the University of Wyoming says Alberta's oil sands also had a geographical advantage, being... In the grand scheme of things, not super duper far away from refining sectors.
And for Canada, exporting heavy crude by pipeline and rail to their oil-hungry southern neighbor just made sense. This source of production that we're talking about
It was a sensible match. The relationship was very symbiotic. A relationship, Kevin Byrne says, that has only strengthened over the years.
Canadian growth occurred at such a rate and scale that it overwhelmed that region. And additional infrastructure was designed to deliver that crude oil into the Gulf Coast region of the United States. And increasing volumes have been making it to the U.S. Gulf Coast. Many miles of new pipeline later, 60% of U.S. crude oil imports come from Canada, according to the U.S. Energy Information Administration. Ten years ago, it was just 33%, making this a crude pipeline.
happily ever after. I'm Elizabeth Troval for Marketplace.
Starbucks shares up 24% today and almost $24 billion gain in valuations. Chipotle off 7%. That's a loss of $6 billion in market cap. So, huh.
Our digital and on-demand team includes Carrie Barber, Jordan Mangy, Dylan Mietten, and Janet Nguyen, Olga Oxman, Ellen Rolfes, Virginia K. Smith, and Tony Wagner. Francesca Levy is the executive director of digital and on-demand. I'm a latte guy. That's why I said hi. I'm Kyle Rizdahl. We will see you tomorrow, everybody. This is APN.
Hello, I'm Simon Jack. And I'm Xing Xing. And together we host Good Bad Billionaire, the podcast exploring the minds, the motives and the money of some of the world's richest individuals. Every episode we pick a billionaire and we find out how they made their money. And then we judge them. Are they good, bad or just another billionaire? Good Bad Billionaire from the BBC World Service. Listen now wherever you get your BBC podcasts. MUSIC