Deep Dive
Shownotes Transcript
Hey, stock market. Yeah, I'm talking to you. It might be time to put down the adult beverage and go home. From American Public Media, this is Marketplace. In New York, I'm Kristen Schwab in for Kai Risdahl. It's Friday, August 9th. Thanks for being here.
No need to beat around the bush. It has been a week that's felt more like two when it comes to news and the economy. So let's waste no time getting into it. Courtney Brown is at Axios. Catherine Rampell is at The Washington Post. Hey, you two. Hi. Hi. Thank you for having me. Thanks for being here.
So we started the week with a global market sell-off on Monday, and today markets are basically back where they started. Catherine, I'm wondering how you felt about the economy on Monday and then how you feel about it today. I mean, I feel kind of exhausted by the economy slash the markets all week.
But I think on Monday, my reaction was, OK, why is everyone panicking so much? It seems like there's a bit of an overreaction. I mean, to be sure, the jobs report from the previous Friday, which should have already been priced in, was concerning. And the Japanese stock market had plummeted even before U.S. markets opened.
But that has something to, you know, that's partly distorted by trades that hedge funds, among others, have made in yen and the yen appreciating. So, you know, I was more worried, certainly at the beginning of the week, but I did wonder slash hope if things might recover later on. And fortunately, they have, you know, largely because of other data coming in that were more encouraging. Yeah.
Yeah, here we are. Courtney, what do you think was going through Jay Powell's mind when he woke up on Monday morning to all of this?
I think because some of the reasons that Catherine cited, the fact that the Japanese market sell-off that then bled over into U.S. markets when they opened was largely due to something called the carry trade unwinding. Basically, a bunch of traders had taken their yen and invested it in higher-yielding assets in the U.S. The yen was appreciating, and that trade was not so profitable anymore. So I think...
you know, Fed officials, including Jay Powell, were probably like, OK, I don't think this is about us. And that wasn't totally clear on Monday. We had people calling for intermeeting emergency rate cuts. And I think by today, you look back at all that that chatter and it kind of seems silly. Yeah. Sticking with the Fed and with you, Courtney, I
You know, one of the much discussed bullet points this week was the labor market. Last week, we got a soft jobs report. Meanwhile, this week, first time claims were a little lower than anticipated. If you're a Fed official, what's your read here?
Well, we got the jobs report on Friday. I think there was a lot of the narrative around the labor market and the economy was pretty negative, not only because of the number we got on Friday, but just how much the unemployment rate had been rising over the last 15 months or so. But then Monday, there was this report that
usually doesn't make a lot of headlines. The ISM services report, they interview a bunch of purchasing managers and ask them how the services side of the economy is doing. And they found that for the first time in eight months, employment was growing on the services side of the economy, which makes up the
overwhelming share of U.S. economic activities. So I think you see that, you're like, huh, okay, that's okay. And then we got jobless claims on Thursday. And the markets don't usually react to jobless claims in normal times, but clearly these are not normal times. And there was a huge sigh of relief that jobless filings were not as high as folks anticipated it would be. Kind of signaling like, hmm, maybe the labor market is cooling, but it's not
it's not cooling in a way that would signal a recession. Yeah, we've all been squinting at every piece of data this week. Truly, truly. Catherine, I want to flip over to sort of the consumer side of this. You had a great column this week about kind of wishing a recession into existence, that we could actually talk ourselves into one. How does that work? What I was referring to was if we all sort of become worried and negative and more risk averse at the same time,
companies start pulling back on investments and maybe they don't start laying off anyone, but they stop hiring. Consumers hear whispers of recession and they stop spending money maybe because they're worried about their jobs. Those kinds of decisions can feed on themselves. That if consumers cut back, that hurts the profits of companies and then they decide to cut back as well. And so you get into this kind of doom loop, right?
that is caused primarily just by a change in psychology. And you don't want to end up in that state of the world where we all decide things are bad and therefore act in ways that make them bad.
To be sure, again, there are actual vulnerabilities in the economy besides, you know, whatever's going on with the job market. You know, we also have credit card defaults rising and some other signs of strain. But otherwise, the key indicators that the...
The grand poobahs of deciding whether we're in a recession, the National Bureau of Economic Research Business Cycle Dating Committee. It's a mouthful. The indicators that they look at generally don't look like we're in recessionary territory. They look pretty strong, actually, or at least strong.
you know, acceptable. And so that's why I think, you know, I wouldn't say that the only thing to fear is fear itself. But like, it's a big thing to fear that if we all get too fearful and nervous at the same time, we can talk ourselves into a bad state of the world. Yeah. Well, on that note, Catherine, looking ahead, what kind of data are you looking for to tell you whether the Fed is on track or not?
Obviously, inflation numbers. The Fed's dual mandate is maximum employment and stable prices. And they have a challenging job because there are threats in both directions. And what you would do to control one or to address one will unfortunately have an unintended bad effect on the other. So you want to see what's going on with
the various measures of inflation that they look at, in addition to what's going on in the labor market. And of course, you know, the other kinds of things that we were talking about measures of investment measures of consumer spending. But yeah, really, I think what's going to dictate the Fed's
rate cutting schedule is how confident they are that we're going back to the 2% inflation target and how confident they are that the labor market is slowing but not headed for a really bad place that includes no job growth slash layoffs, net layoffs. Courtney Brown is at Axios. Catherine Rampell is at The Washington Post. Thanks so much and happy Friday. Thanks, Kristen. Thank you for having me.
Wall Street today decided the beginning of the week didn't matter. We'll have the details when we do the numbers. This week, a lot of folks had a lot of opinions on what the Federal Reserve should be doing with interest rates, including economists, think tanks, and former President Donald Trump. He said that the president should have a say in setting monetary policy. The way it stands now is the Federal Reserve operates independently. Being insulated from politics is key to the central bank's mission.
So why does it work that way? Marketplace's Elizabeth Troval has the explainer.
There's been a sliding scale of influence politicians have had on Fed decision-making over the past century based on evolving norms and practices, says Lev Menand with Columbia Law School. In the 50s, 60s, 70s, presidents routinely jawboned and pressured Federal Reserve officials to make certain decisions about monetary policy.
Then, after a period of high inflation and then a sharp recession spurred by high interest rates in the late 70s and early 80s, both parties decided presidents shouldn't do this. And so in the next 45 years, until basically the first Trump term, 2016 to 2020, you did not see presidents jawboning. So why should the system defer to economists above politicians?
Erwin Morris is with North Carolina State University. As society and the economy become more complicated, it's a lot to expect elected officials to have all of that information. And independent officials won't feel the pressure political figures would. To manipulate the economy in the advance of an election for short-term economic gains that bring long-term costs.
The Fed is kind of like the chaperone at the party who takes the punch bowl away from the American public and their elected officials trying to have a good time, says Peter Conte Brown at Penn. They like an expanding economy. They like things to be going the way of prosperity. And the Federal Reserve is to make sure that that prosperity is not only here today, but it's here over the long term without inflation. And
an independent Fed does more than keep the U.S. economy on the straight and narrow because what happens here ripples into the global economy. I'm Elizabeth Troval for Marketplace. For more on the Fed and the forces shaping our economy, tune into the Marketplace Morning Report, where David Brancaccio and the team bring you the news you need to start your day.
This summer marked the start of a new USDA initiative, Summer EBT. The federal program provides eligible lower-income families with $120 per school-aged kid. The idea is to help cover the cost of groceries during school break.
Well, for states to receive the benefit, they have to put up half of the administrative costs. Fourteen states decided to opt out, leaving that federal money on the table. Many of these states are near the top of the list of places where kids are most reliant on free and reduced-price meals during the school year. So in one of those states, tribal nations have stepped in to fill the gap. Marketplace's Savannah Marr has more.
Good afternoon, Cherokee Nation Summer EBT. Can I help you? A busy summer is winding down at the Cherokee Nation Public Health Department in Tahlequah, Oklahoma. But Administrative Assistant Jenny Locancello is still fielding plenty of questions from families trying to track down and use their summer EBT benefits.
Between calls, Locke and Sello is racing to process 300 last-minute applications, not just from parents. But it's grandparents, it's aunts and uncles who are raising kids who come into their families one way or another, and so...
Even though this is supplemental, it's still a need. And it's urgent because there's a mid-August deadline for families to spend the benefits on their EBT cards, says Melissa Stay-at-Home, who directs the program.
From the time we get here until the time we leave, a few days after hours, you know, and we're still really trying to make sure cards get out to families. And not just Cherokee families, families of over 100,000 Native and non-Native kids. Cherokee, Chickasaw, and Muskogee nations are partnering to administer summer EBT within their borders, an area of nearly 20,000 square miles across eastern and central Oklahoma.
It takes a lot of staff and outreach, a $250,000 investment for Cherokee Nation, but
But opting into the program was an easy call, according to Deputy Chief Brian Warner. And it yields about a $3.5 million opportunity to put that food on the table. Earlier this year, Warner learned the state of Oklahoma was opting out of summer EBT. It was disappointment because I think of those that are not in our area. Families that could use the help but can't access it on non-tribal land.
Oklahoma Governor Kevin Stitt's office didn't respond to a request for comment, but said in January the new program isn't yet vetted. Deputy Chief Warner says offering the program aligns with Cherokee values. When you're looking at Gadoogie, which means working together. Cherokee and its partner nations can administer their own summer EBT programs thanks to federal self-determination laws.
Eric Henson, with Harvard's Project on Indigenous Governance and Development, says this is just one example of tribal governments using their sovereignty to fill economic gaps. Administration of programs, health care, transportation, preschool, the list goes on and on. Henson says we saw a lot of this during the pandemic, when living on tribal lands sometimes meant easier access to COVID-19 testing, PPE, and vaccines.
Lots of tribes kind of threw the doors open and went, hey, if you want to get vaccinated, we've got supplies. It'll help all of us get back to work. When tribal governments thrive, Henson says it's good for neighboring communities, too. From tribes having great largesse with their social services and paying attention to these public goods and spreading them far and wide. Public goods like broadband access, affordable child and elder care, and on Cherokee Nation, some wiggle room in summer budgets.
It helps our family out really a whole bunch. Andrea is a mom of four in Tahlequah with three kids still in school. She works in childcare and she asked us not to use her last name to protect her family's privacy.
Every year, she budgets for the three-month gap when her kids aren't getting free school breakfast and lunch. But it's hard to afford everyone's preferences during that stretch. Our kids really like fruits and vegetables. And then they like to make those parfaits or whatever. This summer, she says the extra $360 helped her keep up with the cost of berries and yogurt.
And we can go do something else with that. Like get ahead on back-to-school shopping and her kids' fall sports fees. In Tahlequah, capital of Cherokee Nation, I'm Savannah Marr for Marketplace. Coming up... There's just not a blade of grass left out there. A look at how wildfires are affecting ranchers out west. But first, let's do the numbers. ♪
The Dow Jones Industrial Average gained 51 points, a tenth percent, to land at 39,497. The Nasdaq added 85 points, a half percent, to finish at 16,745. And the S&P 500 rose 24 points, again, a half percent, to close at 53,44. For the week, the Dow subtracted six-tenths percent, the Nasdaq shed two-tenths percent, the S&P 500 slipped less than a tenth percent.
Stellantis dropped 1.2%. The automaker announced plans to lay off as many as 2,450 workers in Warren, Michigan. It's stopping production of an older model of its Ram 1500 pickup truck. Ford was off 0.3%. GM grew 1.3%. Paramount Global picked up 0.9% as the media giant's quarterly earnings topped analysts' predictions. It announced today it's cutting 15% of its U.S. workforce, about 2,000 jobs.
Bond prices rose. The yield on the 10-year T-note fell to 3.94%. You're listening to Marketplace. This podcast is supported by Fundrise. Buy low, sell high. It's a simple concept, but not necessarily an easy concept. Right now, high interest rates have crushed the real estate market. Prices are falling and properties are available at a discount, which means Fundrise believes now is the time to expand the Fundrise flagship fund's billion-dollar real estate portfolio.
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This is Marketplace. I'm Kristen Schwab. The happiest place on Earth is not quite as lucrative as it used to be. Earlier this week, Disney did report making its first ever streaming profit. But over in its Experiences unit, which is mostly its theme parks, profits fell 3%. The company warned that things probably aren't going to get better in the near future. Disney's CFO said, quote, "...lower income consumers are a little stressed and shaving a little bit off their time at the parks."
Meanwhile, Comcast also reported a revenue dip of 10% from its Universal theme parks. Marketplace's Matt Levin reports on why the attractions are a little less attractive right now.
Megan Hennigan is a Disney super fan. She visits Disneyland in Southern California about three times a week with her season pass, has a podcast and Instagram account about it. She has a pretty simple test for how crowded the park is. Open up the Disneyland app and see how long the wait is for the popular Indiana Jones ride. At four in the afternoon, Indy has a 35-minute wait. That, for summer, wow. I'm like, the park is...
Empty. Inflation is part of the explanation. Higher prices are squeezing everybody's budget and Disneyland is expensive. Hennigan says even her superfan spending is being pinched. I'll tell myself, let's have lunch at home and then go to the park so we don't have to spend money on Disney lunch.
A Saturday Disneyland ticket will cost you almost 200 bucks, and that obviously doesn't count airfare or hotel or that Disney lunch. Carissa Baker is an assistant professor of theme park management at the University of Central Florida. The first thing to go when you're being hit with any kind of financial issue is going to be your travel, your leisure, your entertainment spending.
But Baker says it's not just inflation causing a theme park slowdown. Some of it is just attendance returning to normal after a post-pandemic surge. Bad summer weather also hurt. But while strap consumers may be skipping the multi-day visit to Disney World or Universal Studios, regional theme parks like Six Flags are doing all right. Paul Golding is an analyst with Macquarie. If there is a local regional theme park where the pass price is
is more affordable and there is no need to incur airfare costs. The regional looks fairly attractive. And with the money you save, you can buy your kids some extra funnel cake after they ride the roller coasters. I'm Matt Levin for Marketplace.
We are deep into fire season in the U.S. And year to date, the number of annual acres burned is above the 10-year average. That's according to the National Interagency Fire Center.
Now, ranchers out west, they're used to wildfires. It's sort of a way of life. But this summer, fires have dramatically altered the landscape and have burnt crucial livestock range grounds. That's left cattle displaced, or worse, dead. And as Oregon Public Broadcasting's Alejandro Figueroa reports, ranchers are facing major losses.
Jared Small is a fifth-generation rancher. I'm in his truck along with his wife, Amanda, and we're all driving down a winding dirt road that loops around the Rye Valley in eastern Oregon. Jared knows this country, and ranchers and cattle will live here. Wick had all of his pasture burned, and he runs about 250, 300 head here.
Usually, this landscape is full with tall, dry grasses, miles of sagebrush, and dotted with juniper. But now the fires have left the range scorched. Amanda points to the blackened fountains. There's just not a blade of grass left out there.
We hop off the truck near where they usually graze their cattle. It's also where a lightning strike sparked the Durkee Fire in mid-July. Strong winds and lots of dry grass carried the fire through nearly 300,000 acres of range. It eventually merged with another fire burning an area half the size of Rhode Island. Jared Small grew up around here and says they're used to fire, but nothing like this.
This scale we've never seen around here. It's nuts. They lost at least five cows and nine calves. They burned in the blaze. Some are still missing, and on top of that, the Smalls have another challenge to deal with. They and many other ranchers who lost their grazing lands now have to figure out how to feed their cows. I mean, you can just look around. There's nothing left.
And we don't even know what next spring will look like. It probably depends on the severity of the burns. The herd would normally be grazing on those lands through the fall, which is inexpensive for ranchers. With current hay prices, buying feed could cost us malls roughly $60,000 through the winter months alone. Jarrett says that's not sustainable.
Can you afford two years of losses before your banker says, "No, you're done, you're selling your cows and getting flushed and then you don't have anything"?
And it takes a long time to rebuild. That uncertainty and expense means some ranchers may need to sell off more cattle than they would normally. That's because it might take up to a year or longer for most of the rangeland to recover. It's too early to tell just exactly, you know, what the rangeland loss is right now. That's Whitney Rohner. She manages a handful of soil and water conservation districts in eastern Oregon. I mean, it's black.
And, you know, that takes quite a bit of time depending on what the seed bank was and how much moisture we get over winter. She says many areas will likely need to be reseeded before invasive grasses take root. Financial damages are still unknown, but these fires will leave long-lasting scars. And Roaner notes the fire season is not over yet. We are all on pins and needles hoping that the next fire
let's call it 45 to 60 days, just stays very, very calm. The hot forecast is not promising. She says some rain would be nice. In Baker City, Oregon, I'm Alejandro Figueroa for Marketplace.
This final note on the way out today, you need dependable infrastructure to create the kind of confidence Americans need to buy into electric vehicles. So this news is less than ideal. Saw this on The Verge. ChargerHelp, a company that does EV charger operations, it's tallied up charging stations' biggest pain points. Among them are aging equipment, inaccurate status messages, and unreliable network providers.
Perhaps most frustrating of all, many charging stations don't accurately report the status of their chargers. It means at about a quarter of the stations analyzed, you might pull up to a charger that you thought was online, and it doesn't work.
Our theme music was composed by BJ Learman. Marketplace's executive producer is Nancy Farghali. Donna Tam is the executive editor. Neil Scarborough is the vice president and general manager. And I'm Kristen Schwab. Have a great weekend. We'll be back here on Monday. This is APM. Understanding personal finance can feel like an impossible task, but it doesn't have to be that way.
I'm Janelia Espinal, and on Financially Inclined, I'll guide you through simple money lessons that will change your financial future. Learn about credit scores, how to avoid scams, and why you need a savings account. Plus, we explore the brain science behind FOMO and what you can do to make smarter money decisions. Listen to Financially Inclined wherever you get your podcasts.