Marketplace - A labor market paradox

Episode Date: March 15, 2024

The U.S. economy has been on a job creation spree in the last few years. But wage inflation has eased and unemployment even ticked up recently. What gives? Also in this episode: Infrastructure grants aid communities of color, e-commerce changes the way we shop and crawfish farmers struggle with the impact of record heat.

Yes, the big picture stuff. We'll talk about that, of course. Also, though, crawdads. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Risdell. It is Friday, today, the 15th of March. Good as always to have you along, everybody. We begin today, as we do every Friday, with what happened in this economy the past five days and what it means. In no particular order this week, that means inflation, it means retail sales, and looking ahead, and briefly, I promise, the Federal Reserve Bank of the United States. Neela Richardson is at ADP. Jordan Holman is at The New York Times. Hey, you two.

Hi, Kai. Hey, Kai. Jordan, let me start with you. You're the retail sales reporter for the newspaper of record. Retail sales came out this week. They were up, but not as much as everybody had been expecting. What do you make of that, first of all? I think we're still just trying to fit things for size, trying to figure out, you know, are people buying more, people buying less? And it's not going to be a clear picture of what's happening here. People are still feeling weighed down by inflation.

We also saw that consumer confidence has been leveling out. People are feeling less optimistic despite, you know, still being employed. And so I think for retailers, they're just trying to figure out a strategy that works in this really confusing time. So whether that's trying to make their stores better or find other revenue streams, like that's kind of the way forward because consumers aren't being super clear. All right. So we'll get back to that retailers thing in a minute, the companies, Jordan. But what I hear you saying is that retail is going to be bumpy, much like inflation has been bumpy.

Yeah, absolutely. Because I think the narrative was really clear in the beginning parts of the pandemic, like retail sales are either booming because everyone's buying or they're going down because everyone's getting hit by record high inflation. And now as things normalize and you hear a lot of retailers trying to just skip back to 2019, you get this kind of not clear picture. And that's actually OK. You just have to be smarter with the strategy. All right. Well, so, oh, God, there's a lot in there that I want to unpack. Neela Richardson, I go to you, first of all, with the not clear picture. You are the economist in this conversation. How much does it make you crazy that we still don't have a clear picture of this

economy? Oh, well, you know, that's what keeps me in business, right? If we had a clear picture, you would have me on. That's fair. That's fair. The reality is that consumers are buying differently. And this was before the pandemic, the digital economy, e-commerce, the way people buy. So there was a big narrative before the pandemic about brick and mortar versus online sales. But also what people are buying are different. It started out post-pandemic with goods. Now people are buying services. And that leads right back into those inflation numbers. So it's it is confusing because a lot is changing all at once. You are a labor economist by training.

That means you keep a weather eye on consumers. Are you worried about consumers, Neela? Not as long as the unemployment rate is below 4 percent. I think that consumers have a really good, solid footing in this economy because the jobs market has been so strong. I do worry at the margins. I worry about the high cost of debt. I worry about high interest rates. I worry about consumers and households more generally when it comes to the housing market and savings and how expensive housing has become. But in terms of the labor market and pretty solid spending, as long as inflation keeps coming down, I think the consumer is in pretty good shape. Okay. All right. Good. Jordan, the retailers, the companies that you mentioned, I saw a great quote and this idea that you mentioned a minute ago about you're getting

back to 2019 and what it was like. There was actually a CEO mentioned in one of the articles I read about, sadly not yours, about retail sales. The guy said, we want to get consumers back to being what they were in the before times, which is to say not as used to discounts, regularly spending a little bit more. And I guess I wonder if, do you think the retailers are actually dealing with reality here? Trying to get people to pay more for things than the retailers would like. I mean, I think there is some truth to that. Retailers do have levers to pull, as in not offering clearance sales and people will still buy. I think one interesting example of this is with Ikea.

They announced this week that they were going to lower the prices of their items. So that bookshelf that you bought for $90 last year, it should be for $70. And I think that is a company that is dealing with the reality that people are still weathering inflation. And it's like, hey, we could stand apart from the rest of the pack by doing the opposite of what everyone's doing. So I thought that was an interesting way that a retailer is approaching this economy. Do you think it's going to work? I think people do like things that are less expensive. And also think about Ikea's in this

category of home furnishing. That category has been, sales have been going down because we all bought couches and beds a few years ago. We're not buying it in huge quantities. So they need to be creative about the way to increase foot traffic. Well, look, if being creative means cheaper things, then I'm all in. Neela, let's talk about inflation, CPI, and the producer price index came out this week a little higher than people had wanted. It is going to be bumpy. Here's the note I wrote to myself as I was walking into the studio.

Should we just stop talking about inflation every month? Because we're just bouncing around and it's making people crazy. But people are seeing it. It's interesting how att But people are seeing it. It's interesting how attuned people are to price. And I think this is a really nice tie into what Jordan was talking about. The transparency on price levels has never been greater. You could talk to anyone anywhere. They know like how much they paid for hamburger and eggs today versus yesterday. Like on my Instagram feed right now, there are prices aplenty for everything. And I can comparison shop in real time.

I don't think we're going to stop talking about prices because prices are everywhere. And they've only gone up. The sad thing about inflation is that growth goes down, but prices don't. And that's what's affecting the consumer budget. growth goes down, but prices don't. And that's what's affecting the consumer budget. And that's why I think people are not as happy as they should be considering the low unemployment rate we have. So they're feeling that price impact, whether we talk about it or not. Right. And look, inflation is low, but price levels are high. And that's what's got, what has everybody all turned around. And I totally get that. Very quickly on the way out

here, Neela, and I come to you in your role as formerly, I think you were the chief economist at Redfin, right? Weren't you? That's right. Okay. Chief economist at Redfin. Big news today from the National Association of Realtors on real estate commissions. We were talking, you and I, before the gong went off and I said, wow, you know, all those commission fees are going to stay in, or most of them anyway, are going to stay in home buyers and sellers pockets. And you said, yeah, maybe not. Explain, would you? So this could be good news in the sense that commissions could go down or they could at least be more negotiated than they are now.

And there's a lot to unpack under that. So I won't go deep since we have a short period of time. But this ruling is in the context of higher interest rates and very low inventory. So there are a lot of things that buyers are doing away with when there is low inventory, like inspections, all kinds of closing cost fees. There is a whole host of fees on the table to be negotiated. And some of them will just increase the house price with lower inventory. So good news, probably in the long run, in the short run, there's still not enough affordable housing. And so everything is on the table and may roll up into the price anyway.

Yep. Neela Richardson at ADP now and Jordan Holman at The New York Times. Thanks, you two. Thanks, Kai. Have a nice weekend. Wall Street today was, you know, a little bit on edge, actually.

We'll have the details when we do the numbers. There has been no small amount of, wait, why is this happening about this economy the past year, maybe year and a half or two? Why have consumers been spending so strongly even when inflation was so high? Why have there been so many layoffs even outside high tech firms when the economy has been so resilient? And then maybe the biggest of them all, why, oh, why has the labor market been so very strong? This economy has been adding jobs month after month after month for years now. As Marketplace's Supreme Benishore tells us, please direct your attention to one of the most politically charged issues of this moment. For a lot of economists, something about this booming job market was just not adding up. Where are all these jobs coming from?

Torsten Slock is chief economist at Apollo Global Management. Why is it that the economy is still creating so many jobs without accelerating wage inflation? The short answer is that the U.S. has been importing economic capacity. Immigration has played a very important role in why job growth continues to be so strong. There has been a wave of immigration, legal and not, since 2022. According to the Congressional Budget Office, 5.9 million people migrated to the U.S. in that time, more than 3 million of them in just 2023. A large number came across the southern border, says Julia Gillette, associate director of the U.S. Immigration Policy Program at the Migration Policy Institute.

There's the really strong draw factor of our booming economy. We recovered from the pandemic recession much more quickly and strongly than many other countries, especially in the Americas. The U.S. is maxing out on all its legal immigration pathways, but even those who are undocumented are finding employment, says Madeline Zavodny, professor of economics at the University of North Florida. The popular perception that you have is, oh, you know, they're illegal immigrants, they're, you know, going to be on the streets and all of this, but it does look like a lot of them are working. And working on the books to show up in the data. Tara Watson directs the Center for Economic Security and Opportunity at the Brookings Institution.

She says all this extra labor has basically helped fix economic shortages. And immigrants are helping to supply some of the goods and services that people have been looking for as they come out of the COVID era. They've also filled some shortages of workers in certain fields, helping to balance out an overheated labor market. In effect, she says, immigration has helped bring down inflation. In New York, I'm Sabri Beneshour for Marketplace. There is no shortage of Marketplace content that you can get if you miss it on the air. Try our podcast, would you?

Marketplace.org is where you can get that. Or if you like the platform of your choice, follow us there. For all the economic benefit the interstate highway system delivers and has delivered, it has come with a great deal of social deficits. There are highways in this country, a lot of them in a lot of cities, that run straight through neighborhoods with majority black and Latino populations. This week, the Department of Transportation announced more than $3 billion in grants from the Infrastructure Law and the Inflation Reduction Act to help reconnect some of those communities. Marketplace's Kimberly Adams has that one. There are many reasons why America's infrastructure disproportionately cuts through communities of color. Some of it is overtly racist decisions. Ben Crother is policy director for America Walks, a nonprofit supporting walkable communities. policy director for America Walks, a nonprofit supporting walkable communities. Some of it is highway engineers following the path of least financial resistance. These are the places where it's cheap to acquire property because of

institutional decisions like redlining that has depreciated homes in these neighborhoods. And those choices decades ago have had lasting consequences, says Christopher Coase, an assistant secretary at the Department of Transportation. In these communities today, they generally have higher health impacts. Many communities have higher asthma rates. These are communities that oftentimes are most disconnected from jobs or everyday destinations like health care. The DOT grants include projects to put caps over stretches of highway that can be converted into parks. And, says Robert Blaine, a senior executive at the National League of Cities,

This might create a bridge, for example, that goes directly over the interstate or under the interstate to be able to connect those communities. And what would be a maybe a 10-minute trip or a 15-minute trip is now a two or three minute trip. Even though advocates say these grants mark a historic investment in infrastructure equity, they come at the same time other state and federal infrastructure investments are perpetuating trends of the past, says Yonah Fremark, a researcher at the Urban Institute. We're talking about over $100 billion a year on maintaining and expanding the highway system. And so $3 billion in one year to reconnect communities is quite small.

Fremark says these grants are a good first step, but that there is much more to do to address the historical harms undergirding America's highways. In Washington, I'm Kimberly Adams for Marketplace. Coming up. We're charging a little more than we used to and just trying to have good customer service and hope for better days. Got to have hope, right? First, though, let's do the numbers. Dow Industrials off 190 today.

That's a half percent, 38,714. The Nasdaq gave back 155 points, almost 1%, closed at 15,973. Today, the S&P 500 down 33.6%, 51.17%. For the week, the Dow unchanged. Nasdaq down 0.7%, the S&P 500 down 0.1%. We heard from Spree Beneshore about how immigration can help explain the recent influx of workers into the labor market in this country. So in hiring stocks, Fiverr International fell 0.2%. Manpower Group grew almost 0.7%. Paychecks lost just over 1% today. A new report from the real estate data provider Atom finds there were 32,938 properties with foreclosure filings last month. That is up eight percent from last February. Atom reports foreclosures jumped the most in South Carolina, Missouri and Pennsylvania, but they say

foreclosures are not repeat, not approaching the level seen during the 2008 financial crisis. Bonds quickly the yield on the 10-year T-note, 4.30%. A week ago, it was like 4.0 something. You're listening to Marketplace. This is Marketplace. I'm Kai Risdahl. Not to anthropomorphize it, but I'll tell you what, inflation is taking its own sweet time getting back down to the 2% the Fed wants it at. Talked about that a little bit with Nila and Jordan, the CPI and the PPI that were out this week, higher than expected. But also there is this, a sign of inflation progress. The Labor Department reported today that the price of

imported goods rose three tenths percent in February. That is down from an eight tenths percent increase in January. So Marketplace is Justin Ho now on whether disinflation at the import level can help bring down inflation overall. A big reason import prices went up in February was because of rising energy costs. But the picture looks different when you set those costs aside, says Megan Schoenberger, senior economist at KPMG. Everything else outside of petroleum, oil and gas, fuel for industry, all of that did slow quite a bit.

Schoenberger says the price of imported consumer goods rose at a slower pace in February. Same with the price of imported vehicles. Orders are down quite a bit. Stocking up has slowed down significantly. So that's good news, particularly for the new car prices that we could expect down the pipeline. That's because prices at the import level can affect prices that show up in other inflation data. Erica Groschen is senior economic advisor at Cornell's School of Industrial and Labor Relations. She's also the former commissioner of the Bureau of Labor Statistics, which puts together the import price index and the consumer price index. Groschen says CPI can be affected by import prices, whether they're picking up or slowing down. If you have an importing company like IKEA

or something like that, right, you can expect that a lot of price changes are going to be passed through to consumers pretty readily. Overall, import prices are down almost 1% from the same time a year ago. Jay Bryson, chief economist at Wells Fargo, says that's welcome news for the effort to bring down inflation. Thing is, Bryson says import prices at Wells Fargo, says that's welcome news for the effort to bring down inflation. Thing is, Bryson says import prices are not the big problem right now. The big problem with inflation today, being its general stickiness, is in terms of the service sector. As in the price of medical care, insurance, rent, haircuts. Bryson says two-thirds of consumer spending goes to services,

and those aren't really something we import. It's not like I'm going to Mexico to get my haircut. And to bring down services inflation, Bryson says we'll need to see more of a slowdown in wage growth and housing prices. I'm Justin Ho for Marketplace. Think lobster, but smaller, a lot smaller. Depending on where you're from, you might know the crustaceans in question as crawfish or crayfish. Crawdad works, too. If you're from Louisiana, though, you know them as the heart of a nearly half-billion-dollar industry that supports thousands of jobs.

the heart of a nearly half-billion-dollar industry that supports thousands of jobs. Jobs and restaurants and crawdad farming businesses that are at risk now because of climate change. Also, as Matt Bloom reports, a way of life that's at risk, too. Farmer Mitch Olivier wades through the water of his 80-acre crawfish pond outside Baton Rouge, Louisiana. His eyes are set on a metal trap poking out of the water of his 80-acre crawfish pond outside Baton Rouge, Louisiana. His eyes are set on a metal trap poking out of the water. Nothing. The cage is empty. Even the bait, a severed fishtail, is still in it.

It just goes to show you how little crawfish they have this year. Usually at this point in the year, Olivier would be hauling hundreds of pounds of mud bugs, as they're also called, out of this pond. But a record heat wave last summer, paired with a drought through the fall, dried out his field. That caused the baby crawfish to burrow so deep in the mud below that they haven't really emerged yet. And so the ones that did come out of their little holes, they probably were just content sitting in the mud. Hey man, it's still kind of chilly, you know. I'm just going to sit here and nibble. The few that have emerged are often far from his traps. Olivier says he'll be lucky to make half what he does in a typical year. And he's not alone. Farmers across Louisiana estimate their industry will see a 140 million dollar loss this year due to last summer's extreme heat and drought.

He says the state is talking about ways to keep water in crawfish ponds. We can't control the weather, but we can maybe try to keep the ground a little damper and see if that helps. I don't know. It's tough. So tough that Louisiana's governor just issued a disaster declaration for the industry. The Biden administration has considered sending aid to farmers. Meanwhile, there's still high demand across Louisiana, and that's sent prices soaring. Crawfish boils are a way of life here. So it's a lot of spices, a lot of paprika, a lot of cayenne, a lot of garlic, a lot of onion, a lot of citrus. Andy DeGrange lists the ingredients in his crawfish boil.

He stirs it with a giant metal ladle in a vat the size of a bathtub. He sells plates of crawfish with corn, potatoes, and sausage every weekend at the Bayou Beer Garden in New Orleans. The price is on a chalkboard sign in front of his boil pot. Stressful. This year, it's the highest it's ever been. Normally this time of year, you would get crawfish about $6 a pound. So you might get three pounds for 18 bucks with all the sides. This year, we're doing half of that pound and a half for 19 bucks. It's still not really profitable.

Not profitable because the cost of labor, seasonings, and equipment has all gone up too. The one thing helping DeGrange break even, he says, is the long line of crawfish fans who come here to eat. He says customers have been understanding about that 19 buck sticker price. I've kind of done what I've always done and been very nice to people

and tried to nice to people and tried to explain to them that, hey, prices are high. We're charging a little more than we used to and just trying to have good customer service and hope for better days. It's possible that the season is late and the crawfish catches will be bigger in a few weeks. If not, he says he'll have to try shrimp boils or look into another industry altogether. But losing a crawfish boil would be devastating to local communities. For many, they're a gathering place. It's like breaking bread. One of DeGrange's customers, Bradley Bodat, just finished work and texted his friends to meet up.

He's a regular at this boil. Maybe too regular, he says. I probably come like two days a week right now. Maybe three. My sodium levels are gonna be through the roof, but you know, hey, that's what doctors are for, right? He just loves it. And the higher price hasn't scared him off. I'm not going to buy crawfish anywhere else. I mean, I know what I'm paying here and I know I'm getting good quality, so I don't mind paying for it. So as long as DeGrange, the chef, is boiling, he's coming. In New Orleans, I'm Matt Bloom for Marketplace.

This final note on the way out today, which comes with two observations. Number one, Bitcoin today down about 5-6% from the all-time high it hit this week, $68,000 and change as I speak. Obviously, consult your own financial advisor. and change as I speak. Obviously, consult your own financial advisor. Point number two, how much Bitcoin is it worth to you at whatever exchange rate to spend 40 or 50 years in a federal penitentiary? The prosecutor's sentencing memo for Sam Bankman Freed is in. He is, of course, the founder and former CEO of FTX. The government wants half a century in jail and $11 billion in fines and forfeitures. They will not get it, but that's a big ask. Our theme music was composed by B.J. Liederman.

Marketplace's executive producer is Nancy Fargali. Donna Tam is the executive editor. Neil Scarbrough is the vice president and general manager. I'm Kai Risdell. Have yourselves a great weekend, everybody. We are back on Monday, all right? This is APN. All over the country. We need to improve reading in Wisconsin.

Schools are changing the way they teach reading. I'm calling for a renewed focus on literacy. We have gotten this wrong in New York and all across the nation. And it's happening because of a podcast. I think your podcast has changed my life. And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.