Marketplace - A turning point for the “vibecession”?

Episode Date: September 2, 2024

Consumers’ long-term economic outlook were a bit more positive in August, data from the University of Michigan shows. So if your in-laws were in a better mood on Labor Day than they were, say, on the Fourth of July, that could be why. In this episode, we get into why some Americans are feeling good about the economy while others still feel like they’re struggling to make ends meet. Plus, pediatricians have to make tough decisions about how many COVID-19 vaccine doses to purchase and new Department of Transportation rules require airlines to reimburse passengers’ costs for canceled and significantly delayed flights, no matter the cause.

Are consumers finally starting to feel better about this economy? Plus, pick your fun this holiday. Cooking, music, we've got a bit of it all. From American Public Media, this is Marketplace. In Washington, D.C., I'm Kimberly Adams, and for Kai Rizdal, it's Monday, the 2nd of September, Labor Day. Good to have you along. So, how are the vibes at your Labor Day barbecue?

Any better than at the 4th of July cookout? I ask because we got some data Friday suggesting that the American consumer is in a slightly better mood now. According to the University of Michigan, for the first time in five months, consumer sentiment actually improved. Marketplace's Matt Levin reports on whether that so-called vibe session is maybe turning a corner. So just to kind of remind you

where the economy is right now, the Fed seems to be finally getting closer to its inflation target. GDP grew at about 3% last quarter, which is really good. And while the labor market is cooling, unemployment is still historically pretty low. So that whole consumer vibe session thing, it's got to be over by now, right? No, it's not over yet. Oh. Kayla Brune is an economist at Morning Consult. She says even though consumers feel a little better now that inflation is closer to 2%,

they still very fondly remember their lower grocery bills of 2019. Consumers are very fatigued by prices and it is that inflation component that's really been driving the vibe session and consumers are not over that. In the uptick in consumer sentiment we are seeing, Joanne Shue at the University of Michigan says it's mostly coming from folks rich enough to absorb higher prices or rich enough to play in the stock market. Folks at the top of the income distribution, their sentiment, their vibes have improved really, really strongly since mid 2022.

Of course, the reason we all pay attention to these consumer sentiment numbers is they're supposed to give us a clue about consumer spending. But Olu Sinola at Fitch Ratings says, "'Vibes have been low and spending has been high for a while now.'" It's completely disconnected, completely.

There's no correlation. And Sinola says he doesn't see vibes bouncing back dramatically anytime soon. Cumulative inflation, political polarization, and a labor market that's weakening. You know, the vibe session will be quite weak for some time to come. What a bummer. Maybe I'll go buy something to make myself feel better. I'm Matt Levin for Marketplace. More than 17 million Americans planned to fly this holiday weekend, according to the

Transportation Security Administration, a record-setting Labor Day travel period. New data from the Department of Transportation shows that through the first half of this year, flight cancellations were slightly down from 2023. Even so, the DOT wants to implement new rules requiring airlines to give customers automatic refunds for cancelled or significantly delayed flights. Marketplace's Henry Epp reports. When an airline cancels your flight, it can feel like a personal punishment. But airlines really don't want to resort to cancellations, saysene Becker at TD Cowan because it costs them. They have to accommodate passengers with with meal vouchers sometimes with hotel vouchers and that's obviously quite costly and then it has to pay overtime to its employees and

that's quite costly. In other words the airlines don't do well when they deliver crappy product. Federal regulators want to make the process of getting a refund for a cancelled or very delayed flight a lot less crappy. David Slotnick is the senior aviation business reporter for the PointSky. If your flight is cancelled, the airlines have to give you automatically a refund in your original payment form. So that's cash, credit card miles, whatever. And it's part of a broader push by the government to crack down on flight cancellations.

Henry Hardewelt, an analyst at Atmosphere Research Group, says there are a lot of things that are within an airline's control. Not having enough crew, too bad. That's an airline problem. Aircraft maintenance problems. Also an airline's responsibility, he says. Airlines have mostly recovered from staffing shortages of pilots and crews in recent years, which has helped.

But even so, most delays are caused by something they can't control, Hartfeldt says, the weather. Whether it's snowstorms in the wintertime or thunderstorms and hurricanes in the summer, we are seeing more bad weather events and these bad weather events tend to be more intense, happen more frequently and can last longer. Airlines, he says, are trying to factor worsening storms into their planning because they'll be on the hook for refunds even if it's weather that causes the cancellation. I'm Henry Epp for Marketplace.

Wall Street today, closed for the holiday. We'll still have some interesting details for you though, coming up when we do the numbers. Thanks to streaming, the music industry has been doing pretty well lately. Last year, the $28 billion global music market grew over 10% from the year prior. That was the second highest growth rate on record according to the International Federation of the Phonographic Industry. Music labels, publishers, and even investors want to capitalize off that growth, and one way they're doing it is by buying up the rights to artists' music catalogs. Ashley Carmen is a reporter at Bloomberg. Ashley, welcome to the show.

Ashley Carmen Thanks for having me. So explain the basics. How does this business of buying music catalogs work? Yeah. So really the idea recently is that because of streaming, you can kind of predict how songs are going to perform in the future. So investors, whether it be private equity investors or the labels themselves, have started buying up catalogs with the idea that they can make returns on these investments and

also find new ways to build the revenue beyond even just the streaming revenue. Like what ways are those? So for example, they can create brand deals depending on the types of rights that they have. So they can create brand deals where they put an artist's face on a different product or license their name for a product. They can put songs in movies and TV, which is its own payment, but then also has the added bonus of oftentimes driving up the streams.

So that helps in that way as well. There's a few different ways they can do it. Yeah, this has been around for a little bit. You write about how Kurt Cobain's catalog was purchased back in 2006, and it was pretty groundbreaking at the time. Yeah, so what was interesting about that is when that catalog sold to Primary Wave Music, it was for a reported $50 million. And really once they acquired the rights to this catalog, they got to work pretty quickly.

So they started putting Nirvana's music in movies and TV programs. They licensed Kurt's writing to Converse so they could go on some sneakers. So it really turned into this idea of, okay, we have this catalog, we know people are going to listen to this music in the future, but how can we further exploit it so that we can continue to make even more money on it? So what's contributing to the sort of explosion of these deals right now?

Yeah, so there have been a few things. For one, this kind of took off during the pandemic. And so the idea was, it was a low inflation period, So there have been a few things. For one, this kind of took off during the pandemic. And so the idea was it was a low inflation period, interest rates were low, investors really wanted to find higher yielding assets. And again, with the advent of streaming, music became kind of this asset that although it existed previously, was now a bit more proven out. And that's why you began to see some of these really flashy deals like Bob Dylan selling

his catalog to Universal Music Group for more than $200 million in December 2020. So once these companies get a new catalog or get an old catalog, I guess, how then do they go about kind of marketing that and making these older songs relevant to new audiences? Really, what they begin to do, at least when I spoke to PrimaryWave, one of the companies who does this type of work, is they start building out social media accounts. And part of the reason they have to maybe even start doing that is because if they're working with older artists, they might not have ever been on TikTok or Instagram.

So for example, they work with Smokey Robinson. And when he signed a deal with them in 2016, he didn't have any social media accounts. But now he's 84 years old. He has more than 270,000 followers on Instagram and over 150,000 on TikTok. So the idea is really get the digital audience well-acquainted with this older artist and then ideally the brands will be more interested in kind of working with Smokey, working with whoever and putting their name behind them. So how is this changing the music industry?

It's changing the music industry in so much as we're seeing a lot more as consumers of music interpolations, which are basically where if you own the publishing rights to a song, you can't use the master recordings. That's like the song you hear on the radio, for example, you can use the lyrics and the song itself. And so what folks will do is they'll rerecord that song and the lyrics and use it in a new song. So you can hear a lot of these examples. One is Blue, that popular I Full 65 song turned into a BB Rexha hit in 2023.

Once you start paying attention for these, you can kind of hear them everywhere. Ashley Carmen is a reporter at Bloomberg. Thank you so much. Thanks y'all. Later this week, we'll get an overview on the current employment situation in the August jobs report. But today, given that it is the National Day for Labor, we thought it would be a good fit to bring you a perspective from an American laborer and business owner for today's installment of our series, My Economy.

I'm Amanda Zemlick. I'm the owner of Otters Pond Bed and Breakfasts on Orcas Island in the San Juan Islands of Washington State. I'm actually a chef by training. I went to culinary school and worked as a chef, did product development, and in 2019 I happened upon an opportunity here on Orcas Island visiting my parents for their anniversary that this bed and breakfast was for sale. So I put my chips in and I went for it. In addition to managing the inn and doing breakfast, I also do the upkeep and repair and the housekeeping. One of the funny things that people always ask me is, well, you really do everything,

all of it? It's very much a labor intensive thing sometimes, but it's a labor of love and it saves me quite a good chunk of money to go ahead and do that. I am really enjoying making the building even more sustainable. Three years ago, I was able to secure a grant and put in heat pumps, which has saved a fortune in electricity, in addition to making the property much more green with energy. And the other piece I think that sort of follows after that will be solar. And being located

on the pond, we're actually positioned just so we're able to get quite a bit of sunlight there. I really do enjoy being an innkeeper and owning an inn. I grew up knowing that I wanted to be a cook and not really knowing why. And I think that's one of the things that being an innkeeper satisfies in me is that just making people happy, making people comfortable, sharing the things that you think are magical. I think Orcas Island is a magical place and giving other people the opportunity to experience that is really special. That was Amanda Zimlich, owner and operator of Otters Pond Bed and Breakfast in Orcas

Island off the coast of Washington. We can't do this series without you, so write to us about your economy at marketplace.org slash my economy. Coming up... We also mostly wanted to see where Korean food was going. I want to see too. But first, let's do the numbers. U.S. markets are closed today for the holiday, so since it's Labor Day, let's look at some labor statistics more broadly. The youth labor force participation rate sees a spike every year between April and July.

The number of workers between 16 and 24 years old grew by 2.1 million during this year's summer employment season. Of course, that number drops as young folks head back to school. Hotel workers in the meantime are continuing to strike today. Some 10,000 workers across several cities are demanding better pay and conditions. Marriott, Hyatt and Hilton are among the chains affected. The hotels and the union representing the workers unite here. Both say talks will continue.

You're listening to Marketplace. Hi this is Rob from London, Ontario. Marketplace is I'm Kimberly Adams. Go to marketplace.org slash donate. This is Marketplace. I'm Kimberly Adams. The Food and Drug Administration recently approved the latest round of COVID vaccines, meaning they're now available at many doctors offices and pharmacies around the country. And for the second year in a row, the federal government is not picking up the tab. Physicians have to order the vaccine weeks in advance and pay upfront for the shots they'll have on hand this fall. It's a tricky calculation. Jackie Fortier with our partner KFF Health News has this look at how this is playing out in one medical field, pediatrics. At his practice in Orange County, California,

pediatrician Eric Ball opens a refrigerator full of vaccines. D-Tap, polio, pneumococcal vaccine. This is where we usually store our COVID vaccines, but we don't have any right now. His practice hasn't had COVID vaccines for months. In the spring, they ended up throwing out dozens of expired shots. Last year we bought too many COVID vaccines. We thought the demand would be way higher than it was.

Overordering the vaccines meant his practice ate the cost of the unused doses, $150 each. That's like throwing away $150 repeatedly every day. That's not a mistake Ball in his practice can afford to make again. So this year he slashed his fall vaccine order to the bare minimum. Even so, it's a tricky calculation. We took the number of flu vaccines that we order and then we ordered 5% of that in COVID vaccines. That's roughly 240 doses, which costs his practice about $36,000. It's a gamble because in the 2023-2024 COVID vaccination season, about 15% of kids got

the shot, even though the government recommends it for every child over six months. COVID vaccines aren't typically required for kids to go to school, so it's not like pediatricians can predict vaccine needs based on enrollment. The cost of vaccines, that's our biggest expense. But it's also the most important thing we do, you could argue, I mean, is vaccinating kids. Chicago pediatrician Scott Goldstein owns his own practice. Besides the overhead cost, he says just storing vaccines in his office is risky. They can put you out of business if something goes wrong. We've had things happen before

where a refrigerator gets unplugged and then we're all of a sudden out $80,000 overnight. Some pediatricians say they would order more COVID shots if pharmaceutical companies had a more forgiving return policy. Pfizer, for example, will take back just 30% of unused doses for kids 12 and up. Pediatrician Deborah Greenhouse owns a practice in Columbia, South Carolina. If you only let us return 30 percent, we're not going to buy much. We can't.

Greenhouse operates her own practice. So she orders too many doses that are left over. The cost comes out of her pocket. If we get stuck holding a ton of vaccine that we cannot return, we can't absorb that kind of cost. Once she runs out of doses for her older kids, she'll advise parents to get the shot at a pharmacy. It's not ideal. She knows some parents might forget to make that extra trip or just not bother.

But Greenhouse's practice has thin margins. So a minimal vaccine order is a business necessity. We want to continue to be their medical home. If we go out of business, we're not anybody's medical home. Pharmaceutical companies can't tell pediatricians exactly what the turnaround is from ordering vaccines to delivery, which adds to the uncertainty. In California, Eric Ball is frustrated with the fuzzy timeline. He's heard from a few pediatricians who think it's too much of a hassle and aren't going to stock the COVID vaccine at all. There's reasonable chance that your doctor

will not be offering COVID vaccines this year, which makes it harder to get. And the harder it is to get, the fewer people are going to be vaccinated. And he says when fewer people are vaccinated, those who are most at risk, like infants who are still too young for the shot, might get sick. I'm still sending babies to the hospital with COVID. Like, we're still seeing kids who have symptoms of long COVID. He's hoping that if some pediatricians make the business decision not to stock the COVID vaccine, that parents will take the extra steps to get their kids vaccinated, even if

it's with another provider. In Los Angeles, I'm Jackie Fortier. Going back to that Labor Day barbecue we mentioned at the top of the show, if you enjoy working with the grill, you know there's a lot more you can do with it than just barbecue. And it's like that with a lot of cuisines. Get famous for one thing, but then people miss a lot of other great dishes. All that as set up for our next story about two cookbook authors who are trying to change how Americans think about one particular type of cuisine that has some pretty famous barbecue as well. Marketplace's Sean McHenry takes it from here.

When the title of your cookbook is Korea World, you're kind of making a statement. I think it's one of the biggest stories of our generation, the rise of Korean food, and you see it everywhere now. That voice belongs to one of the two people I met up with the other day at Soban, a popular restaurant in Los Angeles' Koreatown. LA's Koreatown has the largest concentration of Korean-owned businesses in the country. My name is Dookie Hong, chef and co-author of Korea World. My name is Matt Rodbard.

I am the co-author of Korea World with my buddy Dookie Hong, the chef. Buddies and writing partners, Hong and Rodbard have been covering Korean cuisine for about a decade. They have two cookbooks out, including Korea World published earlier this year and their first book, Korea Town, published in 2016. Back then, the conversation in the US around Korean food was defined by one thing, barbecue. So with Korea Town, we wanted to smash that perception and so we were covering all sorts of, First time authors, they made the New York Times best sellers list. And then?

We took a break from each other. Dookie moved to San Francisco. We took a break from each other. It's not like that guys. We were in contact. We decided to just do our own projects. But we also mostly wanted to see where Korean food was going. But to understand where Korean food went next, you also have to look a little outside the

food industry at pop culture. There's a thing called the Korean Wave or Hallyu. Here's Matt Rodbard. It's the way that Korean culture produced in Korea was exported throughout the world. And you could say it was done in a very strategic sense through the Korean government. Money was being spent to promote and to nurture pop music and film and food. A lot of money. For this year, the South Korean government budgeted $1.3 billion to the Korean content

industry. And looking back over the last decade, Holliw supported Parasite, Squid Game, BTS. So there's so many people that knew about it. We call it this cultural trifecta of the cuisine, the music, the arts, all kind of hitting at the same time. We thought that this was a story that needed to be told. And we really challenged ourselves with many things. expanded the universe of Korean food. But it is still a business at the end of the day. The reality is that it's a hits business.

As a publishing executive, your job is to sign up authors two to five years in advance and hopefully a few of them are going to sell. Since Korea World was Hong and Rob Bard's second book, they got to work with a lot of the same people they had for Koreatown. They spent several years traveling through Korea and the US. All I remember are the trips. Like it really didn't feel like work. Should I say that? Oh, sorry. It felt like work for him, but it was great for me. It was work, man. The fruit of that work, Hong and Rob Bard hope this cookbook will be more than an introduction

to Korean food, but instead will add nuance. Hopefully, kind of like, oh, there's Sicilian restaurants here. You can go to a Szechuan restaurant, like regional. So many cuisines have established that. Maybe Korean food gets to that point where we're like, okay, we're going to go to this Jeju restaurant. That'd be a nice little moment in Korean food. And the next moment, they said maybe plant-based Korean cuisine, but they're going to need

another 10 years just to see what happens. I'm Sean McHenry for Marketplace. This final note on the way out, one group of folks laboring hard today is Team USA over at the Paralympics in France, with athletes meddling in track and field, badminton, paratriathlon, and wheelchair rugby. Team USA winning silver today in the wheelchair rugby finals, a sport so intense and high-contact it's casually called murderball. The athletes play in custom wheelchairs with wheels that look similar to gladiator shields and they don't come cheaply. A standard manual wheelchair can run from under 100 to several hundred bucks, but rugby wheelchairs, they start at around $3,000,

with higher-end models upwards of $8,000. And that's before customization. Our daily production team includes Andy Corbin, Elise Hassan, Maria Hollenhorst, Sarah Leeson, Sean McHenry, and Sophia Terenzio. And I'm Kimberly Adams. Production team includes Andy Corbin, Alize Hassan, Maria Hollenhorst, Sarah Leeson, Sean McHenry and Sophia Terenzio. And I'm Kimberly Adams. We will see you tomorrow. This is APM.

Hi, this is Phoebe in Honolulu, Hawaii. The economy shapes our lives and our marketplace helps me keep up with that force without getting bogged down in bad news. I also appreciate their focus on gender and racial inequity and non-climate change. And I love the growth agnostic stories about drivers of our economy other than consumption. Join me in supporting Marketplace with a gift today. Go to marketplace.org slash donate.