Marketplace - Boeing machinists on strike

Episode Date: September 13, 2024

Everyone’s favorite aircraft manufacturer is back in the news — 30,000 Boeing machinist union members are on strike over pay. Typically, flyers don’t care what plane they’re on, as long as it gets them to the right place safely. But Boeing has had a year of high-profile controversies. Will the strike put the company into free fall? Also in this episode: Dollar stores struggle, Sierra Mist fizzles out and Jack’s Family Restaurants thrives in rural towns.

Hi, I'm Kyle Rizdal, the host of How We Survive. It's a podcast from Marketplace. In 1986, before I was a journalist, I was flying for the Navy. Mr. Gorbachev, tear down this wall. It was the Cold War and my first deployments were intercepting Russian bombers. Today though, there's another threat out there, climate change. This could be the warmest year on record. Climate change is here.

Temperatures here are warming faster than anywhere on earth. And while the threat seems new, the Pentagon's been funding studies on climate change since the 1950s. I think we will put our troops and our forces at higher risk if we don't recognize the impact of climate change. This season, we go to the front lines of the climate crisis to see how the military is preparing for the threat. Listen to how we survive wherever you get your podcasts.

It's Friday, so we're going to do that thing that we do. Then we'll talk dollar, stores, and then we'll head out for a bite to eat to wrap things up. From American Public Media, this is MarketFlag. In Los Angeles, I'm Kyle Rizdall. It is Friday, today the 13th of September. Good as always to have you along, everybody. We are just gonna start, if that's all right with you. Amara Mokwe's at Bloomberg, Courtney Brown is at Axios. Hey, you two. Hey, Guy. Hey, Guy.

So let's start with inflation, which we learned this week thanks to the CPI and also the PPI, the Producer Price Index. It is doing what it is supposed to do. And thus, we can pretty much stipulate here, because Jay Powell has all but said it, that there is going to be a rate cut when the Fed meets next week. Amara, I want to start with you, and I want to point out that this first move is a biggie, right? It's going to set a little bit of the tone.

Yeah, that's right. I think it is a big move. In the past, Chair Powell has said that the start of rate cuts, he's called it consequential, right? Because it signals that the Fed, after fighting with inflation for two years, is content that it's moving in the right direction. And right now, particularly because we

have greater concerns about the labor market, it's also a question of what is the Fed going to be doing to make sure that we don't see the labor market cool more than it has, which is something that Fed policymakers are trying to avoid. Another big question is how big the cut will be. And I think that is something that markets have really been grappling with this week. And that's really the big question for the Fed as we head into this meeting. Well, let's keep going there, Courtney. And I will point out here that the Federal Reserve in the past number of years has tried to make it really clear and largely succeeded, I think, that we all, markets, observers, analysts, journalists, we all know what they are going

to do before they do it. And this time, we kind of don't know what they're going to do. I know. It's the first meeting in a long time where we genuinely do not know what's going to happen. Last time I checked the CME FedWatch platform, which calculates how futures markets are pricing in what the Fed will do, it was like a coin flip. It was like 50% chance that they'll do 25 basis point hike or 50% chance that they'll go a little larger and do like a half percentage point cut. So I think there's a lot of uncertainty about what the Fed will do, how big they will go, and then we also get the summary of economic projections

and even there we're gonna learn a lot about what the Fed will do, how big they will go. And then we also get the summary of economic projections. And even there, we're going to learn a lot about what the Fed sees in the months ahead when it comes to rate cuts, inflation and growth. So it's going to be exciting. Not that the other meetings aren't exciting. It's like super exciting. Come on, we got to keep people interested in this. Hang on, because we're going to get to the exciting part in a minute.

But Courtney, I do wanna ask you just super quick, because people ask me, and I don't know the answer other than to say, I guess they just like round numbers. There's no reason they couldn't do like three tenths of a percentage point, right? It's just a quarter or a 50 is like a habit, right? That's right.

It's just like what they do. It would be weird if they didn't do one of those numbers. I know, but wouldn't you love to have them just come out and say, yep, third, it's actually 0.37 today. Anyway. Right in the middle. Right. Amara, let me ask you this though.

Powell's Presser, what are you, because look, there's Kremlinology and reading Tea Leaves and all that jazz. What are you gonna be especially attuned for? Yeah, so I think what I'm going to be looking for, and I think what pretty much everyone is going to be looking for, and I think what pretty much everyone is going to be looking for is a really clear explanation from Chair Powell about why they go whatever size they do go, right? Because if they go 50, I've been talking to a lot

of economists and Fed watchers about this, there is the risk that that could be perceived as an overly negative signal, right? The Fed is really, really concerned about the labor market, and that's not what they have been really letting on recently. They've expressed concern, but they don't, they haven't said that they think the labor market is falling off the cliff, right? So if they go 50, people are really going to want to understand why they went 50. Like what is the rationale for that? And if they go 25, you know, there's going to be the other side with people saying look is that enough to support the labor market right now? Given the risk that several Fed policymakers at this point have said they see to the labor market

So I think people are really going to be looking for pal to to really come out and clearly state how the Fed is Thinking about this first move neither of you two are gonna be in the room for this press conference But you have been in the past and Courtney I, I guess, you know, without telling us what your first question would be, how do you think about framing things? Let's say Michelle Smith, the head of communications there, and sort of, she'll listen to this, and she'll hear me say this and say,

no, Kai, that's not true. She's kind of the boss at the Fed. Let's say she calls on you for the first question. How are you framing it in your mind? I think there's the list of questions you kind of are thinking about in the period between meetings. And so you have that in your head. And then there are the new questions that come up

after you see the statement, the summary of economic projections. What might be interesting, maybe not the first question, but I'm curious if there's some drama this time around. We haven't had a descent in a really long time. And this question of 25 or 50, it is kind of an opportunity for the committee to split a little bit. So I think I would be interested in hearing, you know, which direction did the Fed go? And among the committee was everyone in agreement that that is the right step.

And people who wanted to go in a different direction, what was their reasoning for doing so? Yeah, we should point out here, Amara, that you get half an hour between the release of the statement and the beginning of this press conference. So as you digest it in that half an hour, how do you think about framing your question?

Yeah, I think about sort of what are the questions beyond like the most obvious questions. And I think here for this meeting, I think we've kind of been here before, right? As we headed into this year, the Fed was signaling that it was feeling confident to cut, to start cutting. And then we saw inflation accelerate. And so a lot of the times I'm thinking about, okay, what are sort of the scenarios that the Fed is maybe not anticipating or how would they respond if things don't evolve in the ways that they're anticipating that they evolve now? So that's a lot of what I'm thinking about.

Yeah. Courtney, just real quick on the way out here, summary of economic projections. People will hear it called the dot plot. 45 seconds, please, on why it matters. Why it matters. Okay. Basically, it is this cool visual that lays out anonymously.

That's very geeky, a cool visual, but anyway, go ahead. That lays out anonymously how Fed officials see interest rates evolving over the short term and very interesting the long term. I think Kai, you know I love the neutral rate, which has been nudging higher. So we get like a little sneak peek

into how officials are thinking about interest rates on a very cool graph. It doesn't get better than that. Doesn't get better than that. We're gonna do the neutral rate explainer next week, I think that's what's gonna happen. Courtney Brown and Axelios Amaro-Mokwe at Bloomberg on a Friday afternoon.

Thanks you two. Thanks guys. Wall Street on this Friday. Traders are trying to read the tea leaves just like the rest of us. Quarter point or a half a point, it will keep up until next Wednesday, I promise you. Details numbers, y'all know the drill. More than 30,000 Boeing machinists walked off the job at midnight after voting down

the company's contract offer. Now what happens though to Global Aviation and to the world's number two commercial plane maker, which has already been having a real tough year. Marketplace's Kelly Wells is on that one for us. This strike comes at a time when Boeing's already not meeting production goals, and it will effectively stop production on the 737 MAX jet. That's the model with the door that came off mid-flight in January. And two others crashed several years ago, killing everyone on board. Ryan Ewing is editor and founder of the aviation news site Airline Geeks.

Ryan Ewing, editor and founder, Airline Geeks Obviously, the 737 MAX stuff has created additional oversight by regulators, and then there's obviously the quality control issues that have come as well. So the strike is bad news for airlines that order the jets and the companies that make stuff that goes inside the planes, says Henry Hardevelt. He's an airline industry analyst with Atmosphere Research Group. Fusilages, wings, landing gear, engines, seats, lavatories, galleys, overhead bins, everything like that is going to be affected.

The ripple effect could last longer than the strike itself, Hardevelt says, because those suppliers have to scale back. And that contributes to the ability to get back to a normal production rate. Most of us only interact with Boeing as passengers on their planes. And all this may not affect us much, says Bob Mann. He leads the aviation analysis and consulting firm RW Mann & Company. Most customers don't know what type of aircraft they're flying on, even if there's a safety card right in front of them.

Boeing said in a statement that the company is ready to get back to the bargaining table. The union says its goal is to get a strong contract that meets its members' needs. I'm Kaylee Wells for Marketplace. A year or two ago, when inflation was bad, dollar stores seemed to be set up for success because discount stores win when shoppers' wallets are strained, right? Now though, Dollar General is seeing profits fade and the company that owns Dollar Tree and Family Dollar plans on closing 1,000 stores. Marketplace's Kristin Schwab explains what is plans on closing a thousand stores. Marketplace's Kristin Schwab explains what is going on with these discount retailers. Catherine Snearly has been a devoted dollar store shopper for over a decade now. When

she was a middle school Spanish teacher, she'd go to stock her classroom. Pencil pouches, school supplies also, especially if kids came to school and they didn't have what they needed, I could just go to the dollar store and have some supplies on hand because all that money was coming out of my own pocket. GIGI NONTERAH-KERNAN-KERNAN-PORKER Today, Sneerly is a full-time content creator under the name Do It On A Dime. She shares organization and crafting projects, often with dollar store stuff, partly because of the price, partly because of the convenience. There's always a location near her in Charlotte, North Carolina.

SNEERLY There are a lot where I live. You can drive 10 minutes and get to a Dollar Tree, 15 maybe, depending on if you're in a more rural area. And that ubiquity, the sheer number of dollar stores out there, is actually part of their downfall. John Strong, a finance professor at William & Mary, says between Dollar Tree, Dollar General, Family Dollar, and Five Below, there's just too much competition.

Because now I've got $40,000 stores in the country where I had, you know, $25,000 a decade ago and so the same store sales are just not as robust as they used to be. Dollar stores have tried to become more essential by selling groceries. Strong says something like 75% of what many stores sell is food. But in the meantime, affordable retailers have been expanding and stealing dollar store customers.

Aldi plans on opening 800 locations in the next handful of years. Walmart, already the biggest US grocer, will open 150. And its reach is growing with its subscription service, Walmart Plus. Being able to order things from Walmart and have them delivered within a day or two really does have an effect on dollar stores.

Another problem is that dollar stores pull in a narrow segment of shoppers who are mostly low income. Joe Feldman, a retail analyst at Telsey Advisory Group, says retailers like Family Dollar just haven't been able to capture the middle class. Walmart and Costco and TJX and Ross and Burlington have all performed very, very well because the consumers are shopping at them more frequently in an effort to save money. They're just not trading all the way down to the dollar stores.

Feldman says that's partly because when it comes to unit price, dollar stores are not necessarily cheaper. For instance, a quick comparison of Dove soap bars puts the purchase at $1.25 per bar at Dollar Tree versus $1.15 at Costco. Plus, the Costco bars are bigger. The pack sizes at dollar stores are smaller and designed around convenience. And, you know, the price point of those packs are low in order to help the consumer to, you know, stretch their dollars. And that Dove soap bar, priced at $1.25, it represents another challenge for dollar stores. A lot of what they sell no longer costs $1. Some items go as high as $5. Sneerly, the content

creator, says it makes shopping confusing. You have to be careful not everything is a better deal there. She says the increases kind of erase her price references, her understanding of value. I do have to walk into the dollar stores like now with a very heightened and keen awareness of what things cost other places more so than I ever had to in the past. And that kind of goes against part of what made dollar stores delightful, that shopping there felt kind of mindless in this way that might mimic what it feels like to not worry so much about money. I'm Kristin Schwab for Marketplace. Coming up.

Ain't much here, so you gotta eat where you can. I mean, true, right? First though, let's do the numbers. Dow Delta was up 297 today, just shy of three quarters of one percent, finished at 41,393, did the Blue Chips. The Nasdaq added 114 points, two-thirds percent, 17,683. The S&P 500 gained 30 points, a little bit more than a half percent, 56.26. For the week, the Dow climbed 2.6 percent.

The Nasdaq grew almost 6 percent. S&P 500 pocketed 4 percent. That strike at Boeing that Kelly Wells was telling us about helped drag shares in the Plainmaker down almost 3.7% today. Dollar Store chains from Kristin Schwab. Dollar General rang up almost 1 in 9 tenths percent today. Dollar Tree, which as I mentioned also owns the family Dollar chain, increased 2 and 2 thirds percent. Bond prices went up. The yield on the 10-year T-note fell 3.65% on the 10-year. You're listening to Marketplace. ["The New York Times"]

Some of the toughest moments we'll experience in life often come with the hardest financial decisions. Like how much to spend when your pet is dying. Or what to do if you uncover a loved one's financial secrets after they've passed. It's like having this albatross, this monkey on your back that you don't want amongst everything else. I'm Rima Chavez, host of This Is Uncomfortable, a podcast from Marketplace. This season, we've got a wide range of stories about life and how money messes with it, including the unexpected ways money can shape our journeys through loss and grief. Listen to This Is Uncomfortable wherever you get your podcasts. This is Marketplace. I'm Kai Rizdal.

Sometimes when a product gets discontinued, it's pretty obvious why. The price was too high, or it cost too much to make, or maybe it just kind of stunk and was replaced by something better. I'm looking at you, Microsoft Zune. Sometimes though, a product fails for other reasons, reasons that can tell us something a little bit deeper about this economy. Last year, Pepsi stopped making a lemon-lime soda by the name of Sierra Mist.

It was supposed to be Pepsi's answer to Sprite owned by Coke, but never did quite get there. Marketplace's Matt Levin is on the product to obit beat for us today. Sitting in front of me are two identical looking glasses of clear lemon lime soda over ice, prepared by my wife when I wasn't looking. One has Sprite and the other a Sierra Mist I ordered off eBay that I think was more intended as a collector's item. It's sell-by date was June 2023. The only real difference was the one on the left was slightly less carbonated, which I

guessed was Pepsi's Sierra Mist, partly because of that sell-by issue, but that smoothness was actually a key to its early marketing. So we were coming in the idea that Sierra Mist is a new brand, a new take on the flavor and not kind of the burn that goes down when you drink a Sprite. Bill Bruce was on the creative team at the ad agency BBDO in the 90s and 2000s. Back in 1999, Coke Sprite had about 60%

of the lemon-lime soda market. Bruce wanted to convince consumers a smoother Sierra Mist was more refreshing. So he brought a film crew to Alaska. Off the boat we had a crane, we strung two guys up, and we dropped them 35 feet from above camera into the glacier water. Yeah, it's kind of like that. Introducing a shockingly refreshing new lemon line, Sierra Mist. Shockingly refreshing became the tagline for the first Sierra Mist ads, which mostly had the same vibes, a funny scenario that often ended up with someone drenched in water.

Pepsi spent tens of millions on the campaign. They went with the straight, what I call, product play. But over at Coke, Sprite brand manager Darryl DC Cobbin wasn't overly concerned. All about the taste of Sierra Mist and the refreshingness and the Sierras and all of that. They think they're going to unseat Sprite by talking about their product? They're going the, we're the better lemon-lime strategy? Caban knew that people under 30 made a huge chunk of lemon-lime soda drinkers. And he had spent the last decade attaching Sprite

to two things that increasingly resonated with that demographic, the NBA and hip hop. Image is nuts. With thirst. Thirst is a thing. Thirst is a thing. Thirst Sprite ads from 1994.

Others featured the rappers KRS-One, Missy Elliott, Nas. When Cobbin first joined Sprite, the target demographic was a black urban audience, which the data showed made up a large share of Lemon Lime fans. But as hip hop expanded to the white suburbs and beyond, Sprite became the fastest growing soda in the country. Hip hop became the vessel to carry that message around the globe. In response to Sierra Miss, Sprite didn't change its marketing approach all that much.

In the 2000s and 2010s, it kept inking endorsements from stars like Most Def and Drake. Sierra Miss peaked at around 14% of the market. Sprite never dipped below 50. And sure, hip hop wasn't the only reason Sierra Miss failed to compete with Sprite, but look at how Pepsi is marketing its Sierra Miss replacement, Starry. Mmm, this Starry is mad good.

Thanks boo. I Spice? Wait, who's that? It's my ex, Lemon Lime Soda. That's the Gen Z rapper I Spice in Starry's Super Bowl ad from earlier this year. She's running into an ex-boyfriend, a slightly older corny looking guy in a backwards baseball cap.

It's clearly supposed to be Sprite, even if Pepsi's Michael Smith won't say so out loud. Nobody wants to look like the washed up uncle who's still trying to pretend that they're cool. Darrell Cobbin, the Sprite brand manager from the 90s and early 2000s, actually sees some danger now in Sprite's decades-old marriage with hip hop. Classic hip hop, among some younger, is considered dusty. Can Sprite become dusty?

Sprite can become dusty quickly. By the way, if you're wondering, I tried Starry too. It tasted a lot like the other lemon lime sodas. I'm at Levin for Marketplace. Here's a data point on a Friday when going out for a bite to eat might be in your weekend plans. We, that is Americans, spent more than half a trillion dollars in the first half of this year at what are categorized by the National Restaurant Association as, and this is a quote, eating and drinking places. Big cities, small towns, we love to eat out in them all, but in those small towns

local fast food joints are king. Take you poor Mississippi or Citronelle, Alabama and Adamsville, Tennessee. They've all got less than 4,000 residents and they're all home to one particular fast food chain, Jack's Family Restaurants. As Corey Young explains now from Alabama Public Radio, for that fast growing quick service restaurant, rural towns are the secret sauce. Roy Holly orders his favorite sandwich at Jack's Restaurant in Citronelle, Alabama, The Big Bacon. He's an exterminator for a pest control company and there are seven Jack's restaurants in his rural

territory. Holly gets lunch here a lot. Probably once, twice a week, depending on where I'm working, what area I'm in. On the other side of the dining room, Robert Jarvis is on his second meal of the day here at Jack's. He appreciates having this restaurant in the small town where he grew up. There ain't much here, so you gotta eat where you can. Jack started in 1960 in Homewood, Alabama, near Birmingham. Today there are 261 restaurants owned by a big private equity firm,

though its jingle is less Madison Avenue and more of a nod to its southern roots. You'll go back, back, back to Jack, Jack, Jack, for more, more, more. Jack's. All about the South. Today, Jack's does open up new locations in big cities like Memphis and Huntsville, but about 45% of its restaurants are in small towns, populations of 7,000 or less. And that kind of rural footprint is unusual for quick service restaurants.

Scott Taylor is a food and beverage researcher with the University of South Carolina. Typically you want to be in fairly highly populated areas, right, because that's where saturation is, it's where growth potential is. But he says, Jax has a smart strategy. There's lack of competition, there's there's really no saturation. And small towns with limited dining options are eager to have a restaurant that opens early and closes late seven days a week.

But the beauty is somebody could come for breakfast and get a plate with eggs, bacon, a biscuit and hash browns and then come back at dinner and say they want chicken. Todd Bartmuth is Jack's family restaurant CEO. He says you'll only find Jack's in Alabama, Mississippi, Tennessee and Georgia. And he says there's plenty of room to grow in rural communities there.

Our development strategy is we sort of just go to the next town out. Each new restaurant brings about 40 new jobs to town. But most importantly, Jax brings sales tax revenue for the community. Jason Stringer is Citronelle's mayor. They were expecting to do 1.7 million a year in sales. And some of that helps fill the town's coffers, even with the tax abatement that the mayor says

the city gives Jacks. There's one more major ingredient in the Jacks expansion recipe, truck parking. Mike Holley, no relation to Roy Holley from earlier, is the third trucker in 20 minutes to pull up a big rig at the Citronelle Jacks. He's hauling cardboard boxes to chicken plants in Mississippi and stopped for lunch. Holley comes to Jacks mostly for the parking, but... They've got good food, good shakes, good ice cream. And those good shakes add up to a lot of business.

Jacks CEO says Jacks is on track to bring in more than a half a billion dollars in annual revenue in 2024. In Citronelle, Alabama, I'm Kori Young for Marketplace. ["Woodie Homebuyers"] This final note on the way out today of interest to would-be home buyers among you. I mentioned last week the average 30-year fixed mortgage could be had at 6.35%. This week says Freddie Mac 6.2%. Again, that Fed rate cut is priced in.

Our theme music was composed by BJ Liederman, Marketplace's executive producer, as Nancy Fargalli. Donna Tam is the executive editor, Neil Scarborough is the vice president and general manager. And I'm Kyle Rizal. Have yourselves a great weekend, everybody. We will be back on Monday. This is APM. Some of the toughest moments we'll experience in life often come with the hardest financial decisions.

Like how much to spend when your pet is dying. Or what to do if you uncover a loved one's financial secrets after they've passed. It's like having this albatross, this monkey on your back that you don't want amongst everything else. I'm Rima Chavez, host of This Is Uncomfortable, a podcast from Marketplace. This season, we've got a wide range of stories about life and how money messes with it, including the unexpected ways money can shape our journeys through loss and grief. Listen to This Is Uncomfortable wherever you get your podcasts.