Marketplace - Closer, but not there

Episode Date: September 11, 2024

Annual inflation, according to the consumer price index, fell to a multiyear low in August. That’s great, but we’re still half a percentage point away from the Federal Reserve’s 2% goal. What’s holding up prices? Also in this episode: Campbell’s wants us to know it sells more than soup, recession alarm bells are ringing — but maybe not for the reason you think — and will companies that already collect our data please stop sending us surveys?

Data, a bit more data, and then okay, fine, data from American public media. This is Marketplace. In Los Angeles, I'm Kyle Rizdal. It is Wednesday today, the 11th of September. Good as always to have you along, everybody. The marketplace macroeconomic number of the day today is two and a half. That's two and a half percent,

which is how much inflation we've seen in this economy the past 12 months, data, courtesy of the Labor Department and this morning's Consumer Price Index. It's the smallest increase in more than three and a half years and more to the point, it's just a half a percentage point above the Federal Reserve's 2% inflation target. It does kind of feel though like we've been this close to where the Fed wants us to be for a good long while now.

So why are we so stuck? Marketplace's Justin Ho starts us off. The parts of the economy where inflation is taking a while to come down are really in the services sector. For instance, inflation actually picked up last month in the food away from home category. Which reflects what? Well, that's like restaurants and what's a big component of restaurant costs is labor costs.

That's Menzi Chen, an economics professor at the University of Wisconsin. He says, yeah, the labor market has cooled off recently, but wages are still up there, especially in service sector categories, including the food industry. It's good to have wages rising. What's true is that's going to feed in possibly into costs that are passed on to consumers. Another service sector category where prices are kind of sticky is motor vehicle insurance. Michael Buglisi is a senior economist at Wells Fargo.

He says he can think of that as an echo of the sticker price inflation we saw early in the pandemic. As that receded, you started to see the insurance side of things. As people got back out into the world and resumed driving and has taken time for that to filter through, right?

It's not like it's an instantaneous thing. That echo effect could also be keeping travel prices high. The Labor Department's airfare index rose almost 4% in August. Ann Villamil, an economics professor at the University of Iowa, says we're still feeling the effects of all that revenge spending that happened later in the pandemic. People just said, I want to be able to go out and do things. So we've seen big increases in the demand

for airfare and hotels. That said, a lot of this sticky inflation is still trending down. One big example is the cost of housing. Housing just moves really, really slowly. Laura Veldkamp is an economics professor at Columbia. She says the reason housing prices look high is that the rents people pay right now are based on leases that were signed a

while ago. And so part of what we're picking up were the price increases that were decided on earlier in the year at a time when inflation was a lot higher than it is right now. I'm Justin Ho for Marketplace. On Wall Street today big down and then big up. We'll have the details when we do the numbers. Economists love their rules and their data and their indicators. It helps them figure out what's going on, which is great. The challenge, for us anyway, those who have to interpret those rules and data and indicators for regular people like you, is that that can get a bit weedy, you know?

We are, though, going to give it a shot. We got the latest jobs numbers last week, as you know, and as we talked about, unemployment bumped down just a tad to 4.2%. Now, that is not a bad unemployment rate at all, but both this month and last month's rate got a lot of people worried because they crossed a threshold triggering something called the SOM rule. The SOM rule is a pretty well-known recession predictor among those who follow this stuff,

and it is not the only indicator that has been raising people's eyebrows of late. So this week, we're going to dig in a little bit to see what has set those indicators off and whether we ought to be worried. Marketplace's Stacey Vanek-Smith has the first of two stories. When the August jobs report came out, 830 in the morning, it packed a punch. The Psalm rule had been triggered. It was like an economic fire alarm was going off. And at 831 in the morning, economists all over the country started getting frantic phone calls, all with the same question. Is the recession here? It was live on radio. They read the numbers out. They said, okay, so the SOM rule kind

of says we would be in a recession, but Psalm says we're not, right? Because just looking broadly at it... SOM the person. SOM the person. It says like we're not in a recession. This is Claudia SOM, the person, the economist who came up with the Psalm rule back in 2019. She was studying previous recessions to help policymakers prepare for the next one so they could get aid out to people before they were in deep crisis. And she knew unemployment patterns were the place to look. Whenever the unemployment rate

rose by half a percentage point within 12 months, it meant the country was in the beginning of a recession. The unemployment rate has historically done a really pretty good job of summarizing what's going on. Since the 1970s, the SOM rule has accurately signaled every single recession. So why is SOM the economist, discounting SOM the rule now? Here's the thing about the unemployment rate. It does not only go up when people lose their jobs, it can also go up when the number of people looking for jobs goes up. When you have people enter the workforce, it can take longer to find a job, even in

the best of times, that will push up the unemployment rate. It's kind of like a high school dance. You have the couples on the dance floor, and then you have some single people wandering around the dance floor looking for partners. Those represent our unemployed people. But then a really great song comes on. Everybody at the bar getting tips. And suddenly, a bunch of new people

edge out onto the dance floor, the wallflowers. They were at the dance. They just weren't out on the dance floor. They were hanging back. These are the weren't out on the dance floor. They were hanging back. These are the people who didn't have a job, but they also weren't looking for a job. But now they can't resist the siren song of Shibuzy.

["Bring a Friend"] Psalm says that's basically what happened in the labor market. Millions of people dropped out of the workforce during COVID and many didn't come back for years. Some were scared of getting sick. Some had childcare duties. Now a lot of them are jumping back in. At the same time, immigration has been ticking up in recent years. All of that is pushing up the unemployment rate. So you've got workers who've come in and are looking and the jobs are catching up.

At first when our wallflowers shimmy out onto the dance floor, it looks like there are more people without partners. Everybody's breaking up. This dance is a bust. But really there are just more people on the dance floor. It might take them a minute to find a partner, but when they do, the dance gets bigger and better. As the jobs catch up, it's a good sign.

You've got more people, right? So the economy is growing. More people looking for jobs means more people getting jobs and getting paychecks that they will spend on groceries and haircuts and cars, which means more business for those grocery stores and hair salons and car dealerships. The whole dance grows. But before we put on our dancing shoes, Sam says her rule is still a warning. And just because the SOM rule isn't telling us what we thought it was, doesn't mean

it isn't telling us anything. The SOM rule right now is overstating the weakness in the economy, but it is picking up on weakness in the economy. It's telling us something bigger than itself. It's telling us that the job market is softening. Sam points out that hiring is at its lowest rate since 2020, and job openings are at a three-year low. If those numbers don't pick up soon, it could mean a lot of wallflowers end up dancing on their own for quite a while.

In New York, I'm Stacey Vanek Smith for Marketplace. After more than 150 years in the business, Campbell is kicking soup to the curb. The Campbell Soup Company shall henceforth be the Campbell's Company. The switch is to better reflect its full range of brands, the company says, offerings that include Goldfish, Snyder's of Hanover, and Pepperidge Farm. It's also partly because the prepared soup business, as it's known, isn't quite what it used to be, especially when it's stacked up against snacks. But is a name change really enough to make a difference? Marketplace's Kristen Schwab looks at the strategy behind a rebrand this big.

When I say Campbell's, here's what Kim Whitler thinks of. Soup. I think of being a little girl and watching the soup commercials. Whitler is a marketing professor at the University of Virginia. For me, I specifically imagined that one from the 90s where a snowman eats some chicken noodle and turns into a boy. Nothing melts away the cold like a delicious hot bowl of Campbell's soup. Campbell's now wants people to associate its name with cookies and chips. Whitler says as a manufacturer, that's an important distinction to make for consumers,

but especially for retailers and investors. They're trying to send a message to the whole community of stakeholders that the brand is about a lot more than just soup. The name change could help Campbell's, for instance, acquire other snack companies. John Stanton, a former consultant for Campbell's, says with the acquire other snack companies. John Stanton, a former consultant for Campbell's, says with the word soup in the name. You may not feel they have the expertise because they're telling you they're a soup company and yeah, yeah, yeah, yeah, we have snacks too.

The new boiled down name, one that's more generic, less specific, it's a common step that happens when a company grows, says Phil Davis, president of Tungsten Branding, a naming agency. Dunkin Donuts became Dunkin, Kentucky Fried Chicken became KFC. Phil Davis And that's just the natural evolution of branding. Lauren Henry When a company is new, its name needs to say what it sells. But then… Phil Davis The thing that defines you confines you. It's ironic because the thing that you want to get known for, you become known for, and then you divorce yourself of that. He says the risk of this Campbell's divorce from soup

is pretty low. After all, the red and white can is iconic, immortalized by artist Andy Warhol. I don't think people are gonna think, oh, they've abandoned soup by doing this. But it does make the brand maybe a little bit more malleable to incorporate things that are, let's just say, soup adjacent. We started the program with the big picture news of this economy, Justin Ho on the CPI data of this morning.

It is though a core belief of this program that headlines and data are all well and good, but they don't mean anything if people and businesses are not feeling it in their day to day. So here's today's installment of our series, My Economy. I'm Jessica Mozaco, I'm the owner and winemaker of A.P. Wines, located in Newberg, Oregon. A.P. means and daughter, and it's named that because my father and I co-founded the winery together 21 years ago.

My dad, who was a software engineer, always had a hobby of making wine just for fun in the garage. And when I was growing up, I always helped him, which is translation for, I always cleaned a lot of things. After doing that for 20 years, he called me at my job in biotechnology in San Francisco and he said, I have an idea, let's start a winery together. As the owner and winemaker of a small winery, my role can be as varied as managing our sales

to things that seem as trivial as making sure that our tasting room is well stocked with toilet paper and paper towels. Our wines range from $34 to $70, depending on which wine it is and what the grapes are that went into that. We have seen costs increase across the board over the course of the past four years, largely due to labor costs. So really across the board on all of our service providers, even things such as bottling and cost of goods sold, costs have increased dramatically.

Over the course of the past few years, one of the components that has changed is that we are looking at earlier harvest times and a warmer climate. As a result, I decided to plant the rest of the property, which sits at a thousand feet. A thousand feet used to be considered too high of an elevation or too cool of an elevation to fully ripen wine grapes in our region. I planted it nearly two years ago and I should get a little bit of grapes next year, but really a more full load the following year. So you're talking

about a three or four year time frame where you have all of the costs, but no revenue opportunity yet. So this is an industry that requires patience. Our story is about family. It's how we started, why we make wine, and what I hope surrounds our wine after it leaves us. My daughter is nine years old, so it's certainly too soon to say whether or not she'll follow in my footsteps. But what I do know is that it inspires how I want to move the business forward. Jessica Mazzacco there, owner and winemaker of A Fee Wines in Newburgh, Oregon.

No matter what you do, where you live, or what you drink, we need you to make this series happen for us. So tell us, would you? There's a place you can do it. Marketplace.org slash my economy. Coming up... It's completely annoying. It's inappropriate. It's completely annoying. It's inappropriate. It's just silly.

I mean, you're gonna have to be more specific. First though, let's do the numbers. Dow Industrial's up 124 points today. 3 tenths percent finished at 40,000 to 861. Why then, Kai? The very happy music? Well, I'll tell you why. The NASDAQ added 369 points today, 2-2 tenths percent. 17,395. The S&P 500 up 58, just shy of 1-1 tenths percent there.

Ended things at 5-5-5-4. The giant Chinese battery maker CATL announced it's cutting its lithium production. Betsen shares in other lithium companies. Higher, Arcadium Lithium grew almost 15.5% in lithium. America's added 4.6% today. The English soccer giant Manchester United has lost two of its three opening games, and in the fiscal year that just ended, it lost nearly $150 million.

Shares in Man U conceded almost 4.6% today. Conceded? See what we did there? Bonds down, you'll land the tenure T-note up 3.66%. I guess you have to be a soccer fan. You'reem to be there. Bonds down, yield on the ten-year T-note up 3.66%. I guess you have to be a soccer fan. You're listening to Marketplace. Hi, this is Rob from London, Ontario. Marketplace is an amazing resource and part of my daily routine.

I get highly credible information delivered in an intelligent, interesting, and at times humorous, but always engaging manner. This is Marketplace. I'm Kyle Rizdahl. Back to this morning's data on consumer prices we go, specifically to page 9, about halfway down, where you'll see an item that's fallen significantly in price over the past year, used cars and trucks. They were off 10.4% in August from a year ago. That is the hard data. Here is the anecdotal. In the most recent beige book, which is the Fed's eight times a year region by region survey of this economy, the New York Fed noted that auto dealers have seen a, quote, shift

to older models of used cars for affordability reasons. Marketplace's Stephanie Hughes is on the used car beat today. Buying a used car these days might feel a little like time traveling. The average consumer coming into the market, their last purchase was about five years ago. Melinda Zabriskie is with Experian Automotive. And the sticker shock is intense. Used cars cost over 20% more than they did five years ago, according to the Bureau of Labor Statistics. Even though they've slipped in price since last summer, it's enough to make people want to hop in their DeLoreans and return to a cheaper time or to look for a car from a cheaper time.

What's more affordable is sometimes older vehicles, right? That are more worn or more used. Jeremy Robb is with Cox Automotive. He says another reason people are turning to older models is that a lot of younger used cars just aren't there. Those new cars that weren't made in 2020, 2021, 2022, they affected the new car market back then. They're really starting to affect the used car market now.

The majority of cars sold in the US are used, says experienced Melinda Zabriskie. And while older models may come at a lower price, they do have downsides. Like, it can be harder to get a loan for one. A lot of mainstream lenders won't finance a vehicle that's over nine model years old. You know, you're starting to look at bringing more cash into that purchase. And people who've bought old model high mileage cars in the past few years are now having

to deal with owning old model high mileage cars, says Robert Frick, an economist with the Navy Federal Credit Union. Robert Frick, The Navy Federal Credit Union They're breaking down and to add insult to injury, repairs are a lot more expensive now. Lauren Henry Some of that is because parts and labor have become more expensive. Frick adds that in the US, our car tends to be an expression of our identity, and it hasn't sunk in that

owning one now is a more expensive proposition. Robert Frick It will. Maybe it'll take a generation. Maybe it'll take five years. But it's going to sink in eventually. Frick says people need to start looking at their cars as a utility, something that's functional and gets the job done, even if it's not the latest model.

I'm Stephanie Hughes from Marketplace. At the risk of alarming you, consider for just a moment, would you all the ways that companies have of collecting data about us, their customers? They get us through our smartphones, they put web cookies on our computers to track our behavior online, they simply buy our information from data brokers. And yet there is still perhaps the most prized piece of data of them all, what we think of those companies. To find that out, they do things the old-fashioned way those companies do. They ask us in an email or a text or a phone call, and they ask over and over and over again. Marketplace's Daniel Ackerman knows whereof we speak.

Back in May, I went to Home Depot to buy some tomato seedlings. I picked out a couple healthy looking young plants, brought them home to plant in my garden. But before I even got them into the soil, an email appeared in my inbox. It was Home Depot asking if my purchase met my expectations months before these seedlings bore any fruit. These kinds of feedback requests seem to arrive in email after email asking me about pretty much everything I buy. It's completely annoying. It's inappropriate. It's just silly.

Fred Reicheld is a fellow at Bain, and he might not have much license to complain about all this because he kind of invented what many consider the gold standard of customer feedback questions. How likely is he'd recommend us to a friend? In the early 2000s, Rykel designed a survey to help companies figure out whether customers would become repeat customers. We tested a number of candidates, including how satisfied were you and what's your intention to repurchase. But how likely are you to recommend us to a friend was the one that actually generated useful data.

I didn't really understand the power of that. We were just doing correlations to real customer subsequent purchases. And that was the one that best predicted them in most industries. Go ahead, search your inbox for how likely are you to recommend to a friend. You've gotten this question a lot, and many others like it, in part because. All of this is automated. Sarah Moore is a professor of marketing at the University of Alberta. She says it used to be companies had to mail out surveys or

call you on the phone if they could find your contact info. Now though. We can spam you with surveys and text messages immediately after you purchase. There's no, like it comes with the receipt that's in your email because you used your credit card. Most of these requests, more than 90% of them, get ignored. They may annoy us, but studies show they don't much impact

our buying habits. And when we actually do respond, Moore says they can serve as kind of an early warning system. She gives the example of a big box retailer that was selling a defective Wi-Fi device. The company saw a jump in negative survey data. And so they were able to identify all the customers who had bought those before all those customers complained.

When you do a survey, you can quickly understand how customers feel about their experiences. Maxi Schmidt is a principal analyst at Forrester. She says companies can use survey results to coach employees or improve their product offerings. But, Schmidt says, firms need to be careful with surveys. Sometimes they're too long or can feel like an interrogation. Instead of being a tool that customers feel heard, they end up being a tool that customers feel not validated, not valued, and ignored.

Schmidt says there are just too many feedback requests coming at consumers these days. She thinks about surveys the same way she thinks about drinking wine. If you drink one glass of wine, it's good. If you drink two glasses of wine, it's better. But starting at three glasses of wine, it gets good. If you drink two glasses of wine, it's better. But starting at three glasses of wine, it gets worse again. That's the peak wine effectiveness. And in this industry, we've really moved past the peak survey effectiveness. Even Fred Reichelt, the guy who invented the refer a friend survey question, says there

are other ways to learn how customers feel without pissing them off. Like analyzing phone transcripts from customer service calls or tracking customers online. You can use digital signals and eventually AI to get a deeper understanding and stop pounding your poor customers with survey requests. For now, the requests just keep rolling in. And as for those tomato seedlings I bought way back in May. All right, got a nice red one there, ready to pick. Let's try it. A pretty good tomato. If you're listening, Home Depot, I'm Daniel Ackerman for Marketplace.

This final note on the way out today, another inflation data point perhaps of interest. Argentina reported consumer prices today up 4.2% July to August, again in one month, 4.2% up and this is not a typo, 236.7% from a year ago that is, believe it or not, actually down a little bit. Our media production team includes Brian Allison, Jake Cherry, Jessam Dooler, Drew Jostant, Gary O'Keefe, Charlton Thorpe, Warren Carlos Torado, and Becka Weinman. Jeff Peters is the manager of media production, and I'm Kai Rizdal. We will see you tomorrow, everybody. This is APM. Hi, this is Rob from London, Ontario. Marketplace is an amazing resource and part of my daily routine. I get highly credible information

delivered in an intelligent, interesting and at times humorous but always engaging manner. My day would be lessened without access to Marketplace. Join me in supporting Marketplace with a gift today. Go to marketplace.org slash donate.