Marketplace - Cool your jets! Hold your horses! Slow your (manufacturing) roll!

Episode Date: April 5, 2024

Treasury Secretary Janet Yellen is back in China, less than a year since her last visit. In 2023, she was focused on gently reopening communication channels. This time she has a clear message: You’re making too much stuff. In this episode, why the U.S., Japan and some European countries are pressuring China to slow its manufacturing sector. Plus, we’ll hear from cargo ship workers stranded in Baltimore and learn about the welder shortage.

Among the adjectives I've seen to describe today's jobs numbers from the Labor Department, blockbuster, blowout. The one that feels right to me, though, resilient. From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott, in for Kai Risdahl. It is Friday, April 5th. Great to have you with us on this Jobs Day. And what a headline, 303,000 jobs added last month.

For reference, economists were expecting around 200,000. Meanwhile, the unemployment rate ticked down just a touch to 3.8 percent. It's been below 4 percent now for more than two years, the longest streak since the 1960s. To talk about what all of this means about the economy and for interest rates, we have Catherine Rampell at The Washington Post and Gina Smilick at The New York Times. Great to have you both here. Great to be here. Thanks for having us. at The New York Times. Great to have you both here. Great to be here. Thanks for having us. So Gina, let's start with your initial reaction. What adjective would you use to describe this job market? Robust. I mean, this is a really, really, it's a really strong job market, you know, I think. And it's kind of good news on all sides, too. We're seeing very strong wage growth, but it is moderating a little bit, which is what my friends at the Federal Reserve really wanted to see. And at the same time, we're seeing this really, really solid job, these incredibly solid job gains really be enabled by an increase in population and an increase in availability among existing workers.

workers. So we're seeing this, you know, increased worker supply, which is allowing companies to hire more, which is sort of creating this positive feedback loop where you've got people working and they're spending money. And so other people are getting hired. And, you know, it's a very good news economy at the moment, I would say, as far as jobs are concerned. Catherine, my big question was why? I mean, how is this economy still producing this many jobs when interest rates are so high, relatively speaking? It has been something of a puzzle why interest rate hikes, which are intended to cool the economy, have not had apparently more of an effect. I mean, it's hard to know what the counterfactual is exactly, but they don't seem to have cool. The economy does not seem cool. I'll put it that way.

It's a pretty hot economy. And I think that there are a number of theories out there. One is that not being fully offset by younger native born workers entering the labor force. But on the other hand, you have a huge number of immigrants coming in who are disproportionately working age and are are able to fill all of those jobs that employers have available. And as long as demand remains strong, and again, it may have cooled somewhat because of those more restrictive financial conditions. As long as demand remains relatively strong and there are workers coming in to build stuff, to make stuff, to create services, that keeps the economy humming. And of course, they contribute to consumer demand as well. But I think it's really a supply side story. You have the untangling of a number of supply side problems, supply chain problems, as well as this influx of new talent coming in and filling jobs. And Gina, this is something you wrote about today, too, the role that immigration plays in keeping

this strong job market sustainable. So talk about what that means for employers. If they're able to fill jobs, they have plenty of workers, that puts less pressure on them to raise wages to attract people? Yeah, absolutely. And I think, you know, from a consumer perspective, we care about this because, you know, for example, if I really want to buy a new bike this year, but none of the bike vendors that I shop for bikes at are able to buy, are able to hire, then it's going to be much more difficult for me to do that. You're going to have all these problems and the sort of the chain along the way. But if we've got enough labor, then we can sort of provide more services and products to the economy. And it means that prices don't go up as much. It means that we don't have these bottlenecks that we experienced early in the pandemic that really push prices up pretty drastically. And so

I think that you've got, as Catherine was saying, you've got this nice untangling that's happening because we've got so many laborers, so many potential workers coming into this economy and really filling in needed positions. And so I think we've had a good outcome in that regard. And you've really seen the Federal Reserve in particular get a lot less nervous about the economy and the possibility of overheating because of strong job gains, specifically because this has happened. You know, they are looking at this world and they're saying, you know, very strong job growth, an economy that's really sort of growing gangbusters, but it's happening because of these supply side improvements, and those aren't inflationary. And so we can kind of tolerate them in a way that we wouldn't have if this was all coming just from the

demand side of the economy. So it's a good news story. Okay, so what does all this mean, Catherine, for interest rates and hopes, at least among some market participants, that the Fed would start cutting? Well, that's complicated. I mean, we do have a lot more data coming in between now and the next, at least the next Fed meeting, and then presumably after that as well. But in the meantime, if you look at how markets reacted to the jobs report today, they do seem to be intuiting that there may be fewer rate cuts happening this year, or at least later, happening later this year than had once been predicted. Like a month ago, if you look at markets, the trading activity implied that there was like a 70% chance of at least one Fed rate cut by June. I looked a little

bit before this show, and now it's less than half, you know, less than 50 percent chance that we'll have at least one cut by June. And that's, again, because the economy is very strong. We have seen some slightly hotter than desired inflation imprints recently. more positive interpretation of all of that is exactly what we've been talking about, that maybe you can have strong growth and not be worried about that pushing prices up too much because of these supply chain, excuse me, supply side improvements. But it's really hard to say. Again, we'll have to watch the other data that come in in the next few weeks. Yeah, and we'll find out a lot more next Wednesday, I think it is, when the Consumer Price Index comes out.

Well, Gina Smilick of The New York Times, Catherine Rempel at The Washington Post, we always appreciate your insights. Thanks so much. Thanks, Amy. Thank you. On Wall Street today, yeah, they like this report pretty well. We'll have the details when we do the numbers. We talked a little bit about wage growth in that jobs report.

Average hourly earnings were up 4.1 percent in March compared to a year ago. That's faster than the latest rate of inflation, which is good for workers. But it's also slightly less than the annual wage growth we saw in February. And that is a hopeful sign for the Fed as it keeps trying to tame inflation. Marketplace's Mitchell Hartman explains why. Wage increases peaked back in March 2022 at 5.9 percent a year. That was at the height of the crazy tight post-pandemic labor market. Now, says Frank Fiorelli at small business payroll processor Paychex, things are kind of coming off the boil or slowing somewhat. Small businesses, which have less wiggle room on wages,

have hiked pay just over 3% in the past year. Definitely coming down, the word we like to use, in balance. One thing in particular that's more balanced, says Fiorelli, quitting. Fewer people are leaving one job for another and landing a big raise in the process. Raj Nambuthri is North America director for staffing firm Manpower Group. Employees are definitely looking for some stability.

Employers are finding more stability too, says Julia Pollack at ZipRecruiter. They are experiencing an increase in the availability of labor and they're finding it slightly easier to hire. Pollack points out that even as wage inflation has cooled over the past year, price inflation has cooled even more. And so workers are coming out ahead. They've now experienced positive real wage growth since May of 2023. Though it still may not feel great, says Joanne Hsu, director of the University of Michigan Consumer Surveys. People really celebrate when they get

raises, right? And it doesn't feel good when a raise you get from a promotion or from good performance gets eaten away. Hsu says we tend to credit our own efforts when we earn more, but blame outside forces, the economy, store chains, politicians, when we have to credit our own efforts when we earn more, but blame outside forces, the economy, store chains, politicians, when we have to spend more of what we earn just to make ends meet. I'm Mitchell Hartman for Marketplace. Treasury Secretary Janet Yellen is back in China for a five-day trip. Her last visit less than a year ago was part of an effort by the Biden administration to reopen lines of communication between the two superpowers on issues affecting the global economy. But as Marketplace's Kimberly Adams reports, this trip has a different set of goals and different stakes. The U.S. is entering these discussions with a strengthening economy.

But on the other side of the Pacific, says Rosalind Shea, co-director of the Political Economy Program at Temple University. The Chinese government is more concerned about the Chinese economy. And in many ways, Janet Yellen actually has more leverage. Leverage to pressure the Chinese to rein in their manufacturing sector, says Logan Wright, director of China Markets Research at the Rhodium Group. The U.S. is arguing China is producing way more stuff than the Chinese people and global markets need at the moment. With subsidies in emerging industries like electric vehicles, for example, solar panels, other green technologies,

and there's concern that the weakness in the Chinese domestic economy is going to result in the export of a lot of that excess capacity abroad. So while Yellen is in China, says Josh Lipsky at the Atlantic Council, She is delivering a clear message that there is growing concern, not just in the U.S., but around the world. She's brought in Europeans and the Japanese on this. If this overcapacity isn't addressed, says Zongyan Zouilu, a fellow at the Council on Foreign Relations. That would mean domestic manufacturing would be less competitive as the Chinese imported goods, and that may even imply additional job loss. And it would also mean factory closure.

At just the moment when the Biden administration is trying to shore up American manufacturing. In Washington, I'm Kimberly Adams for Marketplace. Coming up. A dark, a dirty, a dangerous kind of dead end career. Where do I sign up? But first, let's do the numbers. The Dow Jones Industrial Average gained 307 points, 8 tenths percent to close at 38,904. 107 points, 0.8%, a close at 38,904.

The Nasdaq picked up 199 points, 1.2%, finished at 16,248. And the S&P 500 increased 57 points, 1.1%, and at 52.04. For the week, the Dow dropped 2.3%. The Nasdaq slid 0.8%. The S&P 500 lost 0.9%. Consumer credit jumped again in February by 3.4%. That's according to data out today from the Federal Reserve. A big part of that is credit card debt. Revolving credit increased at an annual rate of 10.2%.

Bonds fell. The yield on the 10-year T-note rose to 4.40%. You're listening to Marketplace. This is Marketplace. I'm Amy Scott. In a visit here in Baltimore today, President Biden pledged to rebuild the Key Bridge. There's also news the port of Baltimore could return to normal activity by the end of May. The tentative timeline from the U.S. Army Corps of Engineers comes as divers are still working to assess and clear the wreckage after the collapse of the bridge. For now, eight cargo ships are stuck in the port, including the Dolly, which hit the bridge.

The crews on those ships are used to being docked for only a day or so. Now they're looking at weeks. Marketplace's Stephanie Hughes has this story about life as a stranded seafarer. There are 159 crew members currently living on ships in the Port of Baltimore. All of them come from outside the U.S., countries like Romania, China, the Philippines. About half have to stay on their ships all the time because they lack the proper visas to come ashore. That's an estimate from Joshua Messick, who directs the International Seafarer Center here and is the port chaplain. Life at sea is by its very nature tedious. That's at the best of times. Now they're trapped. Messick is trying to make their lives here more

bearable. He's driving to the Fatra Nari. It's docked basically right next to the collapsed Key Bridge. This cargo ship has a Thai crew. They all have visas that allow them to go ashore. Messick is giving some of them a ride, and he has treats for everyone. I brought chocolate and coffee. The Fatra Nari delivered a shipment of aluminum here, and Captain Prachya Prangsiang says they'd been planning to go to a port in Pennsylvania.

All these crew members are still getting paid, even if they're not moving anything. Prangsiang takes us on a brief tour of the living quarters. The hallways are narrow. Most of the space on the ship is reserved for cargo, not people. In the galley, the next meal is already cooked. Chicken curry, spicy, not people. In the galley, the next meal is already cooked. Chicken curry, spicy, not yet. About eight crew members will miss lunch here. Messick, the port chaplain, is taking them shopping. In the van, they talk about the snacks they plan to buy.

Cheetos or something. Yeah, yeah. Also on the list, beer. It's chief engineer's peset to Makatanaki Lai's birthday next week. We make the party on the list, beer. It's Chief Engineer's Pisset Tamaka Tanaki Lai's birthday next week. We make the party on the Monday. Other times, they can watch movies, try to go online. Exercise is also an option.

Gymnasium. Gymnasium room, we have one board. Do you work out? Yes, yes, yes, yes. Some people, every day, every day, for me, no. As for work, the crew's focused on maintenance and making sure nothing's degrading while the ship's sitting idle. Through all this, they try to keep what they call a good seafarer culture. There's a sign on board the Fatra Nuri.

It says, guide us on the correct path. The captain says it's meant to keep all of them motivated. That's something they'll need to get through the weeks ahead. In the Port of Baltimore, Stephanie Hughes for Marketplace. This week, the federal government announced a $20 billion investment in so-called green banks. The funds come from the 2022 Inflation Reduction Act. The money will be routed through eight community lenders and nonprofits around the country geared toward clean energy and climate solutions. And it'll help finance residential heat pumps, community wind and solar developments, and other energy-efficient upgrades in low-income rural and tribal communities.

The hope is that some government backing will mobilize private investment in those projects. Marketplace's Savannah Marr has details. Investing in renewable energy often isn't all that profitable to begin with, and a project in a low-income community is more likely to be passed over by investors. Well, it typically is put into a high-risk category with the highest rates. Daniel Schwartz is with the University of Washington's Clean Energy Institute. He says some federal funding can sweeten the deal. It de-risks the whole portfolio. For every federal dollar spent, the EPA expects the program to generate $7 in private investment.

the EPA expects the program to generate $7 in private investment. For so long, we have not had that kind of capital. Donna Gambrell heads up Appalachian Community Capital, which will distribute $500 million in green bank funding. She says that could help finance everything from electric delivery trucks to rooftop solar panels in coal country. Really helping families and businesses build wealth, generational wealth. And reduce their carbon footprint. Still, Dan Schrag, a professor at Harvard, says $20 billion is a drop in the energy transition bucket.

Last year, the world spent $1.7 trillion on clean energy, and it wasn't nearly enough. To really get private investors excited, Tragg says the federal government needs to help make renewable energy more profitable than fossil fuels. I'm Savannah Marr for Marketplace. One industry that did a lot more hiring last month, per today's jobs report, was construction. Employers added 39,000 jobs in March, about twice the monthly average over the past year. Meanwhile, the Labor Department said earlier this week that the number of unfilled positions in construction at the end of February was near a record high. A surge in federal funding for infrastructure projects and chip factories and clean energy

manufacturing is boosting demand for workers to build those projects and highlighting a shortage of some skilled trades, especially welding. Marketplace's Justin Ho reports. The Southern California Welding Training and Testing Center in Oxnard, California, is a fairly large industrial space with a roll-up door and more than a dozen welding workstations lined up along the walls. And about 20 students working on various types of welding projects with kind of jargony names. Some of them are arc welding. You hear some TIG welding in the background now. MIG welding. So we've got all welding processes going all at once.

That's Jesse Guzman, the training center's founder. He says some of the students are straight out of high school. Others are looking for a career change. People that work in food service industries, barbers, people that work in different building trades, they wind up seeking welding because they are looking at something more rewarding. A big reason why it's more rewarding is the money. That's what got Nicholas Min to enroll here. He's 28, spent a few years in the Marine Corps as an aviation mechanic. After he left the Marines in 2019, he says he

worked in marketing, website development, and other online work. But the pay wasn't great, and the jobs were inconsistent. But a welding career? I could work at a union, whether it's the pipe fitter union or sheet metal union or iron worker union. A whole bunch of those unions pay $50 an hour, $50 plus an hour. Min says that kind of income would make a huge difference for his family. Being debt-free, not living paycheck to paycheck, making sure you got rent paid for, is definitely a big burden lifted off your shoulder. Manufacturers and other industry leaders are pushing that message, that welding is a rewarding and lucrative career,

because the profession has an image problem. There's a perception of a dark, a dirty, a dangerous kind of dead-end career. That's Monica Farr, executive director of the American Welding Society Foundation. She says changing the public's perception is important because ever since the mid-2000s, a lot of welders have been retiring. Her group keeps track of the national shortage of welders,

and Farr says it's growing. Our last numbers were 300,000 welders needed over the next four years, and now it's at 330,000. And while the supply of welders is going down, demand for them is exploding. The Infrastructure Act, the CHIPS Act, and the government's clean energy efforts rely on welders to build and upgrade roads, bridges, renewable energy infrastructure, and chip foundries. Then there's defense contracting. You know, we're also in fierce competition for that same labor pool.

That's Whitney Jones, the director of the Navy's submarine industrial base. She says the Navy's hoping to ramp up submarine production five-fold by 2028. But... If we don't have the people to make ships and submarines, to sustain and modernize those ships and submarines. It doesn't really matter what else we have. Jones says the Navy is making sure that training programs know what kind of welding skills it's looking for. But even the best classroom training can't teach some of the skills welders need.

That's where we have to do a lot of on-the-job training. Chris Blanch is the owner of Mavericks Manufacturing Partners, a company in Escondido, California that does advanced welding and metal fabrication for the aerospace and defense industries. The company's only been around for about a year, and Blench is still lining up contracts. He's also lining up welders. Because once the work starts hitting, everybody wants it now. We can't take six months to bring on the team and train them and so on. So we need to be ready. Back in Oxnard, California, Nicholas Mint, the welding student, says a better paying job isn't the only reason he's excited to

be a welder. He's a big car guy. Right now he's customizing a 95 Toyota Supra. And as a welder, he'll be able to build up any car he wants to. Call my friends over, build their cars, go to the track, wreck it, build it again. I mean, it's great. Min says welding car parts in his spare time will let him bring in even more money to support his family and his hobby. I'm Justin Ho for Marketplace. This final note on the way out today, Meta, owner of Facebook and Instagram, says it'll start labeling a wider range of video, audio, and images as made with AI starting next month. The new policy comes after the company's independent oversight board said the existing policy of only labeling videos altered to make a person say something

they didn't say was too narrow. Mehta said its manipulated media policy was written in 2020 when realistic AI-generated content was rare and the main concern was videos. But with the technology becoming increasingly widespread and hard to detect, the board recommended the policy also cover manipulation, showing people doing something they didn't do. Our theme music was composed by BJ Lederman. Marketplace's executive producer is Nancy Fergali. Donna Tam is the executive editor. Neil Scarborough is the vice president and general manager. And I'm Amy Scott. Have a great weekend. We'll be back on Monday. This is APM.

A lot of people spend a lot of money on things like skincare, fast fashion, and even surgery, all in the name of self-improvement. But as the price of perfection rises, when is it time to call it quits? I'm Rima Kheys, host of This is Uncomfortable, a podcast from Marketplace. This season, we dig deep into the financial trappings of self-care and the real motivations behind our spending choices. Listen to This is Uncomfortable wherever you get your podcasts.