Marketplace - Credit keeps consumers consuming

Episode Date: January 17, 2025

Retail sales ended last year strong, despite a somewhat uneasy economic mood. Today, we dig into a tool many spenders used to keep up: credit. Non-housing debt just hit a record high, according to the New York Federal Reserve — that includes credit card and buy now, pay later purchasing. Also in this episode: Activist legal groups strategize in anticipation of Trump’s second term, history-themed media is having a moment and housing starts leapt up from November to December.

This week on Imperfect Paradise, inside the first five days of LA's destructive wildfires, we sit down with host of Air Talk Larry Mantle. Through moving Collins and Larry's insight, we piece together one of the scariest weeks in LA history. There's nothing else like what we've gone through with these twin fires. On Imperfect Paradise, wherever you get your podcasts On the program today the week that was of course and the four years to come in this economy from American public media This is Marketplace.

In Los Angeles, I'm Kyle Rizdal. It is Friday today. This one is the 17th of January. Good as always to have you along everybody. We will get to the next four years in this economy in a minute or two. But before we do there is this week's business to attend to. Katharine Pels at the Washington Post. Jordan Holman is at the New York Times. Hey, you two. Hey, Kai. Hey, Kai.

Jordan, let me start with you and retail sales. The American consumer keeps on buying. Here's what I want to know from you. In your conversations with the people who are running retail in this economy. How do they keep us hooked? How do they keep us spending? Because, I mean, we've been saying this for years now. The consumer's driving this economy, and how long can it last?

And, oh, look, it still does. Okay, I talked to several retail executives this week, and some of them said they were even surprised by how much people were spending in November and December. But I think it's a few things. It is actually becoming harder to sell people on necklaces or something higher priced. But they're using a lot of personalized data or very specific ads. They're figuring out ways how to entice people.

And also the other thing you think of a Walmart or a Costco, this kind of one-stop shop retailer, they're the ones who are really gaining market share. You go in for one thing and then end up with all this other stuff that you leave with. Are they worried at all that it's going to slip? Well, let me ask a better question. It's all groceries and essentials, right? That's actually what's going on. Well, for the November, December time period,

a lot of the retail sales was boosted by cars, by clothes, by some of those purchases, but the executives will caution. The fourth quarter is like its own beast. They're not saying, okay, well, we think now everyone's gonna spend so much in 2025. They're still very cautious because there's a lot of macroeconomic uncertainty going into this year. Yeah, fair enough. Catherine, I want to talk inflation with you, the core numbers this week, a slight downside,

surprise. Inflation is still a factor. Here's what I want to know. How come the market seems to be ignoring, number one, what the Fed is saying, and number two, what the Fed is doing? Bond yields are up, mortgage rates are over 7%, and it's like the markets are going, yeah, we don't care. That's an excellent question, and I'm not sure I have a great answer for it. There has been, I would say like over the last couple of years, markets have significantly downplayed any sort of hawkishness that, or that's in my view anyway, that the Fed has

signaled. Like they keep on saying we're going to cut rates less frequently, or they keep on signaling that there's more hesitation anyway about continued rate cuts. And markets are like, eh, whatever, you know, we don't really believe it. You know, eventually the markets catch up and they do price in the fact that the Fed is, you know, less likely to cut than, you know, the Fed itself had forecast a year or so earlier.

But it's really perplexing. I mean, I think it matters, of course, that corporate tax cuts are on the table and that's boosting equity prices and that's maybe making people feel a little more bullish. But there's a lot of uncertainty right now. So there are many different ways to read the data. Is there inflation uncertainty, Catherine, do you think? If you look at the surveys of consumers, there definitely is. There's a lot of uncertainty about inflation and a lot of political polarization even about whether inflation is expected to continue cooling or to go up. If you ask Republicans, they say that they think there's gonna be like no inflation over

the next year. Democrats say they think there's gonna be a lot. So it really depends. And what the incoming president does may affect the answer to those questions as well, right? If we have tariffs, if we have mass deportations, if the new president decides to politicize the Fed, all of those things would affect the answers to those questions, right? Jordan generally speaking the vibe is whether founded or not the vibe is that that a Trump and the second Trump administration will be more friendly to business

That will then lead to better economic times and consumers will be likely to spend more spend more Do you find retailers buying into that and are they optimistic for 2025? Yes, I think a lot of them are optimistic and they're point to the fact that that's kind of what happened in the first Trump administration. But they will also mention some of the things Catherine just did too, immigration, what could that mean or the lack thereof, tariffs, that all of those things could impact how the consumer mindset is. So they're still also planning cautiously. It's always better to, you know, what's it called,

under-promise, over-deliver. And so it seems like that's kind of the vibe, just because they're not quite sure, and we'll get more insight in a few weeks, but it's a bit too early. Yeah, wait, what's coming up in a few weeks? Is there something not on my calendar that I should be paying attention to? No, just once Trump like starts enacting things.

Well, yeah, well, look, I mean, we're not going to know until we know. But look, Catherine, that gets me to my last question. It goes like this. And I'm reasonably sure you and I have talked about this before. Presidents often get too much credit for what happens in an economy and they also get too much blame, right? Because generally speaking, presidents have not had a lot of instantaneous control over what happens in an economy. That seems to be different come Monday

when President Trump will lean very heavily on the levers that he has. Yes. Unfortunately, I don't think he's going to do a lot of the things that consumers or voters elected him to do. Whatever levers he has, they don't include lowering the price of eggs and bacon. So that's not going to happen. But there's a lot of stuff he could do to mess things up. I mean, I think in general, when the economy is going well, there's not

a ton of tools available to the sitting president to make it go even better. But there are a lot of missteps that they could take to knock things off course. So we've talked about tariffs. Tariffs would be extremely disruptive to consumers, to businesses, exporters, you name it, entire supply chains could get uprooted. Major changes to the immigration system. Again, immigration is part of the reason,

high levels of immigration is part of the reason why we've had inflation cooling, in fact, for the last few years, why we've been able to sustain such high job growth. There's a lot of demand for workers and the workers who are coming in, you know, working-age immigrants are filling some of those jobs. So if he shuts off that spigot, whether we're talking about illegal immigration or illegal immigration, that could throw the U.S. economy off course as well.

And then as you and I have talked about before, and as I alluded to earlier, if he messes with the Fed, that could cause a lot of damage. If Trump just sits back and does kind of nothing, he's actually inheriting a very good economy right now. Now, whether he would get, he should get credit for it, Biden should get credit for it,

lots of other things should get credit for it, we can debate another day. But yeah, I think there's a lot of risk for things that this president has talked about doing that could in fact have major effects on the economy. Catherine Rampel at the Washington Post on this Friday, Jordan Holman at the New York Times. Thanks you two. Thanks, Kai. Have a nice weekend. Wall Street to end this week, the Bidenman at the New York Times. Thanks, you two. Thanks, Kai. Have a nice weekend. Wall Street to end this week.

The Biden era ends on an up note. We will have the details when we do the numbers. With apologies to W.P. Kinsella, he wrote the book Field of Dreams, you'll see where I'm going in just a second. With apologies, if you build it, they will come if they can afford it. We got an update on home construction today. Housing starts, projects that are breaking ground, were up 16% in December from a month earlier. And that's a bit surprising,

given how expensive it is to build homes right now. Construction loans ain't cheap, see also the interest rates that I was talking about with Catherine. And there are shortages of building materials and skilled labor too. Marketplace's Justin Ho has more on that December uptick and what the coming year might bring. out with Catherine. And there are shortages of building materials and skilled labor too. Marketplace at Justin Ho has more on that December uptick and what the coming year might

bring. Today's report raised a few red flags for Ryan Sweet, chief U.S. economist at Oxford Economics. He says, for one, construction usually slows down in December when it's really cold in parts of the country. And when you look at the types of construction projects that broke ground, it was mostly apartments. And that's the most volatile segment of the housing market, particularly when it comes to the construction side. Sweet says in December, apartment construction probably looked higher because in the previous

month it was slow. We've had a string of natural disasters. We've had hurricanes. That kind of teed us up for a decent rebound in December. But there are some signs that the construction market is actually improving. A survey out this week from the National Association of Home Builders found that builders' sentiment rose. And Odeta Cushi, deputy chief economist at First American, says permits for new single-family homes ticked up a little.

Existing home inventory is limited and so you need more new homes being built to sort of fill in the gap. That's because there's still plenty of demand for single family homes, even though prices and mortgage rates are still high. Kushi says it helps that home builders have a few tricks they can use to encourage buyers. They can offer everything from price reductions to mortgage rate buy downs that that can help a potential homebuyer make the numbers work. Meanwhile, apartment developers will likely focus on building more affordable rental units. John Kirk is the founder of the Lightpath Company, an apartment development firm in New Braunfels, Texas. He says developers can build smaller units,

they can use cheaper materials, and they can try to get concessions from local governments. Tax abatements or fee waivers or They can use cheaper materials and they can try to get concessions from local governments. Tax abatements or fee waivers or some type of agreements to provide a more affordable product. Kirk says apartment construction is still going to be a challenge this year, especially since construction loans are expensive. But he says as long as builders can make affordable units, construction could pick up.

I'm Justin Ho for Marketplace. Jordan was giving us the behind the scenes on the retail sales numbers we got this week, how those retailers are keeping us hooked. One thing we really didn't get into though is that more people are using credit cards and buy now pay later programs as they buy. Non-housing debt, that's the actual term that includes credit cards, has hit a record high. That's according to the New York Fed. Marketplace's Kristin Schwab looks at how long

consumers can keep on consuming on credit. This story begins with a familiar narrative, the tale of two households. On one side, you have lower income Americans relying more on credit cards to pay for essentials like groceries and gas. And then there is the other half. Spending is being driven by upper income households. Ted Rossman, a credit card analyst at Bankrate, says this is usually the case, but is especially

true now. People who own their homes, their finances have been buoyed by rising property values and low mortgage rates they locked in a few years ago. Meanwhile, unemployment is low. And even if it doesn't feel great that inflation is gobbling up a lot of your wage gains, at least there are wage gains. All in all, Rossman says the debt to asset and income ratios are looking safe. Despite that, though, nearly half of Americans carry month-to-month credit card debt. And interestingly, a growing number of those people are upper-income households, says Atif

Mirza, senior vice president of digital insights at VantageScore. The rate of growth and delinquencies for high-income consumers were much faster than the lower-income consumers. Higher-income consumers aren't just increasingly spending more. They're increasingly paying off less. Odysseus Papadimitriou is CEO of WalletHub. This is the time to make your debt smaller, not to expand your debt levels. And unfortunately, most people use the good times to expand the debt levels.

Lifestyle creep is real. And Papadimitriou says some of the habits people formed since the pandemic, traveling and shopping and dining out, some of them have stuck. And he doesn't think those habits will change soon. So the question is not whether we're going to reach a breaking point. The question is when we will reach that breaking point. He says the breaking point is when the job market goes south and people can't afford to keep spending. I'm Kristin Schwab for Marketplace. Coming up.

The revolving door, as it were, is actually helpful to both sides of this market. If you say so. First, though, let's do the numbers. Dow Industrial has picked up 334 points today, 8 tenths percent, 43,487. The NASDAQ increased 291 points. That's about a percent and a half 19,630 the S&P 500 added 59 points 1% even 59 and 96 there for the five days gone by the Dow grew 3.7 percent the Nasdaq climbed two and a half percent S&P 500 elevated itself 2.9 percent Justin Ho is telling us about the jump

in housing starts Taylor Morrison Home Corporation down 1.1 percent today KB home Slid about a half percent Smith Douglas home corporation gained one and four tenths percent today electric vehicle maker Rivian automotive Has finalized an agreement with the Department of Energy to build a new manufacturing facility in Georgia 7500 jobs on the line Rivian nonetheless down 1.6%. Bonds down, yield on the 10-year T-note, 4.62%. You're listening to Marketplace. Hi, this is Nicole from Camp Hill, Pennsylvania. I'm always surprised how much content Marketplace can pack into 30 minutes. Listening is part of my daily routine.

I love the way they make the content digestible and relatable for us folks who don't have a strong background in economics or business. Join me by making a gift to Marketplace today at marketplace.org. This is Marketplace. I'm Kai Rizdal. I have said more than once on this program, I am reasonably sure that history is cool, or more formally, that history really matters. that history is cool, or more formally, that history really matters. History is also, it turns out, a business model. There was a story in Bloomberg the other day, the title of which was,

The Business of History is Booming. Will Dunn wrote it. He's the business editor of The New Statesman over in the UK. Well, it's good to have you on the program. Thank you. Give us sense, would you, just as a ground truth here, how well is history doing sort of as a genre in the business world?

It's doing incredibly well. So you might have noticed that in bookshops across the country and indeed around the world, lots of books aren't selling that well, but the one shelf you will always see in every bookshop is a well-stocked history shelf. That's been true for a long time, but now it's really swelling in popularity. So in the UK and Ireland, history sales, book sales, the highest since records began. And in the US, so the whole US book market is pretty much flat apart from a few genres, one of which is history, which has grown by about 6% in the last year. And in podcasts, it really is exploding.

The biggest history in the podcast in the world is the rest is history, and that's getting 12 and a half million downloads a month. Also, just for public radio listeners here in the United States, to put this into context, the rest is history gets more downloads than this American life. That's right, yeah.

Yeah, which is not nothing. Okay, now. It's pretty big. Why? Why is this happening? Well, I think there are a few reasons. Like I said, history has always been popular. I suspect it has something to do

with the current moment that we are in. And in moments of profound political or technological or social change, people often look to the past. So this was true of Victorian Britain, for example. Their society was changing. They had the Industrial Revolution, they had new technologies, and they were obsessed with Egyptology.

They're obsessed with the ancient world. And so I think it's a lot to do with that. It's also a lot to do with podcasts themselves. People really, really like it. And I think there's just a lot of people out there who are doing a really good job of telling those stories. We'll get to the podcast in a second. But I think also it's interesting to note that,

as you pointed out in this piece, sort of academic history is on the wane, right? Fewer people are actually studying it in school. That's right. Yeah. So that's the other side of this, is that university admissions for history degrees are going down. That, I think, is partly to do with the long-term trend in the decline of the humanities, because university keeps getting more and more expensive, and people rightly think about, oh, what's going

to be the job I'll get at the end of this? And not a lot of teenagers think, oh, great, I'm going to make my millions as a historian. They could be wrong about that actually, by the way, because history is a great preparation for lots of different jobs. You're preaching in the choir here, pal. I'm a history major. I was a history major way back. Yeah.

It's fantastic preparation for lots of different careers, but it doesn't look like that from somebody, a teenager, choosing their major. On the podcast thing, as we were talking about before we turned the microphones on, I am a recent discoverer of and now newly obsessed with The Rest is History, which is, as you point out in this piece and will be self-evident to anybody who listens to it, it's two middle-aged English white guys talking about history, which you wouldn't think would be gripping. But the point is, yeah, it's about the history,

but it's also about the parasocial relationship here, right? It's about the relationship that we as listeners have with these people who are saying these interesting things. That's right, yeah. I mean, you, um, perhaps may experience this yourself, your listeners, uh, kind of short, which I enjoy, you know, it's a key part of how I do what I do. Yeah. Yeah. I, you know, um, is quite a personal experience listening to somebody's voice,

especially, you know, in your headphones for perhaps for hours a day and the, the company behind the rest is history, Goalhanger. They know that and they deliberately seek that. They concentrate on the relationship between the two hosts. And that really helps with the, you know, when it's people who you have a kind of feeling of a social relationship with, that really increases your personal feeling of investment in the story.

Goalhanger is quite an interesting company. We should actually just do a whole separate thing on that. Well done. The new statesman over in the UK wrote in Bloomberg about the business of history. Well thanks a lot. I appreciate your time. Thanks for having me on. Lawyers are surely among the busiest people in President-elect Trump's retinue as the incoming administration readies its initiatives and executive orders, proposals that will

surely be challenged by those on the other side. The presidential transition offers a window into the Washington legal industrial complex, as Marketplace's Kimberly Adams reports. Many of the groups that opposed Trump in his first term were a bit blindsided by his 2016 win and had to scramble to respond to his policies and practices. One thing that was very different in 2024 from 2016 is I don't think anybody was totally surprised this time. Noah Bookbinder is president of Citizens for Responsibility and Ethics in Washington.

It supported some of the efforts to block Trump from running for office again, clearly without much success, and filed briefs alleging a variety of misconduct during Trump's first term. Even when they weren't successful, they did learn what kind of resources it takes to fight the Trump administration in court. So this time, says Bookbinder, they have a plan. We've had job postings before the election. We've had more after the election.

We are doing some hiring. Bookbinder says many civil society groups are updating their strategies in light of what they learned during the first Trump term and its aftermath. A lot of people tried a lot of things in the first Trump administration, and some things worked well in pushing back against abuses and corruption,

and some things worked less well, and maybe it's a time to be a little bit more strategic. The American Civil Liberties Union, for example, will be focusing a lot more on local action. The ACLU successfully challenged some first-term Trump policies on immigration and funding for the border wall. This time, says Cecilia Wong, national legal director for the ACLU.

One of the big differences between what President Trump did in his first term and what he is promising to do in his second term is that he has said that he is going to launch the largest mass deportation operation in U.S. history. Wong oversees about 200 lawyers and support people who make up about 30 percent of ACLU staff. And she says many of them are or will be deployed to the towns and cities, farms and factories where immigration raids might happen. And so I think that what we're going to be doing is fighting back in communities around the country. And the goal is to make for longer range change

in terms of federal policy. And to help with these efforts, we're likely to see lawyers from the previous administration, Biden's, eventually in court opposing efforts by the Trump administration to unwind their work, the old revolving door. You know, many career lawyers are mission driven.

Deb Connors with the law firm Morrison & Forster, but spent decades in the Justice Department. She says lawyers in appointed roles usually decamp for the private sector after their administration's term is up. And for the lower level, career attorneys, especially those passionate about their work, say on environmental regulation or antitrust enforcement.

And if they see that that's going to kind of come to a standstill where they are, then they're going to look for other opportunities. The money can be a bit better on the private side for the former feds. Plus, says Conner, having that in-house experience can make things a bit easier for government lawyers when they're sitting across from someone who has walked in their shoes. They understand how these matters work.

That's very helpful. So I think the revolving door, as it were, is actually helpful to both sides of this market. That may not make the coming litigation any less contentious, but it can help smooth the logistical side of things. In Washington, I'm Kimberly Adams for Marketplace. This final note on the way out today, which comes with the acknowledgement that sometimes the numbers involved in government finances are so big they can seem like funny money.

They are, however, very, very real. The Congressional Budget Office was out with its 10-year budget and economic forecast today, and let me just tell you, there are a whole lot of zeros in there. The CBO says the federal deficit this year is going to be $1.9 trillion. Deficits, again, are the annual shortfall between what we take in and what we spend. In all, by 2035, federal debt, that's what we owe since Alexander Hamilton was Secretary of the Treasury, that's going to be $52 trillion. And that is without, it should be pointed out, the

four or so trillion dollars that extending the Trump tax cuts are going to cost. Our theme music was composed by BJ Liederman. Marketplace's executive producer is Nancy Fargalli. Donna Tam is the executive editor. Neal Scarborough is vice president and general manager. I'm Kyle Rizdahl. Have yourselves a great weekend, everybody. We will see you again on Monday. All right?

This is APM. Hi, this is Michael from Sinking Spring, Pennsylvania. Marketplace is both enjoyable and extremely informative. Hi, this is Michael from Sinking Spring, Pennsylvania. Marketplace is both enjoyable and extremely informative. Kai and the reporters go out to all kinds of people in the community and they ask straight ahead questions like, how are you holding up these days? It's very personal and as we listen, we get a good sense of the challenges people face as they are trying to make it from day to day.

I listen to the Marketplace podcast every day and have been doing so for a number of years. It's a breath of fresh air that helps me understand the economic world better. Join me by making a gift to Marketplace at marketplace.org slash donate.