Marketplace - GDP grows more slowly than expected

Episode Date: April 25, 2024

Gross domestic product grew by 1.6% in the first quarter, slower than expected after the six-quarter steak of 2% growth or more. How will the Federal Reserve respond to this data when making its next interest rate decision? Also in this episode: The new deep-water channel helping cargo ships leave the Port of Baltimore, protecting trade secrets with noncompete agreements, and the struggling pneumatic tube business gets a boost from the cannabis industry.

Hey, if you're listening to this, I will assume you're at least interested in money, understanding the economy and finances as well. Some of us now want to get the next generation interested as well. Check out Million Bazillion, Marketplace's award-winning kids podcast that breaks down money to help dollars make more sense. Tune into Million Bazillion wherever you find your favorite podcasts. A whole new season is out now. Million Bazillion is presented in partnership with Greenlight, the debit card and money

app for kids and teens. Greenlight helps kids and teens learn to earn, save, spend wisely, and invest. Get one month free and an extra $10 when you sign up for a Greenlight account at greenlight.com slash million. Growth is slowing, ships are moving, birds are migrating, so let's get going ourselves. From American Public Media, this is Marketplace. In Washington, DC, I'm Kimberly Adams in for Kai Rizdal. It's Thursday, April 25th.

Good to have you along. GDP, gross domestic product, is a measure of all the goods and services produced in the economy, and it's generally used as a shorthand for sizing up economic growth. According to the Department of Commerce today, the U.S. economy continued to grow between January and March, but at a slower clip than expected. GDP expanded at an inflation-adjusted rate of 1.6% in the first quarter, snapping a six-quarter streak of 2% growth or more. Marketplace's Savannah Marr explains. Let's start with the good news. Consumer spending, the force that's been booing economic growth for months, still looked solid in this report.

I don't know if everyone's getting tired of that R word, but I'd rather use resilience as the R word than recession. Economist Jennifer Lee with BMO Capital Markets says strong wage growth is helping us keep up with inflation. And while we bought a little less stuff in the first quarter, spending on services more than made up for it. People are still going out for dinner, people are still staying at hotels. Now the bad news. Business leaders aren't feeling quite as confident.

I think we have had a tumultuous quarter. John Lear with Morning Consult says inflation proved stickier than we hoped early this year, sending interest rate forecasts all over the place. That creates some divergent expectations for businesses and in turn in business investment. Inventory shrunk in the first quarter, sometimes a sign of caution or uncertainty. The report also looked at trade, the country imported far more than it exported. But Jason Furman, an economist at Harvard, says those drags won't necessarily endure. What depressed the GDP number was volatile categories that I don't expect to see continued.

In other words, things like inventory and trade tend to jump around a lot. Consumer spending is more steady. But he does see one serious red flag in this report. CorePCE, the Fed's favorite measure of inflation, clocked in at 3.7% growth in the first quarter, higher than expected. And so that was a bad surprise here. That's the biggest news for the Fed. And a data point they'll be weighing ahead of next week's meeting. I'm Savannah Marr for Marketplace. One thing that tends to help GDP is smooth supply chains, some of which have been disrupted due to the Baltimore bridge collapse last month. There have been eight cargo ships stuck

in the port of Baltimore for more than four weeks now. They've been unable to move beyond the wreckage of the collapsed Francis Scott Key Bridge. Today, that finally changed. Salvage crews cleared a new channel through the waterway. It's 35 feet deep, which will allow several of those ships to move through it. Marketplace's Stephanie Hughes has more on what that means for the business of shipping and the crews of those ships, too. The shipment of aluminum that the cargo ship the Fatra Nuri brought to Baltimore was unloaded weeks ago. The ship has a Thai crew, and Captain Prashya Prangsean says they learned yesterday that they're finally scheduled to sail through the channel today.

It's good because we stay here too long. The crew's shore pass has expired about a week ago. Since then, they've been confined to the ship, which they've spent a lot of time maintaining. Prangsan says that the container ship Dali's collision with the bridge made him hyper aware of all the things that could go wrong. We have to know our ship and we have to in the emergency case what to do. He doesn't know where the ship will go next. He says the plan is to get through the channel safely, drop anchor, and await instructions. But just getting these cargo ships moving is good for business. The fact that they're finally leaving, right, there's a large opportunity cost to having

sat there the entire time. Christina DiFasquale is a professor at Johns Hopkins Business School. She says it's hard to know the total cost to the economy of the ships being stuck, but estimates it's at least $10 million for each one. In terms of lost time, extended wages that are being paid, but also not being able to deliver those products or use that ship for other things that they hadn't planned for. The ships leaving today is a big step for the port as well. Deepa Skolay says there's an emotional value in seeing this happen. Of having a checklist. And as you continue to make progress, that's obviously going to

keep spirits up. On the Fatra Naree, Captain Prascha Prangsthan says his bosses are ready for the ship to get moving. He has a couple months left in his contract. Then he plans to return to his home in Bangkok and take his family on vacation. Their favorite destination? The sea. But we're used to the sea. Yeah, but no problem. He says he doesn't plan to bring them to Baltimore, at least not anytime soon. In Baltimore, I'm Stephanie Hughes from Marketplace. GDP report. We'll have the details when we do the numbers. Well, that was fast. Within a day of the Federal Trade Commission issuing its ban on non-compete agreements, the U.S. Chamber of Commerce and other business groups sued to block it. About one in five workers in the U.S. are bound by a non-compete clause, which typically means they can't work for an employer in the same industry or

start their own competing business for a period of time. Now companies often argue that they need these non-competes to protect their trade secrets. But do they? Marketplace's Megan McCarty Carino reports. What does a world without non-competes look like? California. The state basically banned them back in the 1800s, says Mark Lemley, a law professor at Stanford. You know, banning non-competes doesn't mean people are free to do whatever they want.

For instance, an engineer who worked on self-driving cars at Google was found to have violated trade secret law by taking documents to found a competing company that was then bought by Uber. California law says we can't stop you from going to work for Uber but we can absolutely stop you from taking the secrets with you. All states have some form of trade secret protection and there's been a federal law on the book since 2016 but in order to qualify as a trade secret, the information has to be actually valuable and secret.

Like the closely guarded blend of 11 herbs and spices in KFC's fried chicken, says Doug Braley, an employment attorney in Boston. It's not even something that every single employee has access to, right? It's probably in some vault somewhere or it's behind a bunch of passwords. For less tasty IP, Braley says companies can turn to the other nones, non-disclosure and non-solicitation agreements, which bar employees from taking confidential information, clients, or staff when they leave. There's still a lot of arrows in the quiver for employers that want to protect the real

important things about their business. Tory Summey, an employment attorney in Charlotte, North Carolina, says he's already advising clients to move away from non-compete agreements and towards policies that more directly address what employees can and can't do with company secrets. That means more onboarding sessions, bigger employee handbooks, and tighter cyber and physical security. I'm Megan McCarty Carrino for Marketplace. Over the past few decades, ATMs and online accounts have just about killed the drive-through window at the bank.

And that's been bad for the companies that sell pneumatic tubes. You know, with the canisters, you put your check and deposit slip in and then they get whisked away by air pressure. But there is a new market for pneumatic tubes, and it's green, as in cannabis. Matthew Algio has the story. There's a scene in Elf where Buddy discovers the wonders of the mail room's pneumatic tube and gets his head sucked onto it. Elf might be a fairy tale, but once upon a time pneumatic tubes really were a big deal. The golden age of pneumatic tubes was the late 19th into the early 20th century. Holly Cruz is a communications professor at Rogers State University in Oklahoma, and she studies obsolete technologies. Back then, she says major cities like New York,

Philadelphia, and Washington, D.C. had miles of underground pneumatic tubes. Pneumatic tube infrastructure was a way to quickly transport messages, both the mail and telegraph messages, in urban areas, bypassing the slow traffic on the streets. In 1900, Postmaster General Charles Emery Smith said it wouldn't be surprising to see quote the extension of the pneumatic tube system to every house. Alas, modern improvements like the telephone and highways killed that idea, but the tubes are still used in hospitals for moving medications and specimens and in recent years another industry has led to a bump in sales, cannabis dispensaries.

Business changes, but a lot stays the same. You know, there's always some sort of physical product that needs to be transported, and that's what Pneumatic Tubes does. Matthew Kelly is a sales rep for his family's company, Kelly Systems, which has been in the Pneumatic Tube business since 1904. He says the systems are becoming common in cannabis dispensaries. To move the product from their vault to the retail floor is a very controlled and policed system in the dispensaries. And you can either have somebody doing that or a system like this

where it can't be interrupted or tampered with. Also, pneumatic tubes are just kind of fun. And then we'll recall the canister. Super fast. I love it. In Riverside, New Jersey, Scott Rudder demonstrates the pneumatic tube system at his cannabis dispensary, Township Green. It's in an old bank, and customers can pick up their pot without getting out of the car.

They order ahead online, pull up to the drive- up their pot without getting out of the car. They order ahead online, pull up to the drive-through, and send their ID through the tube. Once we get their stuff, we get their order together, we then send it back in. There's a cool factor to it, I think. It's totally cool. It's totally cool. And that's what it is. It's a cool factor.

You're just, you know. Particularly those of us who are old enough to really enjoy pneumatic tubes, like that whole experience our entire lives, it's only been cash and checks from sitting in the back seat of your mom's car, and then you're doing it as an adult, and then all of a sudden it's weed now. Rudder says it's not how he expected to be using pneumatic tubes in 2024. So is this the beginning of their second golden age? Probably not, but in many cities the tubes are still underground, so you never know. Take note, however, in Washington, D.C., the exact location of the

pneumatic tube network is classified. I'm Matthew Algio for Marketplace. Coming up… There aren't a lot of places to try binoculars before you buy them. Bird watching problems. But first, let's do the numbers. Yeah, I saw that one coming. The Dow Jones Industrial Average shed 375 points, almost 1% to land at 38,085. The NASDAQ shed 100 points, 2 thirds percent, to close at 15,611.

And the S&P 500 lost 23 points, a half percent, to end at 5048. Meta dropped more than 10 percent on concerns over its rising costs. The company plans to spend up to $10 billion on AI infrastructure, which it says may take some time to generate revenue. Amazon dipped 1 2 3rds percent, Alphabet slid 2 percent, Microsoft was off 2.5 percent. Construction equipment maker Caterpillar fell 7 percent after posting first quarter revenue that fell short of analysts' expectations and issuing disappointing second quarter guidance.

John Deere was off a tenth of a percent. Bonds fell, the yield on the 10-year T-note rose to 4.70 percent. You're listening to Marketplace. This is Marketplace. I'm Kimberly Adams. In their earnings report out this week, General Motors reported a significant increase in profits for the first three months of the year, citing robust sales of gas-powered cars as a main reason for the bump. But it's not all good news for GM these days.

The New York Times broke a story last month about how GM was collecting data on drivers' behaviors, mostly unbeknownst to the drivers themselves. Kashmira Hill was the reporter on the story and recently found out she was among the car owners being tracked. Kashmir was last with us a few months ago to talk about facial recognition software and tracking. Welcome back to the program. I wish I could say it's good to be back, but it's not really because of what I'm here to

talk about. Yeah. So back in March, you broke the story of GM sharing consumers driving habits with insurance companies. So can you give us some background on what you found back then? Yes. So I found that automakers were collecting information from people's cars about how they drove, including how many miles they were driving, when they were braking too hard, accelerating rapidly, and they were sharing it with risk profiling companies, including LexusNexus, who were then sharing

it with insurance companies, and it was affecting what people were paying for insurance. And is GM the only company doing this? Other companies were doing it, but essentially I discovered the story because I saw people on online car forums who had cars made by GM. And their insurance rates went up. They asked their insurers why and their insurer said, check your LexusNexus report. And when they did, they would find hundreds of pages of records of every trip that they had taken in their cars. And they just had no idea that that data was being collected by GM. And only recently you found out that you were among the drivers being tracked yourself. How did you get caught up in this?

Yeah, so while I was reporting the story, I was very aware of the fact that I had a car made by GM. And so I had checked to see if this was happening to us. I had requested my Lexus Nexus report. It did not have driving data on it. But then after the story came out, my husband requested his Lexus Nexus report. And when it came, it had all of our driving data. All of the data was just going on to his report because the dealership listed him as the primary owner of the car. And you definitely don't recall consenting to share this data.

No. And I was shocked. But at the same time, this is what drivers of GM vehicles have been telling me. They said, I don't know how I signed up for this. I don't understand why it's happening to me. And so this was a unique opportunity for me to report out my own consumer experience and find out, you know, when had we signed up for this? How had we signed up for this? And so that's what I did. It started with a phone call to our salesman asking him about this. And when you spoke to the salesman and then later GM, the company itself, what did they have to say about how this happened?

So what I found out is that there was a screen that car buyers are supposed to be shown at the dealership. It's part of enrolling for OnStar, which is the connected services for GM cars. My husband and I do not recall seeing the screen and my salesman told me, I just sign people up for OnStar myself and I always hit yes on that screen. He didn't realize it was going to sign us up for all of our driving data being shared with data brokers. I went to the dealership and asked about that and more senior salesman said, hey, we always didn't realize it was going to sign us up for all of our

driving data being shared with data brokers. I went to the dealership and asked about that. A more senior salesman said, hey, we always show these screens to customers and they're the ones who say yes. about risk profiling companies entirely and unenrolling the many millions of people who are currently part of it. So then what lessons do you think people should take from this experience about connected cars in general? I mean one reason I've been doing these stories, I do want people to understand that their cars are connected. I don't think a lot of people realize how many sensors are in their car.

Increasingly cameras, there's a sensor in the seats that detects how much you weigh. There's just so many data collectors in the car now and that is being sent back to automakers. And then I think this is a conversation that we need to have as a society. What should the automakers be allowed to do with that data? There are really good reasons for them to have it. They can see when there's something going wrong with a vehicle. They can send you a recall notice, for example. But they're also exploring selling this data.

And this can be quite personal. This is when you drive your car, where you drive your car. One of the advocates I talked to said, you know, that should be your data. It shouldn't belong to the automakers and they shouldn't be allowed to sell it. Kashmiri Hill is a tech reporter at the Thank you. And now, birds. A third of all migratory birds destined for the U.S. move through the state of Texas each spring, making the state a hot spot for bird watchers from all over the U.S. and beyond when migration is in full swing during April. Many birds stop along the Texas Gulf Coast where enthusiasts can identify species of migrating warblers and nesting waterfowl. As birdwatching grows in the US, so does spending, and local hotels, restaurants, and gas stations

stand to benefit. Marketplace's Elizabeth Troval has this one on the economic impact of birders. About 80 miles southeast of Houston in the small unincorporated community of High Island along the Bolivar Peninsula, local birder Winnie Burkett takes me on a tour of the Boy Scout Woods Sanctuary. You hear it? It's a blue-headed vireo. It's probably just come in. We haven't had any reported this morning.

This is about the time a day birds start to come in. It's midday at this Audubon-owned bird sanctuary, one of four in High Island. Birds come to rest and eat here after they fly across the Gulf of Mexico from the Yucatan Peninsula. And that's why birdwatchers come because this can be a place that you can see all the eastern warblers and you can see painted buntings and indigo buntings and you can see tanagers and Orioles. Today was slow at the Boy Scout Wood sanctuary because wind conditions.

Still, by noon some 120 odd people bought day passes. She reads where some people traveled from in the guest book. College Station, California, South Carolina, Los Angeles, Olympia. The U.S. Fish and Wildlife Service estimates some 43 million people traveled to birdwatch in 2022, up from 18 million in 2011. In that same time, spending on wildlife watching, which is a lot of birding, nearly quintupled to $250 billion. And that spending plays out in communities across the country. From the middle of the march, I see birders around.

I reach Priya Fernandez at the High Island Mart gas station. She says hungry birders help pick up business before summer high season, buying chips and sandwiches. She can spot the birders by their distinctive markings. You know how they dress, right? They're mostly like in the khaki pants and tops and their hats on. And they come mostly by the bug sprays. And birders don't just need snacks, beer, and bug spray. They also need gear. There aren't a lot of places to try binoculars before you buy them.

I catch up with Chris Heisinger at the Smith Oaks Bird Sanctuary also in High Island. He sells binoculars here during spring migration as part of his Houston-based business, Land, Sea and Sky. He scoped out birders as a target market when he bought the business. We really went after a lot of the bird festivals. So whereas in 2017 or 2016, we were only going to one festival each year in Texas,

now we go to, I think, seven festivals in Texas. He says birding gear went from roughly 10% of his business to 50%. Also at this sanctuary is birder Judy Dobler. She especially loves the rookery. Where all the big birds, the egrets, the spoonbills, cormorants, everything big is nesting there. So you can see them all easily and see the birds turning their eggs and the egrets hatching. It's just cool. She's traveled to High Island in her RV and is from Spokane, Washington.

I came here as a tourist last year and this year I'm here for the month of April as a volunteer. For some, birding is not simply a hobby, but a way of life. In High Island, Texas, I'm Elizabeth Troval for Marketplace. This final note on the way out today, Southwest released its quarterly earnings this morning with worse than expected losses and a cut to its growth forecast. But perhaps in a bigger move for the company, CEO Bob Jordan said in an interview today with CNBC that the company is considering moving away from its famous open seating policy, saying Southwest is looking into new initiatives in the way it seats and boards its planes.

One thing Jordan says the airline is not considering is starting to charge for those first two checked bags. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher, and Stephanie Seek are the Marketplace Editing staff. Amir Babawi is the Managing Editor, and I'm Kimberly Adams. We'll see you tomorrow everybody. This is APM.

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