Marketplace - Has the Fed ever met its 2 goals?

Episode Date: August 7, 2024

Since the 1970s, the Federal Reserve has been officially tasked with a dual mandate: keeping prices stable and maximizing employment. But has the Fed ever found that sweet spot? It would be easier to answer if the economy wasn’t always in flux. Also: Disney’s streaming service posts its first profit, what we can learn from women entrepreneurs of the 19th century, and noise from a bitcoin mine haunts people in a rural Texas town.

The Federal Reserve has two main jobs, just two, and neither of them are about making markets happy. From American public media, this is Marketplace. In New York, I'm Kristin Schwaab in for Kyra's Doll. It's Wednesday, August 7th. Good to have you with us. The big sell-off on Wall Street earlier this week pointed a lot of eyes at the Federal Reserve and what it'll do with interest rates, as if eyes weren't already laser-focused there to begin with. Economists, analysts, regular people had a lot of loud opinions. The Fed's taking too long. It should make a bigger cut than it's been

signaling. It should make an emergency cut before September. Again, just noise on the internet. But remember, the Fed has a dual mandate, ensuring stable prices and maximum employment. And not to have a total crisis of self-hear, but with an economy that's constantly in flux, what does that even mean? Marketplace's Samantha Fields explains the delicate balance. Samantha Fields Lately, I've been visualizing the dual mandate as a Venn diagram. Two circles, one for price stability, one for maximum employment.

And I've been wondering how often the Fed has been able to get those circles to overlap. Michael D. Dadd It's kind of a tough question because it's hard to say what exactly it means to achieve the dual mandate. Michael D. Dadd, an assistant professor of economics at the University of Akron, says the law is actually kind of vaguely written. So achieving price stability and maximum employment, what exactly is maximum employment, what exactly is price stability? These days, the Fed defines price stability as 2% inflation.

That's the goal. Maximum employment is a little murkier. That's not a number. That's a concept. Anne Owen, an economics professor at Hamilton College, says the concept is basically that you want to get the unemployment rate as low as it can go without causing inflation to rise.

The risk, if it gets too low, is that businesses will start raising wages to compete for workers and then raise prices to cover their higher labor costs, which could trigger a wage price spiral. But what is that Goldilocks unemployment rate that corresponds with maximum employment? That number isn't always the same. It's always changing because the economy is always changing. And Owen says because of that and the fact that we don't get economic data in real time, It's very difficult in the current moment to know, yes, we've hit the sweet spot.

Looking back though, it's easier to say, yes, at X point in time, we were in fact in that economic sweet spot. Kevin Jakes, a former economist with the Treasury Department, says in the last few decades the Fed has actually gotten those two Venn diagram circles of maximum employment and stable prices to overlap a fair amount. There's some very good time periods in the 1990s when the Fed was able to achieve what we might think of as the dual mandate. The job market was great, and inflation was low.

Similarly, in the early to mid-2000s... After 9-11, after the bursting of the dot-com bubble, but before the financial crisis, you again had some nice periods there. The Great Recession, around 08-09, was decidedly not a good time for the economy. Unemployment was too high and inflation, for a while, was maybe almost too low. But then... The 2010s on up through the pandemic, once you got past the financial crisis, but before the pandemic hit, a long stretch there where you've got low unemployment rates, low inflation.

And where you could say that the Fed had, once again, more or less achieved its goals. So what about today, right now? Have they achieved the dual mandate now or, you know, almost to achieved it? Michael Ddad at the University of Akron says, if you look at recent economic data, We've got still relatively low unemployment. We also have relatively low inflation compared to where we were two years ago. It's still a bit above the Fed's 2% target, and unemployment is ticking up. So maybe not quite there.

But it seems like maybe they're close. We may only know for sure in hindsight. And if history is a guide, those Venn diagram circles probably won't overlap for very long. I'm Samantha Fields for Marketplace. Wall Street today gained some, then lost some. The streaming wars have been warring for a while now. A battle over content and commercials and consumers. Well, one platform is starting to pull ahead of much of the pack. In its quarterly earnings report this morning, Disney said its streaming service posted its first-ever profit. Disney Plus, combined with ESPN Plus and Hulu, brought in a total of $47 million.

That's a modest haul if you consider the billions it's invested. But any profit in an industry where profits are pretty across-the-board elusive is a milestone. Marketplace's Savannah Marr has more. Early in the streaming wars, say 2017 through the start of the pandemic, services figured they'd chase subscriber growth first and worry about profits later. Aside from Netflix, which got an early foothold, that strategy put most of the industry in a pretty deep hole, says Brandon Katz with Parrot Analytics. It requires massive amounts of capital to make and acquire steady streams of new

content and to keep subscribers signing up and to keep subscribers engaged. Engaged and loyal when they can easily cycle in and out of monthly subscriptions. The spending spree kept up until around 2022 when the pandemic binge watching bubble burst, says Michael Smith, a professor of IT and public policy at Carnegie Mellon. The markets basically said we're running out of patience. We'd like to see you turn a profit. Enter high subscription costs, slimmer content libraries and bundling, which is part of how Disney's streaming arm finally landed in the black.

J. Christopher Hamilton is an entertainment attorney and a professor at Syracuse. Hey, we're not just raising prices, but we're giving you more. Like the bear, major league baseball and Bluey on the same monthly bill. You don't have to have 50 different logins. You don't have to subscribe to 20 different services. I think that's really what is going to break through the noise. And tamp down subscriber churn.

Ross Benish with eMarketer says there's some creative accounting behind Disney's reported streaming profit. For one, most of it's coming from ESPN+. Still, it's a symbolic win for the industry. There is space for more people to succeed than Netflix. You know, that's what it would signal. Now, there's not space for all these companies to succeed. Out of today's crowded field of eight or so major streamers, Benesh predicts maybe four will survive the race to profitability. I'm Savannah Marr for Marketplace. You know who races to cover the news every weekday morning? David Brancaccio and his team.

Listen to the Marketplace Morning Report to get the news you need to start the day. Cryptocurrency is an intangible asset. That's kind of the point. But the system that supports cryptocurrency very much has a physical presence. There are at least 137 cryptocurrency mining operations across the country. That's according to the US Energy Information Administration. And the computers at these facilities use a lot of energy and generate a lot of heat. Heat that's cooled by fans. Those fans have become a big pain point for residents of Granbury, Texas. In 2022, when a Bitcoin mine opened just outside the rural town, people started reporting a loud, constant hum. Since then, the hum coming from the

mine, which is now operated by Marathon Digital Holdings, one of the largest Bitcoin holders in the world, the hum has gotten worse, haunting residents day and night. Andrew Chow is a tech correspondent at Time magazine and author of the new book, Cryptomania, Hype, Hope and the Fall of FTX's Billion Dollar Fintech Empire. He wrote an article about the mine near Granbury, Texas. Andrew, thanks for being here. Andrew Chow Thank you so much for having me. S1 So set this scene and tell us about Granbury, Texas. What is the community like there? Granbury is about an hour's drive outside of Fort Worth. The town is really charming.

And there is a gas plant that sits about a 15 minute drive south of the town proper. The gas plant right now on its lot, there's a new Bitcoin mine that was put up in 2022. So the people who are right in the town, like next to the opera house and the restaurants, aren't really hearing anything. But there are a lot of people who live sort of on the outskirts of town, including right directly across the street from this new Bitcoin mine. It was switched on in 2022, began making noise and seemed to be getting louder and louder

as its capacity is expanded. Yeah, how loud are we talking here? Sure, so I was with a local constable who is recording the noise with a sound reader he bought off Amazon. He would stand across the street from the mine, and it's emitting a sort of hum that some people have compared to anywhere from like a vacuum to a lawn mower to sitting on a tarmac.

So going back to how much noise it actually is, the Constable has been recording over 90 decibels basically every time he goes out there, which is not what you're supposed to be hearing on a 24-7 basis. Yeah, and this is about more than just that sound or vibration driving you crazy, right? Immediately some weird things start happening to people in the community? SIDNEY Yeah, so it can be a little bit difficult to untangle what are the symptoms coming out of the mind and not. But the first symptoms coming out are tinnitus, you know, people are ringing in their ears. They're getting migraines, severe splitting migraines. And then some of the more severe things that they're reporting are severe vertigo, dizziness, and then heart palpitations and other sort of cardiovascular issues.

Let's take a step back for a second and talk about how Bitcoin mining works and why these facilities are so loud? You can basically think of Bitcoin mining as enormous computer server farms, thousands of computers at each location. They need fans to cool them down. A lot of them are out in places like West Texas where there's really no one around for them to bother. But the problem is when they start moving closer to communities like in Granbury and the companies aren't taking precautions to try to mitigate some of this sound. What did Marathon have to say when you reached out to them about the noise level in that

community? They told the community that they want to be a good neighbor and they were taking steps to mitigate the noise. And that involves replacing the fans, which are the noisy parts, and instead putting the computers in oil, which is called immersion cooling. In terms of, you know, potential health impacts, they have not commented on that at all. They have not commented on that at all. And right now, they're sort of moving full steam ahead in an effort to try to juice the Bitcoin mining industry in the US and try to build a lot more rigs. Now there's a Bitcoin lobby that's been working really hard in state legislatures all over the country to try to remove Bitcoin mines from having to abide by noise ordinances or other

zoning laws. So if it was up to the Bitcoin mining industry, they're trying to put these things everywhere as many places as they can with as few regulations as they can. Well, where does that leave the residents in Granbury, Texas and what they've done or what they can do to try to get this facility to stop emitting so much noise? They don't have many options. The way that Texas state law is written, if you're outside of city limits, you really basically don't have the ability to create new noise ordinances. They can try to file a lawsuit, but that would take months or even years to wind through the courts.

And the main thing they want right now is an injunction for the machines to stop running. Because they feel like their lives have been ruined, they can't sleep anymore, a lot of their bodies seem to be falling apart by having to listen to this thing 24-7. Lauren Henry Andrew Chao is a technology correspondent

at Time Magazine. His book, Cryptomania, came out on August 6. Andrew, thanks so much. Andrew Chao Thank you so much. Coming up. Increased female entrepreneurship or business ownership can expand opportunities for other women. Makes a lot of sense. But first, let's do the numbers. The Dow Jones Industrial Average shed 234.6% to end at 38,763. The Nasdaq lost 171.1% to land at 16,195. The S&P 500 was off 40.75% to close at 51.99.

Novo Nordisk dropped 0.6% to close at $51.99. Novo Nordisk dropped 6th and 7 tenths percent. The drugmaker posted second quarter earnings that missed analysts' expectations as sales of its Wigovie obesity treatment slowed. Eli Lilly, maker of the weight loss drug ZepBound, dipped 2.2%. Savannah Marr was telling us about Disney turning a profit in its streaming operations for the first time. Disney gave back 4.5%. Netflix brightened 0.3%. Paramount was up 0.1%. Bond prices fell. The yield on the 10-year T-note rose to 3.95%. You're listening to Marketplace. This is Marketplace. I'm Kristin Schwab. Last week's job numbers, the ones that created

all the markets hullabaloo this week, they were kinda meh. One bright spot, though, was healthcare. Half of all new employment in July was in that sector. 55,000 new jobs, mostly in home healthcare,, and residential care facilities. It means competition for workers in the medical field is pretty fierce right now, and that's led to some interesting recruiting tactics. Case in point, New Mexico is running ads in Texas trying to lure workers who may want to leave because of the state's abortion restrictions. Marketplace's Elizabeth Troval has more on the fight over health care workers.

So, can we really expect droves of frustrated Texas health care workers to relocate to New Mexico? Probably not. A man, Abu Zayed, runs Incredible Health, a recruitment platform for nurses. When we just look at the top 10 cities that nurses want to move to, it correlates very closely with where Americans are moving to in general. In fact, Texas is still a big draw for nurses. Also Florida, Georgia, their motivations for moving, family reasons, cost of living, and Number one is their specific career advancement opportunities that they want to pursue.

For example, advancing their specialty or advancing their skill. While New Mexico's ad campaign might not boost health care hiring, their investments in student loan repayment programs may help. That's a workforce solution that's tried and true. Mike Schimmons runs the National Rural Recruitment and Retention Network. Another tactic he's started to see in rural areas where finding housing can be a challenge. There are organizations out there that are starting to offer solutions for that,

i.e. either buying or even possibly building their own housing. Education can be another tool to retain or attract workers, says Kristen Stanford with the recruitment firm AMN Healthcare. So what we've seen is some wise healthcare systems really investing in the opportunity for a healthcare professional to be paid for continuing education. And of course, pay is another biggie.

But for lower wage healthcare jobs, employers aren't just competing with other healthcare providers, says economist Vivian Ho with Rice University. The increases in minimum wages you see for Walmart target all of these large employers have to be affecting the ability of healthcare employers to get home healthcare workers. As wages creep up in other industries, healthcare has to compete. I'm Elizabeth Troval for Marketplace. The starting point for a lot of stories we cover on this show is economic data, often disaggregated economic data. That's when information is broken down into categories like race, gender, and age. Well, it turns out a lot of that data is relatively new.

For instance, the BLS didn't start categorizing unemployment rates by gender and race until 1972. So then, how do economists study history? How do they study what happened a long time ago, as in before we were even alive? Raveda Gozin is a research economist at the London School of Economics who studied female entrepreneurs of the 19th century. Welcome to the program. Thank you very much for inviting me. I'm so happy to be here. So I guess I'm wondering if there's so little data about how women existed in the economy in the 19th century, how do you even decide where to dig in?

Right. I mean, that's an important question. I mean, especially if you look at the literature, we observe there are important studies studying women laborers or women in the labor market. But if you want to study women business owners, it's actually really hard. And one of the data sets, an important part of this paper that we used is census of manufacturers. And in this data set, there's a column where people recorded the name of the establishment owner. So you need to infer gender based on the name. And that's how we actually started to create this data

set, you know, women business owners based on the name. And we also linked this census of manufacturers to the census of population to understand, you know, who these women were. Yeah, well, let's go back and talk about the data set you built off of business owners' names because you're kind of jumping to some conclusions in there. And I imagine there's some challenges in just having that little information. Right. I mean, so for example, one of the things is to look at the name and kind of guess the gender. For example, if it's Elizabeth, then you say, you know, probably that's a woman, like very likely to be a woman. So you just, it's equal to one. But if it's John, you say that's a male. Sometimes people write their initials.

So in those cases, we had to make an assumption and we said, let's not assume that's a woman because we do not want to inflate the results. And at the same time, there might be like unisex names or there might be multiple owners. And that's actually quite like a small portion of the whole women entrepreneurs data part. And we found by using these methodologies, we found like 3,600 establishments owned by women, which is actually corresponding to only 1% of all the data that we have. So we were talking about it like a very small percentage, but it gives us a very distinctive picture about themselves, about how they differ from their male counterparts. Yeah. Well, tell me more about what you learned about studying this small flock of female

entrepreneurs and what they maybe had in common. Right. I mean, I think the results are, to me, they're very interesting. So first of all, like for example, we found that women actually started their businesses with significantly lower capital investments. And they were also very much concentrated, for example, in the East and the California area. And in terms of industry too, they were very much concentrated like clothing, millinery, like shoemaking, shoelaces, or decorations in those areas as well. And even more interestingly, I think, we found that women entrepreneurs or business owners in manufacturing, they hired more women compared to their male counterparts, and at the same time, they also

paid them significantly higher wages. So that could suggest that increased female entrepreneurship or business ownership can expand opportunities for other women in the labor market as well. Yeah. Well, let's talk more about the purpose of this work and how we might apply some of these lessons to today's economy. Right. I mean, so if you, for example, we're talking about 50% of the population, right, in all

countries. And if you look at the data and statistics, we observe that women still participate less in entrepreneurial activities or innovative activities compared to men. This is an important issue because that means that we might be losing so many talents or there are so many hidden or lost talents that we still need to uncover. So in that sense, for example, there are studies showing that women being role models, like in entrepreneurship or in innovative activities, it can lead to more women or young women to participate in those areas even more, like STEM field could be an example. And at the same time, you know, creating these opportunities for other women can also have

a further implication in the long run. So disadvantaged groups, minorities, women, you know, they may face frictions, and it's important to address these issues with policy tools. Do you have a favorite female-owned business or inventor that you studied? Right. I mean, actually there are several because I also work on women inventors. For example, in one of my papers, I talk about Josephine Cochrane, who invented the dishwasher machine. I mean, and then she invented that, patented it and it became a very successful business. And if you look at, for example, the 19th century, innovations by women, it is very much concentrated also in household appliances.

So you would see a lot of applications like dishwasher machines or ovens or refrigerators, those types of machinery. And I think that was very fascinating. Nicole Sade Shout out to Josephine, who is now also my favorite inventor. Raveda Gozin is a research economist at the London School of Economics. Thanks so much for chatting about your work. Raveda Gozin Thank you. Thank you for inviting me. This final note on the way out, today is mom's equal payday. It's less of a holiday and more of a way to call

attention to how much moms make compared to dads. So here it is, saw this in the 19th news. Moms working full-time earn about 71 cents for every dollar a white working father makes. As usual, the numbers get worse once we break it down. Single moms earn 56 cents, Black mothers 52, Latina and Native American moms earn 51 cents. Our media production team includes Brian Allison, Jake Cherry, Jessen Duller, Drew Jostad, Gary Oakheath, Charlton Thorpe, Juan Carlos Torrado, and Becca Weinman. Jeff Peters is the manager of media production and I'm Kristin Schwab. We'll see you tomorrow! This is APM.