Marketplace - How fast would the economy feel an interest rate cut?

Episode Date: July 10, 2024

Inquiring minds want to know: When will the Federal Reserve cut interest rates? Fed Chair Jay Powell isn’t ready to answer that question. But when rates are cut, there’s gonna be a lag before the Americans feels it. Also in this episode: Egg-freezing rates skyrocket as more employer benefits cover the procedure, the U.S. is less trade-oriented than other countries, and nearly half of Gen Xers aren’t financially on track to retire, a new study says.

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What goes up must eventually come down. How long that journey takes? TBD. From American Public Media, this is Marketplace. In New York, I'm Kristin Schwab in for Kai Rizdal. It's Wednesday, July 10th. Good to have you with us. Today was day two of Federal Reserve Chair Jerome Powell's testimony on Capitol Hill. Here's the lowdown. It sounded a lot like yesterday. Basically, we're making progress on inflation, but the mission has not yet been accomplished. Now, the Fed's been on this mission for more than two years. It first raised interest

rates in March of 2022 and has yet to set a date for cuts, though Wall Street expects it to happen sooner than later. Whenever the cuts do come, well, then what? As in, will the pace at which Powell cuts rates match the pace at which he pushed and propped them up? Marketplace's Matt Levin has more on how fast or slow rates might fall. Part of the Fed's job is to take away that proverbial punch bowl before the economy gets too crazy and starts doing keg stands on the front lawn. Fed Chair Jay Powell took away the punch bowl a while back with those rate hikes, and now that the party finally seems

to be dying down. He's got his hands on the punch bowl. He's walking around the room with it, and he's not sure whether to put it down on the table yet. Anne Owen is an economist at Hamilton College. She says even when the Fed does decide to cut rates, the economy doesn't immediately roar back to life. That's partly because when would-be-bar-wars

see one interest rate cut, they wait for more. If you are a person who's thinking, wow, I want to buy that new car, but rates are just a little bit high, well, when the Fed cuts rates eventually, they're not going to do it just once. You should wait a little bit if you can, because they're going to go down even more. While economists agree rate cuts won't instantly

juice an economy, there's really no consensus on just how long that lag is. Sarah House is an economist at Wells Fargo. HOUSE It's hard to say because a lot of times when the Fed is cutting rates, it's because the economy is already in a downturn. And so in some ways, it's hard to really separate how much the rate cuts are doing when you already have a lot of negative forces. So while history isn't much of a guide, some research does indicate that rate cuts don't help the job market as much as rate hikes hurt it. Michael Gapin at Bank of America says it's easier to pull back economic activity than it is to

generate it. Meaning you could cut interest rates all you wanted, but you can't force a firm to hire, you can't force a household to spend. You know the old expression, you can lead an economy to a punch bowl, but you can't make it drink. I'm Matt Levin for Marketplace. Wall Street Today must have really decided those rate cuts are coming. We'll have the details when we do the numbers. Saving for retirement quite literally takes a lifetime of work. And how successful any given person is at this includes a ton of variables. How much money they make, what kind of financial responsibilities they have, also what the economy was like

during their prime saving years. I say all this because when it comes to retirement savings, there is a real generational divide. A recent survey from BlackRock says more than 75% of Gen Z claim they're on track to retire. Millennials and Boomers follow at 72 and 68 percent. That puts Gen X in last place, with just 60 percent saying they're saving enough. Marketplace's Kaylee Wells has more on what that means, especially now that the oldest Gen Xers are reaching retirement. SONIA DARA GILL, MSNBC CORRESPONDENT Gen Xers are in their mid-40s to late-50s, so it makes sense that they're thinking and worrying about retirement. But that worry isn't new, says Anne Ackerley with BlackRock. She's their senior advisor on retirement. We've been doing read-on retirement for the last nine years. Gen X is always less confident about

whether they're on track or not. And their confidence has gotten worse as they've gotten older. Gen X has a nickname, the sandwich generation. Compared to other generations, it's caught between caring for older parents and younger children. GenX have baby boomers as parents and they're living longer. And GenX delayed childbearing. Medical bills, college education, those are expensive and cut into retirement savings. And yes, prior generations had those responsibilities too, but they had more help.

They had more siblings to share the burden with. That senior economist Angie Chen at the Center for Retirement Research at Boston College. Gen X as a smaller generation caught between the largest two ever. Plus the generation before them, baby boomers, had a supply of unpaid caregivers. Women were expected to care for children and the elderly. Because labor for precipitation among women has risen and it might become more of a strain for Gen X and younger generations. Ironically, Gen Xers came of age during boom times. The late 80s and 90s were prosperous with low inflation and unemployment.

And that's when everything was hunky dory and it was a Goldilocks zone. Andrew Herzog is a certified financial planner at the Watchman Group. So they possibly got too accustomed to things being too good and saying, hey, you know, if I just put a little bit of money in the stock market, I'll get 10 percent, 12 percent, no problem. And perhaps they were, you know, if I just put a little bit of money in the stock market, I'll get 10%, 12%, no problem. And perhaps they were misled. The BlackRock researchers say even the oldest Gen Xers have time left to save for retirement. I'm Kaylee Wells for Marketplace. For people who aren't quite ready to start a family and need to press pause on the biological

clock, egg freezing can be a bit of an insurance policy. It's also expensive. A single cycle of IVF can cost more than $20,000, and doctors often recommend multiple cycles to increase the chance of success. It's a reason why more employers are adding fertility benefits to their employees' compensation packages, and a lot of workers seem to be taking advantage. According to the American Society for Reproductive Medicine, the number of egg freezing cycles jumped 300% between 2015 and 2022. Emma Goldberg covers workplace culture for the New York Times and wrote about the trend. Emma, welcome to the program. Yeah, it's great to be here.

What inspired you to write this story? Well, one thing is that it just felt like more and more people that I knew were starting to talk about egg freezing. Even if they didn't necessarily feel that they could afford it, they were starting to lobby their employers to cover it. I noticed at my workplace, for example, that once we expanded our egg freezing benefit, people started to talk about egg freezing a lot in the office. There was like a Slack channel devoted to people helping each other figure out how to get their

medication. So it felt like something that had been shrouded in mystery all of a sudden burst into public view. And then when I went through the process myself, I also thought this is such a fascinating, brave new world reality in which we can just kind of put motherhood on ice and people have so many complicated feelings and reservations that come along with that. So it felt like a lot of fodder for a story. So who used to be the typical profile of somebody freezing their eggs?

So it used to be people who were a bit older. It was often women who were around the age of 38. And anthropologists and sociologists who kind of studied the phenomenon found that the reason a lot of people were doing it was if they were in their late 30s and they hadn't met a partner that they were going to raise kids with yet and so they wanted to just kind of preserve their options for future motherhood. Now the doctors I interviewed said that the age of women who are pursuing this is starting to get a bit younger into the earlier 30s or even sometimes late 20s. That being said, you know, the demographics that it's reaching are still pretty white

and wealthy. Sure. And part of that is because you talk about how more employers have started offering their employees fertility benefits. What types of employers are these and why are they doing it? So that, it started as a benefit that was particularly concentrated in the kind of big tech field. And it was like a lot of these, these employers like Apple and Google that were in this kind of war for talent. But in recent years, it's started to expand. So it's not just big tech, it's law firms, it's finance, it's media,

like the New York Times, my employer. So there's more and more tech, it's law firms, it's finance, it's media, like the New York Times, my employer. So there's more and more employers that are starting to cover it, so much so that now it's around 19% of large employers up from around 5% just a few years ago. Wow. And why? What's in it for these companies? There's a couple of different incentives for the companies.

One is that some of the employers I spoke to said that they found that fertility benefits were actually the number one most in-demand benefit from employees. So it's something that workers are saying that they want. Another thing is that from the perspective of some employers, it can mean that women are free to kind of throw themselves into their work earlier in their careers, like take the late night meetings, all the work travel, and then they have this kind of psychological assurance that they could always focus on their personal lives later into their 30s. In your story, you weigh the question of whether fertility benefits are a feminist dream or

a Silicon Valley fantasy. Can you tell me more about the feminist dream side of this? Yeah, I mean, for a lot of women, this is a dream come true because women have always had to do this kind of impossible equation of feeling like the exact moment when they should be investing in their careers and like catapulting themselves forward is also the moment when they should be trying to start having kids and build a family. And so I think for a lot of the women I interviewed, it felt like this dream scenario of you could like untether all of your anxieties around your reproductive health and your fertility

from your career. And then there's the flip side that I mentioned about people who feel like they're kind of being tricked into a Silicon Valley fantasy. What does that mean? There's a lot of dimensions to the kind of illusion part of all of this. One is that the science isn't totally there yet. So it's not like people can freeze their eggs and have total assurance that they'll be able to unfreeze them and use them to have a baby. And then the other part of it is just that the challenge of balancing life and work is

still going to catch up with people even if they differ motherhood, right? So I spoke with a lot of women who froze eggs and then some ended up either unfreezing them or they just had children naturally and then the reality still kind of crashed down on them that they were exhausted trying to do the juggling act of focusing on their career, taking care of all their professional responsibilities and trying to take care of a family. And sometimes people say, you know, egg freezing is just one tiny piece of the bigger puzzle that corporate America needs to pursue to actually support working parents. And that includes, you know, like more generous paid parental leave policies or childcare benefits.

So there's so many pieces of the puzzle that make it possible to balance work and family and people feel like egg freezing is just this one little part of it. AMT – Emma Goldberg is a business reporter. She covers workplace culture at the New York Times. Emma, thanks so much for sharing your story. The ability to freeze your eggs is certainly a marvel of modern medicine. Here's another, maybe less obvious one, electronic medical records. You know, the thing your doctor types into during your appointment. They're actually a relatively recent development. So on that note, here's the next installment in our series, My Analog Life,

in which we look back at how work used to get done. My name is Dr. Lau and I live in Florida. I take care of adult patients who have kidney disease. I graduated from medical school in 1995 and so internship residency started after that. We would have to round with a carousel of patient charts. Basically, you know, paper charts that came in a bound binder. Every patient had one that had their name labeled, and we would be carting around with, you know,

all these charts. If we wanted to review, like let's say, my patient's chest X-ray or CT scan, we would have to go down and fetch the actual physical file. And this was quite a feat because each one would be quite heavy. As you can imagine, some patients have had X-rays for 10, 15 years in that folder.

We would lug it to what we call the viewing room, where we had all of the light boxes. What I often did as a resident is that I would strategically plan to do radiology rounds at like 10 p.m. at night, you know, when the place was empty. Electronic medical records has definitely changed every facet of medicine that I practice. I can access the vitals, I can access med lists, I can access what's going on in the emergency room just by a press of a button. All of this revolutionary change

has allowed me to see more patients. However, my concern is whether or not it has improved my ability to give better quality care. Because a lot of what we do now is in front of a screen, you know, and perhaps less time eye to eye, if you will. That's Dr. Winnie Lau in Gainesville, Florida. You can tell us about how your job has changed, whether that change happened a long time ago or more recently, at marketplace.org my analog life.

Coming up, you can't put a digital magazine on your coffee table. An iPad is just not the same as good old paper. But first, let's do the numbers. The Dow Jones Industrial Average gained 429 points, 1 in 1 tenth percent, to finish at 39,721. The NASDAQ rose 218 points, 1 in 2 tenths percent, to close at 18,647. And the S&P 500 was up 56 points, 1 percent, to end at 56.33. The S&P had its sixth straight record close, that's the longest streak since 2021.

Costco announced its first membership fee hike since 2017, $5 more in the US and Canada, for a yearly fee of $65. Costco returned 0.2% Walmart added 0.7% Target declined 1%. Bonds rose the yield on the 10-year T-note fell to 4.28%. You're listening to Marketplace. This is Marketplace. I'm Kristin Schwab. There are three letters that are important to any economy. G, D, and P. GDP is important because it's a measure of economic health. And for many nations, a sizable portion of their GDP comes from international trade. President Biden actually introduced new tariffs earlier this spring and has kept many Trump administration tariffs to reduce our exposure to competition from overseas. Even though here in the US, trade

accounts for just 27% of GDP, according to the World Bank, which puts our trade to GDP ratio among the lowest figures in the world. So why are we an outlier and what does it say about our economy? Marketplace's Maria Hollenhorst explains. US consumers buy a lot of stuff from abroad. We have a couple of cars, both of which are Japanese. Most of what we wear is made in other countries. All of the different types of coffee, whether it's from Colombia, the Dominican Republic. That's Peter Koklannis, Professor of Economic History at UNC Chapel Hill,

Nancy Chow, Professor of Economics at Cornell, and Sarita Jackson, president of the Global Research Institute of International Trade. But U.S. consumers also buy a lot of stuff that's produced here. Yesterday, I bought supplements that are fully made in the U.S. consumers also buy a lot of stuff that's produced here. Yesterday, I bought supplements that are fully made in the U.S. and I made sure that it was. That's where the U.S. trade to GDP ratio comes in, that 27%. On the other end, there's Hong Kong, where Nancy Chow grew up. Well, we produce nothing. Hong Kong's trade to GDP ratio is 352.

The global average is 63. So it gives you a kind of rough and ready sense of where a particular place stands in comparison to others. Now the interpretation is much more complicated, however. Let's get into that, however. Tariffs can play a role, but so can poverty. And then there are opportunities available within a country.

Trade consultant Sarita Jackson helps businesses figure out how to expand internationally. First of all, identifying the right market. Then when we get into the execution, that's a whole nother ball game. Plenty of U.S. companies do that and sell their products overseas. Then sometimes it's like, ah, okay, maybe I'll just stick with the consumers here in the United States. Choosing to sell only within your home country

is an option in a big consumer market like the United States. Here's Peter Koklannis at UNC again. Our ratio, again, is low, not because we are poor, we have necessarily the highest tariffs in the world. It's a function in some ways of our strength and our wealth and our diversity and our just largeness. To be clear, global trade does matter a lot, but it just might not matter as much to the U.S. economy as it does to a lot of the rest of the world.

I'm Maria Hollenhorst for Marketplace. Print versus digital. It's long been a topic of discussion in the journalism world, though a little Print vs. Digital It's long been a topic of discussion in the journalism world, though a little less so here at Marketplace, because audio. And it's been a more common discussion lately on college campuses. Alumni magazines, often cheerful and picture-filled pages, are meant to remind readers of what the old campus looks like and tell people what old classmates are up to. They're also meant to inspire people to donate to their alma mater. But during the pandemic, many colleges cut costs by taking their magazines entirely online.

Marketplace's Stephanie Hughes looks at where they are now. Scripps College in Claremont, California was founded in 1926. It's an all-women's school with about a thousand students on campus. And around 10,000 living alumni. All those students and grads receive Scripps Magazine. The title font is meant to echo the campus itself. It's based on the way the school's name appears on a landmark gate onto the grounds. In the school's marketing and communications department, creative director Maureen Panos is reviewing cover concepts for the next issue.

Do you think that you could pull up the proofs that you emailed over earlier? The magazine runs just under 50 pages, matte paper, no ads, and comes out twice a year. But in 2020, after students were sent home, revenue for the college dropped, and the school made a 20% cut to all administrative budgets. It decided to save on printing and postage costs by taking Scripps Magazine fully online. We definitely saw it as an experiment. Binti Harvey is vice president for external relations and institutional advancement at Scripps.

The digital version still had features, a letter from the president, class notes, but one thing it didn't have was the envelope. In the print edition, there had been one tucked in the pages that readers could send back with a check. Sometimes we will get checks as large as 30,000. It definitely is a trigger or motivator. But no envelope, no trigger. Gift revenue plummeted, and in fall 2021, Scripps decided to bring back the print edition. Harvey says it was also meant to signal that campus life was returning to normal. That the college, you know, remained in a stable position and was really looking ahead

to the future. In other words, that they were open for business. At least half of all American colleges stopped printing their alumni magazines during the pandemic, at least temporarily. But the vast majority have now returned to print. That's an estimate from alumni magazine consultant Erin Peterson, whose firm is called Capstone Communications. She says colleges learned that many alumni like having the physical magazine. It is a social signal. If you're really proud that you went to an institution, you want to put that on your

coffee table. You can't put a digital magazine on your coffee table. Some colleges did make compromises on their print editions. Fewer pages, less expensive paper stock. And some got pickier about whose coffee tables they were landing on. They didn't send to all alums. There are some schools that have very sophisticated sort of engagement metrics that they can measure, like have they volunteered with us, have they given to us, and then they decide from that.

One alumni magazine did go digital in 2020 and isn't looking back. Purdue alumnus from the public university in West Lafayette, Indiana. Matt Folk runs the Purdue for Life Foundation, which puts out the magazine. He describes his audience as a fairly techie crowd and is able to collect lots of data about what they're reading. We can tell who looks at each and every article. We can look at how long they spend on the article. Fouke says Going Digital has saved just under $200,000 a year

and that donations have actually gone up since they've gone online. He does get complaints sometimes from older alums who miss the feel of the print magazine. And he admits that even he, a 91 Purdue grad, does too. But he says young alumni aren't all about it being on the internet. They can read it, you know, when they're on commute on a train. They can forward it to friends that may not even be alum because they're proud of the university. COLLEEN O'BRIEN Meanwhile, Scripps Magazine doesn't have much

of a digital presence. It has fully committed to print instead. Scripps' Binti Harvey says she wishes she had the budget to do both well. And she does worry about staying in touch with recent grads. SRIPPS That will reach a point where the print magazine will no longer be appealing to them. Stephanie McLaughlin Harvey points out she is trying to reach an audience of alums ranging from those who graduated 60 years to six months ago and is

trying to keep track of who wants to flip a page and who would rather click a link. I'm Stephanie Hughes from Marketplace. marketplace. This final note on the way out today saw this in Fast Company. Amtrak's new rail line connecting Chicago and Minneapolis has only been running for about a month, but its passenger numbers are exceeding Amtrak's expectations. In June, the route had more than 18,000 riders, averaging about 300 passengers a day per direction. The full trip takes just under seven and a half hours. My question is, does that reflect how many people love trains, or does it reflect how many people are fed up with air travel?

Our media production team includes Brian Alzen, Jake Cherry, Jesson Duller, Gary O'Keefe, Charlton Thorpe, Juan Carlos Turado, and Becca Weinman. Jeff Peters is the manager of media production. And I'm Kristin Schwab. We'll be back tomorrow.