Marketplace - How low can it go?

Episode Date: February 19, 2025

At the national level, 2.5% is the lowest the unemployment rate has ever been … and that was for just two months in 1953. We’re at 4% right now, but the labor market is pretty tight. In this episode, we ask: How low can unemployment go? Plus, Samsung buys back stock and retires shares, the Fed is thinking about tariffs and a program that teaches refugees to drive runs out of gas, thanks to President Trump’s immigration policy.

On the program today, we can't not do tariffs. Sorry, we don't make the rules. We'll do streaming video and the unemployment rate as well. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizal. Tuesday, the 18th of February, good as always to have you along, everybody. We begin today with the observation that we are in week five of the second Trump administration, which is to say it is very early days yet.

But all the same, some familiar economic themes are solidifying, first among them the ever-present threat of more Trump tariffs. We start there because this is one of those weeks where various and sundry Federal Reserve officials get, well, chatty with remarks scheduled from regional Fed presidents and from members of the Board of Governors in Washington. And the question they are trying to answer as they steer this economy through the chaos is this. Do tariffs lead to one-time price increases? And so maybe

aren't that big a deal? Or do they jumpstart inflation, broader price increases over time, which as we all know is a much bigger deal? Marketplace's Kristen Schwab sorts out the Fed strategy. To predict how tariffs might affect inflation, economist Stephanie Kelton at Stony Brook University says we need to know exactly what the tariffs will be. Stephanie Kelton It's so tough because we're trying to have a conversation about something where there's just, you know, nobody knows. Gigi We don't know if all the proposed tariffs

will go through or if they'll lead to a trade war and more taxes. So Ken Kuttner, a former Fed staffer, says at first, Ken Kuttner The Fed is going to try to look past that transitory inflation spike that will be created by the tariffs. Unless consumers think that price spike is just the beginning. People started thinking, well, you know, price of tomatoes went up, everything else is going to start going up. And so we're like returning to an inflationary environment. Returning is a key word here.

Years of inflation have primed us to think higher tomato prices mean higher prices for cars and clothes. And with tariffs, that might appear to be true since they cover many categories of goods and their prices will rise kind of all at once. Randy Kroszner, a former governor of the Federal Reserve Board, says assigned workers believe this is inflation as if they ask for raises. Stephen Keltin, Ph.D., Ph.D. Typically, the Fed will respond to something that it sees as an ongoing process. You know, wage increases continue to be very high and that adds to the cost of production and that will lead to higher prices on the line.

Gigi Sotir, Ph.D. It's why regardless of where the tariffs land, the Fed's messaging will be important. Here's Stephanie Keltin again. Stephanie Keltin, Ph.D. If the inflation rate starts to move up for whatever reason, the Fed is going to feel compelled to respond in some way. With a longer than anticipated pause or even a raise to signal to consumers that it is serious about getting inflation down to 2%.

I'm Kristin Schwab for Marketplace. Wall Street after a three day weekend. Traders were well rested and still apparently unconcerned. We'll have the details when we do the numbers. I'm going to throw some data points at you en route to this next story, nice and slow, of course, because they are important. Unemployment in these United States was three and a half in February of 2020, that is, heading into the pandemic. In the post-plague recovery, it got down to 3.4%. That was April 2023, a more than 50-year low. And it now sits, unemployment does, at 4%, still historically very low. But could it go even lower? 2%? 1.5%? And wouldn't that be great?

Maybe. But also, maybe not. Marketplace's Mitchell Hartman takes it from there. So this question, how low can unemployment in the US go, was prompted by a story I did recently. I was explaining why unemployment couldn't keep falling as rapidly in the post-pandemic period as it had before the pandemic, because that would have meant unemployment falling to 1.5%, which I said economists will tell you pretty much can't happen. And then I heard from fellow Marketplace reporter Stephanie Hughes. I know that below 4% is really good, but why can't we get to 1.5%? And right off the bat, I found an economist, Julia Pollack at Zip Recruiter, who says it's

not unthinkable. We know from some states and cities in America that very low unemployment rates are possible. In 2024, South Dakota had an unemployment rate of just 1.9%. But at the national level, it's only ever fallen as low as 2.5% for two months in 1953. One reason it hasn't gone lower, says former Fed economist Claudia Somm, is that certain demographic groups face barriers to full employment, including lack of education and training and discrimination. Black unemployment has historically been about twice as high as white unemployment.

In South Dakota, unemployment on some Native American reservations is 80% or higher. There's mismatches of the skills that workers have and the geographies where they are. And that is the limit on the national unemployment rate these pockets of Structurally much higher unemployment. There's another kind of unemployment that keeps the rate well above 1.5% says Betsy Stevenson at the University of Michigan Something that economists call frictional unemployment the flies in the ointment that prevent workers and jobs women, the flies in the ointment that prevent workers and jobs from finding each other right away. It's the unavoidable churn in good times and bad as workers leave one job to find another

or graduate school and start looking. And we actually want some frictional unemployment. It's a sign of a healthy labor market, says economist Michael Strain at the American Enterprise Institute. Being unemployed for a few weeks and finding the best match you can, you're more productive, you're contributing more to the firm, to the economy, means that you're earning a higher wage. Now, we might develop better technology to match workers and employers faster, which

could reduce frictional unemployment a bit. And that would be a good thing, says Heidi Scheerholz at the Economic Policy Institute. When unemployment is low, that's great for workers and the economy. But it actually can get too low. Economists pretty much agree anything lower than two and a half to three percent risks extreme labor shortages developing in the economy.

Firms who have job openings, they're just basically poaching workers from other companies because there's hardly any unemployed people to hire. That requires big wage increases. And then that translates into big price increases. In other words, inflation. The Fed would raise interest rates to fight it, driving unemployment back up again. And it's not only a hot labor market that can lead to super low unemployment, says Betsy Stevenson. A low unemployment rate could be associated with a very stagnant labor market where there are no jobs, so there's no point looking. This is her tech-driven nightmare scenario, where AI and robots are able to do the work of most humans cheaper than we can do it ourselves.

Human wages are pushed so low that maybe people don't even want to work. Maybe they can't even survive while working. So, bottom line, unemployment could fall lower than it has in the last 70 years, maybe as low as 1.5%. But if it ever does, we should be very worried that something's seriously wrong with the U.S. economy.

I'm Mitchell Hartman for Marketplace. We all know by now that streaming is a business model. For the big, highly produced content streamers, Netflix and all the rest? Sure. But also for the content creator streamers too. YouTube of course, but also for companies like Twitch. And the reality is, as Twitch demonstrates, that that content creator business model is hard. There have been rounds of layoffs and, as of yet,

no profit for parent company Amazon. And for the millions of people who stream on it and either are or aspire to make a living from said streaming, well, that's not easy either. Nathan Grayson's new book about the company is called Stream Big, the Triumphs and Turmoils of Twitch and the Stars Behind the Screen. Thanks for coming on the program.

Thanks for having me on. For those unfamiliar, what is Twitch, if you can sort of encapsulate it for me? Yeah, so Twitch is a live streaming platform that originally was kind of dedicated to video games, to people playing video games for audiences to watch, but has since expanded in all sorts of different directions. So people will broadcast themselves out and about

in their hometowns or while traveling, doing things of that nature. Some people broadcast like talking about politics and news. It's really for pretty much everything at this point. Well, the interesting thing about Twitch to me now, and you get to this later in the book, and it's a totally fascinating story, but what has happened is that a lot of Twitch stars

that top layer, if you will, they're now on multiple platforms, and Twitch has sort of given up on exclusivity, and it's the stars realize they have to be on multiple platforms, and Twitch has recognized it, and it becomes sort of a business model challenge for them now. BOWEN Well, and you know, a lot of that is a result of just how the social media ecosystem has evolved in general.

A lot of people on, say, TikTok, are also on YouTube, are also on Instagram. Kind of everybody now doesn't put all their eggs in one basket because they've learned if you do that, there's always a chance that that platform could shift or change massively, or they could switch up their algorithm or something like that. And then suddenly things that you made

that used to perform well, no longer find an audience. I probably should have started with this, but if you were going to describe the content creation ecosystem to somebody who's reasonably online, but is not on Twitch, doesn't follow many of those sort of streaming platforms, it's huge, and yet it's not like in the American business

mainstream conversation, you know? Yeah, let's see, how would I describe it? In terms of appeal, a lot of people follow their favorite content creators, in part because these people feel relatable to them, and they're like, yeah, this person, they do feel kind of like a friend. But then you kind of expand that out into the larger ecosystem,

and it becomes almost like reality TV. There are all these little people with all these little dramas that you're keeping up with constantly. And then within all of that, everybody is kind of a small business owner, right? Where they are effectively, well not effectively, literally they are contractors under

the various major platforms that pay them out, often via ad money and things of that nature. They're all performing what is a job, but it's also a form of entertainment. Yeah. No, look, that's really good. And as you were offering that description, an example occurred to me,

and it's about the consumers of the content. We say on this program all the time, the American consumer is fickle. My wife and the one child who's still living at home with us were introduced by our oldest son to this guy on YouTube who treks through the Alaskan wilderness. He used to be a traffic attorney in Virginia, and now he just goes out and does stuff, like makes snow forts and teaches you how to survive in the Alaskan wilderness.

And we watched it like pretty steadily for like two weeks, and then we just kind of clicked off. And I imagine that's what consumers of Twitch and all the other platforms do, right? They're like, oh, yeah, this is interesting, but then I'm gonna go look at this thing over here, and then I'm gonna look at this thing over here. And that becomes a business challenge

for those content creators. And it's kind of like the, this sort of Damocles is always hanging over their heads. Is like, if I don't, if I'm not consistent enough, because that's the big thing on Twitch, it's just like being there every day, streaming during the same time segment, there's always the thought of,

if I stop or if I take a sustained break, then everyone will leave. They'll find somebody else to either follow or watch or crucially give their money to. Because if you're not around for like a week, a lot of viewers are gonna say, okay, well then why am I paying this person $5 per month? Right.

You know, something you said a minute ago resonates here. This is a job for these people and that's how they make their living and that's why they keep grinding it out even though it can be really, you know, you've got examples in this book of people having health problems and all kinds of stuff, but they get up and they do this because it's their job. Well yeah, exactly. But in this case, like, you know, it's a different kind of job. For one, you are in front of an audience. You are this version of your personality that has

dialed up to 11 and that takes a lot of energy, but a lot of these streamers are doing it for eight to 10 hours per day, or in some cases, even more than that. In addition to that, being a streamer or a content creator also means maintaining all sorts of relationships with various people, with various brands, and whatnot that you're doing deals with.

It is one of those jobs that, you know, if you let it, and it's very easy to let it because the incentive structures are there, it can become all consuming. Some streamers, I remember a couple years ago, XQC, who's one of the bigger streamers on Twitch and now Kick, talked about buying a car, and then was like, yeah, but I never use it because I don't have time.

I'm always just streaming. Wow. I was gonna ask you just as the ender, I was going to ask you, you know, what happens to Twitch in five or ten years? And I... Well, see, that's kind of an unknowable thing, right? Because this whole ecosystem is changing so fast, no?

I mean, it's really hard to say what happens to Twitch in five or ten years. Um, because, for example, five years ago, there was a really unprecedented moment for Twitch, which was the pandemic. And in 2020 and 2021, that was kind of like the Twitch boom. But all that is to say that it's not just the content creation ecosystem that is unpredictable,

it's also the world. If God forbid there's another pandemic, I think we're gonna see a lot more people on Twitch again. Short of that, it's hard to say because Amazon wants Twitch to be profitable so much. And because they've in the past couple of years laid off over a thousand people from a company that was only like a little bit over 2000, that seems to suggest that the priority is just we need to make money. And, you know, if that means that this product suffers or loses relevance,

well, that's tough. So bad, yeah. Yeah. Nathan Grayson, his book is called Stream Big, The Triumphs and Turmoils of Twitch and the Stars Behind the Screen. Nathan, thanks a lot, appreciate your time. Yeah, thank you. Coming up.

That is the vehicle that connect them with the outside world. Sometimes the key to independence is a set of keys. First though, let's do the numbers. Dow Industrial is up 10 points today, basically unchanged. 44,556 on the blue chips. Nasdaq up 14 points, about a 10th percent there. 20,000 and 41 S&P 514 points to the go to quarter percent 61 and 29 the National Association of Home Builders

says home builder confidence is at a five month low some of that of course uncertainty over the future pricing of imported materials where did we start the program today tariffs isn't that right yes yes yes West Fraser timber company grew 8 10% UFP Industries down 1.6 percent today. Ford Motor Company Reuters reports its withholding stock bonuses from about half its middle managers in an effort to cut costs. Ford accelerated 1.2 percent. Bonds down. Yield on the ten-year T-Node rose 4.55 percent. The Double Nickel, you're listening to Marketplace. understanding it all simple. Get smart takes on the week's biggest stories delivered to your inbox every Friday.

No jargon, no hype, just economics you can use. Sign up today at Marketplace.org slash subscribe. Hi, I'm Kai Rizdal, the host of How We Survive. This season is all about the institution that shaped me, the U.S. military, and how it could shape the future of climate tech. You've probably heard that 2024 was the hottest year on record, that wildfires devastated Los Angeles, and that the U.S. withdrew from the Paris Agreement again. And while all that might feel pretty terrible,

the climate crisis is not an inevitable reality. From simulated climate emergencies to microgrids and sustainable aviation fuel, we look at how the military is investing part of its $850 billion budget in a greener, more resilient future. Listen to how we survive wherever you get your podcasts. This is Marketplace. I'm Kyle Rizdal. Samsung, purveyor of among other things, TVs and smartphones and laptops, revealed this morning it has bought back and is going to cancel more than $2 billion worth of its shares of stock. Gonna make them just disappear. The upside of canceling shares is that the shares that are still trading are worth more. The definitely not upside of canceling shares is that it can be a bit of a tell of tough

corporate times. Not for nothing, Samsung shares off 35% over the past year. Marketplace of Kelly Wells takes it from there. Usually, when companies buy back their own shares, they hang on to what they buy so they can give them to employees or resell them later when they need a little money. Connell Fulincamp, an economics professor at Duke University, says canceling bought back shares is a bold statement. Traditionally, this has been a way for companies to try to signal to the markets, hey, we think

our shares are undervalued. And canceling shares kind of solves that problem, says Ari Schwader, who teaches economics at the University of Michigan's business school. The overall value of Samsung is still what it was, but the number of shares that exist in the world is less. And so the value per share will go up if the number of shares goes down. And investors have a reason to prefer share cancellations to, say, offering a dividend, says Paul Shea, who teaches economics at Bates College. You don't pay a dividend tax rate on it. You pay a capital gains tax rate, which is lower

for most people. But Shea says the billions of dollars that Samsung spent to buy the shares it's canceling is billions it did not spend on acquiring other companies or building new plants. So that could be a negative signal, but it could also just be that this is not a time where there's great opportunity for expansion. Shea says the cancellations would make him more nervous for a younger company that's never turned a profit. With an older, more stable company like Samsung, he says there's nothing wrong with returning

money to shareholders this way. I'm Kaylee Wells for Marketplace. The Trump White House has, among its other immigration-related policies, stopped the U.S. refugee resettlement program and frozen funding for refugee processing and services. The caveat here, of course, is that by the time you hear this, the courts might have intervened on one side or the other. But the disruption of the refugee ecosystem that's happened just so far has already started to hit the organizations that provide those services. Layoffs have started in cities

like Baltimore and Phoenix and Houston, a hub for refugee resettlement. Houston is also where Marketplace's Elizabeth Troval spent some time with the program teaching a critical skill for anybody living and working there. In Afghanistan women are not supposed to drive, especially under the Taliban. But Shaquilla Hotak isn't in Kabul anymore. This is Houston. We sit in her red Toyota. She turns on one of her favorite songs she plays on her way to work.

This is your driving song? Yeah. Hotak came to the US as a refugee two years ago. She supports herself through her factory job that pays $11 an hour. Through a Dari interpreter on speakerphone, she says before getting her driver's license and car. Did the bus mean of them? I was taking bus and I was taking two bus.

Her commute by bus was roughly two hours each direction. Now it's around 35 minutes and she has the freedom and time to do other things. I'm leaving my home and I'm going to work and also I go to hospital and I'm making a cup of coffee or like I drink tea. So I go to chat with my friends." Getting a driver's license is a must for refugees and immigrants. That's why YMCA International Services in Houston has helped these drivers learn the rules of the road for free and in their native language. In a recent class, innocent to Yeren Jere leads orientation for the Drivers' Ed program.

We are going to learn how to the process of obtaining driver's license. This class was just a few weeks ago. The program started in 2021 and it's helped around 550 people. First question is, why do you feel like you need driver's license? The responses? The response is, it's necessary, especially for work, which is why Tuyirin Jere is here to teach them about things like insurance and car seats for kids. Joanne Pantaleon supervised the program and says her clients were hired for new jobs and kept their jobs after getting their license through this program, which was especially

popular among women. You empower women by allowing them to get out of the home and doing things for themselves and not depending on their husband to do day-to-day activities. In particular, she says she's happy so many Afghan women signed up. Culturally, the women from the Afghan community stay at home. The fact that a hundred Afghan women came to us, learned how to drive, tells me that they're on the path to integration. At Farnaz Azimi's house in West Houston, we sit cross-legged in her living room on a red

carpet. Gartoons are playing for her youngest. Her son Hafiz interprets Dari for us. He said that she's at home and all three years that she's in here. Azimi's life has largely revolved around the home while her husband works and kids go to school. She got her driver's license. To run everything by herself, to buy groceries,

go to the gym and maybe one day get a job. She's one step closer with her new Texas driver's license. She goes to her purse to show it to me and smiles. How did you feel when you got the driver's license? She was so happy. Azini already has her license, but there won't be new students anytime soon. YMCA just suspended the program and furloughed employees because of the pause on refugee resettlement. YMCA wouldn't comment further, so I talked with Zenobe Olai, who heads the Houston Immigration Legal Services Collaborative.

She says resettlement programs and classes don't just give people the chance to flee violence. That is the vehicle that connect them with the outside world to independence. The refugee resettlement Program is actually a beacon of hope about America, what America is. We are losing a lot by cutting the program. Without a change in policy, it's likely that program cuts and layoffs will continue.

In Houston, I'm Elizabeth Troval for Marketplace. This final note on the way out today, which comes with the hope that you got your chocolate fix on Valentine's Day. Both Mondalis and Hershey's said today at a conference in New York that high and rising cocoa prices mean consumers are going to be paying more to satisfy their sweet tooth. Here's the quote from the Mondalis CEO, consumers will need to get used to chocolate that is 30, 40, 50% more expensive than it used to be. Our digital and on-demand team includes Carrie Barber,

Jordan Mangy, Dylan Mietinen, Jenna Nguyen, Olga Oxman, Ellen Rolfus, Virginia K. Smith, and Tony Wagner. Francesca Levy is the Executive Director of Digital and On-Demand, and I'm Kai Rizdal. We will see you tomorrow tomorrow everybody.