Marketplace - Libraries are still an internet lifeline

Episode Date: August 23, 2024

In this century, reliable internet access isn’t just a want — for many, it’s a need. The federal government is spending billions to bring broadband to underserved areas, but in the meantime, for residents of those hard-to-reach places, libraries are often the only place to access high-speed internet. In this episode, we visit an internet-providing library in rural Kentucky. Plus: Automakers expected a faster EV investment payoff, and prospective homebuyers play the falling-mortgage-rate waiting game.

We begin today with our favorite game show, which you knew we kind of had to. What is Jay Powell thinking? He gets eight words because he's the Fed chair. The time has come for policy to adjust. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdal. It is Friday today. This one is the 23rd of August. It is always tabula long everybody.

You know, you don't really have to read too terribly closely between the lines to understand Powell said everything except the actual words. Yep. We're going to cut interest rates during that much awaited speech of his in Jackson Hole today. But I think there is some subtext to explore here, so we will. Honest Watson is at the New York Times. Sudeep Reddy is at Politico. Hey, you two. Hey, Kai.

Hey, Kai. Sudeep, let me start with you. Just toss the coin. I'm going to play another piece of tape from Powell, and then the three of us will discuss Here we go Disinflation while preserving labor market strength is only possible with anchored inflation expectations Which reflect the public's confidence that the central bank will bring about 2% inflation over time That confidence has been built over decades and reinforced by our actions I'm just gonna say that that is Jay Powell spiking the football. Sudeep?

Look, he has to say something like this right now. It's been two years of extreme pain with high interest rates. The Fed clearly screwed up. The Fed was behind the curve, but he was banking on the idea that the Fed could fix this. Now, there are other parts of this speech where it was both a declaration of victory, but also a little bit of a mea culpa. They missed the boat on transitory, calling it transitory like a lot of economists did. Inflation was not transitory.

It stuck around longer than expected. And now this is a chance for him to explain, it was a speech for history, to explain at the Jackson Hole setting why the Fed missed the mark here, but also to say that they at least fixed the problem in these two years, and it didn't take a decade or more to fix it. Anna, I don't want to rain on anybody's parade because what the Fed has done after their initial mistakes is get inflation down from a substantial high. It has to be said though that price levels are still elevated.

Yeah, price levels are still elevated. I mean, there's still work to do, which Powell acknowledged. But my takeaway too is that if you look at the whole speech together, Powell is giving kind of himself a pat on the back here, but he also talks a lot about how there's an emerging consensus that the reason inflation is coming down is that we are just kind of normalizing from this weird pandemic economy that we've been experiencing over the past few years. pandemic economy that we've been experiencing over the past few years. And that seems like that is the trajectory that has put us on this kind of soft landing course that we're on now.

The fact that we're returning to normal from these weird increases in demand and supply shocks from the pandemic. So I don't doubt that the Fed did do something in that equation, but I think there's a lot of room for debate over how much they really did versus these other factors, as he kind of acknowledges in his speech himself. Sudeep, how sobering do you think the annual revision that we got this week to the labor market was, that 818,000 fewer jobs?. While yes, we've added a bunch of jobs, it was fewer than expected.

How sobering do you think that was for the FOMC and the chair? I think most of them were probably not hugely surprised. There were other parts of the government. The Philadelphia Fed had actually estimated a lot of this months ago. And so it shouldn't have been hugely surprising. The fact that the unemployment rate has now come up

at a level that historically would indicate a recession on the horizon has got to be a sign of concern for them. The tight labor market, as Jay Powell said, has become a lot less tight, and it's comparable to what it was in 2019. That was not a great period. And what came after that was also not very good.

Obviously, it was a pandemic induced recession. But when you had the conditions of the yield curve inverting, similar to where we are now, you've had markets at record high, a lot of the things have got to be concerning for them right now. And so J-PAL is clearly indicating that the Fed is going to be here on the other side of the mandate. And he is ready to cut rates

the moment there's a sign of trouble and will not hesitate to cut rates when there's a sign of trouble. But as we all know, except for the great soft landing in the mid 1990s, whenever the Fed is in position of cutting rates when unemployment is rising, that's usually not a good sign, not a great period to be in, but at least they're ready this

time. I did think it was interesting. He said, we neither seek nor desire, I think is what he said, further softening in the labor market. I guess the question now is, now what do we do? Do we just wait for every meeting and they cut a quarter point until they get to somewhere where they're happy? I mean, I do think that is sort of what data dependent means to a certain extent, right?

And, you know, that, I mean, Pell didn't really need or, or want to get ahead of the next jobs report that's going to come out on September 6, right, which will be a very important signal for Fed officials about the size of the rate cut that they're going to take at their next meeting and then what they're going to do beyond that. But I think Sadiq is absolutely right that he strongly signaled that we're there and there are reasons to be concerned about this unemployment rate ticking up. The pace that it's risen in the last couple of months is a pace that's rare outside of a recession, but I also thought it was really interesting that the reasons that the unemployment rate are rising, you

know, it's not that we're seeing sort of a lot of elevated layoffs like you would see in an economic downturn, but you're just seeing kind of a slowdown in the pace of hiring. So that's interesting, but there's still clearly reason to be worried. And you know, Paola's saying that that cooling is unmistakable at this point. Let me just go to the buzzword and I'll ask both of you the same question. And Ana, you get to go first. Is this a soft landing or too soon? I think, you know, it clearly has been a soft landing so far, but you haven't landed until you've really landed, right? And so, this soft landing is just taking much longer

than I think any of us had anticipated, and we have to see it all the way through. Floating down the runway. Sudeep, what do you think, soft landing or too soon? This is definitely better than anybody could have expected. It's a softer landing than we would have ever hoped for when we started seeing, when we saw inflation as high as it was

and we saw interest rates go up as quickly as they did. And so at least we are not in what would have been considered a worst case scenario. I just think it's way too soon to be able to make that judgment, especially with what we've seen happening with the unemployment rate and some of the other labor market factors out there. And that's got to be high on Jay Palo's mind right now. Yeah.

Sudip, last one to you, and I'm just going to put you on the spot because, well, you know, because I feel like it. Fifty basis points or 25, do you think, in the September meeting? Half percentage point or a quarter point? At this point, it really will rest on another labor market report another inflation report but there's there's very little damage that will be done if they make a first cut of 50 basis points and it seems like a lot of the fed is heading in that direction of moving faster rather than slower. City Brady at Politico, Anna Swanson at the New

York Times on a Friday afternoon. Thanks you two. Thanks. Have a nice weekend on Wall Street today. I mean, do I even have to tell you? Well, I do. We'll have the details when we do the numbers. Alright, follow along with me here for a second as we digest the implications of Powell speech today.

Housing is among the most interest rate sensitive sectors of this economy. So if overall rates go down, then mortgage rates are going to go down and then more people are going to borrow money to buy a home. Totally makes sense. Except maybe not. The Mortgage Bankers Association reported this week the average rate on a 30-year fixed dropped to 6.5%, the lowest it's been in well over a year in mere anticipation of the Fed cutting.

And yet, weekly mortgage applications actually fell to their lowest level since February. The September rate cut that looks like it's on its way could be the first of many cuts over many months. So if you're a would-be home buyer, do you just wait a little longer? Marketplace's Matt Levin is on that one. Southern California real estate agent, Kama Burton, has noticed a change in the first-time homebuyers she often represents. I'm seeing that buyers are more on the fence and they're also a little bit more apprehensive

of making offers. Burton says she frequently gets buyers asking whether they should just hold off on the biggest purchase of their life until mortgage rates drop some more. She first tells them no one really knows what the future holds and then gives them the horror story of what it was like to buy a house a couple years ago when interest rates were incredibly low. It was absolutely bananas. We were literally standing in line just to go into our open house.

No chance at all to get properties. It's unlikely mortgage rates will get back to that three percentage range that partly caused all those bidding wars and waving of home inspections. Sean Park at Fitch Rating says even if rates do tick down in the next few months, you won't see a flood of home buyers immediately enter the market. Even if like, you know, the rates go up by 1%, it's great news for the home buyers, right? However, they might want to see, you know, if the mortgage rate comes down further.

That's partly why existing home sales last month were down 2.5% year over year and down 40% from peak frenzy in 2021. Meanwhile, the number of homes actually for sale has finally started picking up. Fresno real estate broker Sabrina Brown says while home buyers may have the luxury of waiting, her home seller clients often can't. Life just forces them to give up a very cheap mortgage. Someone passed away, the trustees are now selling the property. So I'm dealing with that right now.

And then also, I have another one, they're going through a separation. You can lock in a mortgage rate, but you can't lock in what the future holds. I'm Matt Levin for Marketplace. I know what the future holds for you. A podcast of this radio show. Should you miss it on the actual radio? You can get it at our website Marketplace.org or the platform of your choice. Follow us there. Coming up.

And there'll be people outside, 35 degrees, in sleeping bags using the internet. When you need to get online, you need to get online. But first, let's do the numbers. Yeah, the really happy music. Thank you, Jay Powell. Dow Industrial is up 462 today, just over 1 1⁄10%, 41,175. NASDAQ grew 258 points, that's 1 1⁄2%, closed at 17,877. The S&P, 563 points to the good, 1 2⁄10%, 56 34.

For the five days going by, the week that was, the Dow up 1.6 percent the Nasdaq up two tenths of one percent S&P 500 picked itself up nine tenths of one percent. The Biden administration says it's going to resume offering free at home COVID-19 self-tests in late September. Some test maker stocks then Abbott Laboratories found about a half percent CVS Health Corporation improved one and seven tenths percent today fast casual Mediterranean restaurant chain Kava posted higher than expected earnings today the company credited its new grilled steak Must be some steak as one reason it had done so well over a quarter where other restaurants saw declines Kava group Just up 19 and six tenths percent must be really good steak right? Bonzeros yield on the 10-year T-note fell 3.790 percent.

You're listening to Marketplace. This is Marketplace. I'm Kai Rizdal. Here are three true statements about electric vehicles in the United States right now. One nearly 600,000 of them were sold in the first half of this year, so says Kelly Blue Book. That is 7% more than were sold in the first half of last year. Two, that growth, 7% a year, is down a whole lot compared to just a couple of years ago. And in fact, sales are not meeting the projections that automakers made back in early 2022, which

is not that long ago. Fact number three and related, Ford yesterday saying, yeah, we're going to pull way back on electrics. Marketplace's Henry Epp looks back at why car companies figured Americans would jump into EV so fast and why those expectations have fallen short. If there was one moment when the EV hype really hit the mainstream, it was the 2022 Super Bowl. Nearly every car ad that year was for electric vehicles. I figured you could use a little pick me up. All electric? All electric. Look at this now.

It's Elmahajek and Arnold Schwarzenegger as Greek gods driving an electric BMW, the kids from The Sopranos reuniting next to a battery-powered Chevy Silverado, and Mike Myers reprising Dr. Evil from the Austin Powers movies. Hold on, I've got it. I will help save the world first, then take over the world. Dr. EV-ill. Get it? To a TV audience of over a hundred million, the auto industry was saying, electric vehicles

are here and they're cool and you should buy one, even though in the previous year, EVs made up around 3% of new car sales. But that fraction was growing fast. EV sales were up by nearly two-thirds between 2020 and 21 thanks to one company, Tesla. They basically made it obvious that this is now economically viable. Tom Narayan covers the auto industry for RBC Capital Markets. Making only electric vehicles, Tesla's profit margin shot up in 2021 and other automakers found themselves playing catch-up. Meanwhile, car buyers had pandemic stimulus money on hand and they could get government tax credits for EVs. All of that made the electric car market's trajectory look bright to companies and analysts, Narayan says.

If you're looking at the numbers and they're coming in stronger than you expected, you can't help but extrapolate that into the future, right? Because you don't have any data point that would suggest otherwise. So extrapolating that consumer demand would keep growing and feeling pressure from regulators, many carmakers went all in on electric, betting billions of dollars in capital investment. Stephanie Brinley at S&P Global Mobility

says carmakers were thinking. Okay, at some point, we're gonna probably be an EV dominant market if not 100% EVs. If we're gonna be part of that market, we need to invest. Those investments are what led companies to run those Super Bowl ads and put out ambitious EV production targets, thinking consumers would be there to buy them. The expectation for how quickly EV adoption would happen got set a little high. got set a little high. EV sales continued to grow, but the trajectory they were on in early 2022 didn't last. In part because the economy changed, says Carl Brower, executive analyst at iccars.com.

Interest rates going up, making it harder to finance anything, including more expensive cars. Plus inflation. Which made it harder for people to go buy a new car or an expensive car when they're trying to buy milk and bread. And once they tried EVs, Brower says, some consumers just weren't happy with them. Scott Lambert has seen that in Minnesota, where he's the head of the state's Automobile Dealers Association. He says electric cars haven't met two of the needs for some drivers in his state. Driving in cold weather and towing things. If you've got an electric truck and you think you're going to pull your ice house onto the

lake on a cold February day, you better plan your day pretty carefully because you'll lose a lot of range pulling that ice house and you'll lose a lot of range in the cold weather. But even if EVs aren't meeting everyone's needs now, they might in the long run. I really think it's important to recognize that the EV transition was always going to be a 10 to 15 to 20 to 30 year sort of timeframe. Stephanie Brinley at S&P Global Mobility says despite the recent slowdown in sales, the auto industry is still betting that EVs are the future. but it's realized this is not a sprint, it's a marathon. I'm Henry App for Marketplace. We've been doing a series the past couple of months called Breaking Ground about how

the trillions of dollars from the Inflation Reduction Act to the Bipartisan Infrastructure Law and the CHIPS Act are changing the way the government is in this economy. Next week we're going to be tackling one piece of that, the Broadband Equity Access and Deployment Program, BEDE for short. As part of the bipartisan infrastructure law back in 2021, $42 billion were earmarked for the express purpose of getting every home in this economy

connected to high-speed internet. Before we get to the nitty gritty of how that is actually going to happen, and trust me, we are going to get there next week, we wanted to set the scene for you and also set the stakes. Well, here we are, the Spencer County Public Library. I was in Taylorsville, Kentucky a couple of months ago. It's about an hour southwest of Frankfort,

Kentucky's capital, population almost 6,200, median household income a little bit north of $83,000 a year. That's according to 2022 census numbers. Lovely day here in Taylorsville. We're here to chat with Deborah Lawson. She's the library director. Hi, how are you?

Hi, I'm great. I'm Kai. Nice to see you. How are you? Nice to meet you. I'm good. Thanks. Show me inside, would you? I'll be happy to. All right. Lovely. The library is not huge, but it has been renovated recently.

Nice white walls, wooden shelving, plenty of natural light. Inside are all the things you'd expect to find in a public library. Children's and teen sections, reading areas, community meeting spaces. It's not busy busy, but for, what are we, two o'clock on a? Two o'clock on Wednesday. Wednesday afternoon. Right. And Wednesdays are, yeah, they're typically kind of slow. And there are the kinds of signs you might see

in a lot of public spaces about how to get on the wifi, network name, login info, that kind of stuff. But what interested me the most were the dozen or so computers scattered around. Are these public use computers? They are publicly used computers. Our public use computers? They are public use computers. Our public use computers, the usage is going down. Really?

Very quickly. Our Wi-Fi numbers, on the other hand, are through the roof because people are bringing their own devices and they use it 24-7. We leave our Wi-Fi up 24-7. So sometimes if I check something on the camera, if I come in the next morning, check up the camera, and there'll be people outside, 35 degrees, in sleeping bags using the internet.

Spencer County is far from the least served county in Kentucky when it comes to internet. A little more than three quarters of the people here have access to internet that is fast enough to count as broadband according to data from broadband now But that is also to say about a quarter of the people don't Who comes here?

Mostly and why to use the Internet, you know to use the Internet. Yeah There are so many people that do and there's multiple reasons of course, but one is income. They can't afford to get internet here. And the second one is that it's just not available. You can have a house filled with money and you can't get good service provider because of the topography. And also some people can look 100 yards down the road and see a house that has internet access But they can't get it because it stopped right there and the provider is not going to go down the road for one house What would these people do if you weren't here?

Well, they might be hanging out at McDonald's. We have no Starbucks, so they wouldn't be there. We're a no-Starbucks town. And I can't even imagine. I can't even imagine because the services that we provide and the way they use our computers are participating in society. They're doing their insurance, they're looking, they do their taxes, they're participating. The library is footing that bill to participate.

How much is your internet bill every month? Oh. Don't look it up if you need to. Well, our internet bill is going up. We're going to get fiber. I'm so excited. Are you sure? Yes, I am sure because it's in the city. So it runs from downtown out to the high school. And the price finally came down low enough where we could get it with E rate and we can afford it. Education rate, e-rate. So that's going to run around $9,000, but e-rate will pay 70%. So I think that is about $6,300. They're going to pay $6,300.

It leaves you on the hook for, sorry, doing the math, $2,700. Is that a month or a year? That's for a year. Oh, all right. Just checking, because you know, you can see some of that. Right? Exactly. So there's a huge federal infrastructure bill. There's $42 billion in it. For a year. Oh, all right. Just checking because you know, yeah, right exactly So there's a huge federal over ice structure bill. There's 42 billion dollars, right?

Internet money a billion dollars coming to state of Kentucky, right? Fiber is gonna pay for some chunk of that to come to you, right? What's gonna look like here in five years? Like when you're about to get think about starting to get ready maybe to retire no offense no that's fine um what about that it'll look pretty good I think if it funnels down to this level well that's the plan right the plan is for this billion dollars that they're gonna get in Frankfurt to wind up here somehow? That would be wonderful. You're nodding and you're like, yeah. And I think it will, but it depends on how it's passed out.

I'm hopeful. I'm positive. It's going to be great, Kai. It's going to be great. Now you're definitive. Now you're definitive. All right. I try to avoid that.

I understand. This is just one library in a single state, but it is a really good example of what communities all over the United States are dealing with in the pursuit of internet access. So next week, we'll explore what it's going to take to get every home in the country connected, what the opportunities are, what the challenges look like and how it all works in a year where federal priorities might change. Broadband in the Bluegrass State, the next installment of our series, Breaking Ground, coming up on Monday. This final note on the way out today, one more from Chair Powell. Sudeep alluded to this, a victory lap of sorts.

The Good Ship Transitory was a crowded one with most mainstream analysts and advanced economy central bankers on board. I think I see some former shipmates out there today. Ah, the days of transitory, maybe a little mea culpa there as well. Our theme music was composed by BJ Liederman, Marketplace's executive producer, who's Nancy Fargalli. Donna Tam is the executive editor. Neal Scarborough is the vice president and general manager.

And I'm Kyle Rizal. Have yourselves a great weekend, everybody. We will see you again on Monday. All right? This is APM. Understanding personal finance can feel like a lot of work. This is APM. Understanding personal finance can feel like an impossible task, but it doesn't have to be that way.

I'm Janelia Espinal, and on Financially Inclined, I'll guide you through simple money lessons that will change your financial future. Learn about credit scores, how to avoid scams, and why you need a savings account. Plus, we explore the brain science behind FOMO and what you can do to make smarter money decisions. Listen to Financially Inclined wherever you get your podcasts.