Marketplace - Making more stuff without working more hours

Episode Date: August 1, 2024

Strong productivity growth last quarter coupled with recent wage growth means we’re generating more output and, at least to some extent, getting paid for it. In this episode, why productivity growth prevents a wage-price spiral. Plus, California wants to build an offshore wind turbine assembly plant, national economics impact national performance in the Olympics and equity-rich homeowners can’t do much with their housing wealth right now.

Wages play catch up with inflation. Homeowners build wealth, at least on paper. And how economics fuel Olympic success. From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott in for Kai Rizdal. It's Thursday, August 1st. Good to have you with us. Tomorrow is the big day for jobs when we'll dig into the latest employment situation report from the Labor Department.

But today there's news on the jobs front too, also from the Labor Department, which said that first-time claims for unemployment benefits reached a one-year high last week, another sign of what Fed Chair Jay Powell has called a gradual normalization of labor market conditions. A separate report showed worker productivity grew in the second quarter of this year up 2.3 percent on an annual basis. Real wages that is adjusted for inflation rose too. Marketplace's Elizabeth Troval has more. 2.3% productivity growth is nothing to sneeze at, says Luke Pardue with the Aspen Economic Strategy Group.

Luke Pardue, Aspen Economic Strategy Group Productivity growth that we've been seeing has been central to the soft landing. Kasey Haley, Aspen Economic Strategy. This is the tight labor market has contributed to productivity growth. That's because businesses have had to lean on the employees they already had to pick up extra work. Productivity growth is about as close to a free lunch as you can get in the economy. And that's because when workers become more productive, businesses are able to produce more without hiring more workers.

And so they see higher revenue, which they can then reinvest in the business, or pay workers in higher wages without needing to raise prices. And workers are seeing higher wages, especially in manufacturing, even when you adjust for inflation. But Dennis Jansen with Texas A&M says for many workers, pay is still lagging inflation. Real wages have been a little better than glacially, but gradually creeping upward. And so this big decline is going away, but it's taking a long time. And boy, are we ready for it. Zach Bethune is with Rice University.

If real wages are increasing, but it's in the context of an inflationary environment, inflation can harm them in other ways. It depletes nominal savings, wealth. But inflation is down, with prices increasing 3% in the 12 months through June. And for anyone who fears the wage increases in today's data could get passed down to consumers, Duke University's Gregor Drozs has some good news. Wage growth is actually pretty perfect reflected by relatively high productivity growth.

And so in that sense, I don't think there's the sort of like purely nominal wage increases that are not reflected in productivity that could be back into prices. Because productivity has increased alongside wages, he's not worried about that dreaded wage price spiral. I'm Elizabeth Troval from Marketplace. On Wall Street today, quite the come down from yesterday's post-Fed meeting high. We'll have the details when we do the numbers. We reported earlier this week that home prices just kept rising in May, as of the latest Case-Shiller index. One effect of that is that home equity is growing too. The real

estate data company, Adam, says almost half of households with mortgages are equity rich, meaning they owe 50% or less of the home's market value. But what homeowners can actually do with that wealth is another question Marketplace's Stephanie Hughes reports. Kate Sam and her husband got a great deal on their small house in Baltimore when they bought it in 2010 and an even better deal on their mortgage rate a couple years ago. With about 50% equity in the house, they feel secure. It feels like we did something right. We will have something to pass on to our kids.

But it feels limiting, like, why would we give this up? Sam would actually love to give it up for a bigger place. Her husband, who's an artist, works on the tiny sun porch. And because she doesn't have a desk, she often does her nonprofit communications work from an armchair in the living room. But with current home prices and mortgage rates, it's hard to justify making the leap

to a bigger house right now, possibly ever, honestly. Homeowners who don't want to move can also tap into equity to fund things like kitchen renovations or college tuition. But refinancing or taking out a home equity loan comes with that high interest rate right now. Jenny Schutz, a senior fellow at Brookings Metro, says having money in your house is not like having it in a piggy bank or in mutual funds.

You can sell some of your mutual funds. You can't sell off a part of your house. The only way to tap some of the equity while staying in the house is to use these financing tools. Those financing tools include a cash out refinance, an option say that parents had traditionally used to help their grown kids become homeowners too. So Susan Wachter, a professor of real estate and finance at Wharton. They can't do that today. Because interest rates are just too high. They can't refinance, take the cash out, give it to their kids for paying for a down payment.

But even if it is hard for people to actually access the money that's tied up in their homes, just having increased equity makes homeowners feel richer. And that affects their spending. Again, Jenny Shutz of Brookings. That they're more likely to do things like go on a vacation or spend more money going out to dinner more often. Even if they're not planning on selling their home

and getting a big payout for years, they're more likely to feel wealthy and to act like it. I'm Stephanie Hughes from Marketplace. If you're like me, maybe you spent some time this week cheering on Team USA in Paris. Don't worry, no spoilers if you haven't seen the Women's All-Around Gymnastics Final yet. I haven't. But let's just say American athletes are taking home some hardware, and a lot of that success has to do with our economy.

Veronica Dollar teaches economics at Pace University and has studied the connection between Olympic achievement and wealth. Veronica, welcome to Marketplace. Thank you so much for having me. So I think, you know, even a casual Olympic watcher can probably see that bigger, wealthier countries tend to do better in the Olympics. But you've been studying this. How strongly is Olympic performance correlated with economics? So there are different ways you can sort of look at this data, right? So if you

take a big bird-eye view and sort of look at just gross domestic product and population size, those are probably one of the most important determinants, how many medals a country wins. But then, of course, there are all these subtle issues that sort of play a role as well that influence who gets to be an athlete and who gets to succeed and in which sport. Right. And it sort of belies the notion of a meritocracy when you see these differences in terms of wealth.

But why, generally generally speaking would wealthier countries perform better in the Olympics? So, the most important thing that matters is basically the infrastructure, right? Or even just before the infrastructure, health and nutrition and life expectancy and infant mortality, those are some of the very, very basic first variables that we should be looking at when we're sort of thinking about how many athletes we can create, let alone getting proper equipment and proper coaching and things like that that our top athletes here in the United States are exposed to. SONIA DARA-MARGARETTI Well, and just an example you give in your research of the cost that

supporting athletes can reach. I mean, can you talk about cryotherapy and just how that has become popular and it's so expensive? Right. So it's cryotherapy. They're like these bed chambers where the oxygen level is reduced. And so Michael Phelps was the first one I remember talking about it. So he was sleeping in this very heavily modified bedroom with lower level of oxygen. And this was like millions of dollars to create something like that. So just having this kind of exposure and training, you know, gave pretty big advantage to him and not to mention the nutrition and then, you know, having the best equipment and everything is properly measured and things like that.

You've also been working on an analysis looking at the role of income inequality in Olympic achievement. What have you found? Yeah, so this is something that it's sort of a new addition to this research. So I come from Slovenia and that's actually one of the reasons why I started to study this. So I come from Slovenia, which is one of actually the most successful countries in per capita medals.

And now I live in the United States and I also sort of participate in sports. And I was just sort of really shocked to see how expensive it is for small children to sort of get involved with sports. And this is where this income inequality sort of plays a role, you know, whether or not you give a chance to children that might be very, very talented, have the grit and all that it takes to become the top athletes, but are not born to right parents in a sense, right? So that's really sort of the key factor here. So I've heard you're an athlete yourself.

You're a badminton enthusiast. Yes. So I started to play badminton here in Slovenia. And that's actually one of the reasons that I'm interested in this type of projects as well because my experience here is very, very different from the experience that my children have in the United States. So just to give you an example, to book a court here in Slovenia, it costs about five euros or five dollars. To book a court in the United States, in New York where I live it's over $80 per

hour. So not to mention how much it costs to pay for private coach. In many European countries, sport is heavily subsidized, which basically means that even for sports like badminton, the state would actually pay a coach. So coaches are civil servants. There is no such thing, obviously, in the United States, not at least to that level. And as a result, we have this like privatized youth sports that have become this multi-billion dollar enterprises for those who can afford it.

Huh. Well, it's really interesting research. I will be watching the Olympics differently after this conversation. Veronica Dollar is associate professor of economics at Pace University. Thank you so much. Thank you so much for taking time and talking to me. Coming up... There's no current large male celebrity running a book club. Sounds like an opportunity. But first, let's do the numbers. Yeah, no kidding.

The Dow Jones Industrial Average fell 494 points, 1 and 2 tenths percent. To finish at 40,347, the NASDAQ subtracted 405 points, 2 and 3 tenths percent. To close at 17,194 and the S&P 500 lost 75 points just shy of 1 and 4 tenths percent and at 54.46. The big week for big tech earnings rolls on. Yesterday after the closing bell, Meta platforms reported revenue that beat analysts expectations. Thanks to strong social media ad spending on Facebook and Instagram, Meta accumulated four-and-eight-tenths percent.

Snap, parent of Snapchat, also reported strong ad spending, but it gave up three-and-eight-tenths percent. Bonds rose. The yield on the 10-year T-note fell to 3.98 percent. That is below 4 percent for the first time since January. You're listening to Marketplace. This is Marketplace. I'm Amy Scott. Right now, about 10 percent of energy in this country comes from wind power. That's according to the U.S. Energy Information Administration.

And it's about to get a big boost. The state of California recently decided on a plan to build hundreds of wind turbines off the coast. And in November, voters will choose whether to approve a bond issue to help fund the project. The turbines would be unique in the states because they float. Pilot projects in Europe have shown that the technology is feasible, but it's never been tried at this scale. Marketplace's Kaylee Wells has this preview.

Near the mouth of the Port of Long Beach is a giant empty square of calm ocean water. It doesn't look like much now, especially in the context of the nation's largest port complex. But if things go as planned, it'll be ground zero for California's offshore wind industry. That's where you would see the production of the turbine, the foundations being assembled, and the integration along the wharf. Chief Harper engineer Suzanne Plescia is standing on a helipad a few hundred feet away, pointing and gesturing in the air to paint a vision where right now there's just empty space. The port's name for that vision is Pier Wind. Even as we look out here in our outer harbor, it is hard to get a good perspective on the scale.

It is hard, but let's try anyway. This is 300 football fields of space. Half of it would be a staging area where the turbine puzzle pieces would be delivered and assembled. The other half would be a wet storage area where the fully assembled turbines would sit waiting for the tow boats and calm seas needed to get them to their final destinations. All of this is behind a breakwater that keeps the ocean calm enough for this work. The turbines would be a thousand feet tall, like the Eiffel Tower.

Not a lot of facilities can accommodate that. We have this large area in our outer harbor where we can build a new facility that is out in front of our bridge. So there's no air height restrictions. We have direct access to the open ocean here with those deep wide channels. That's different from say the Bay Area ports in Northern California because they're behind the Golden Gate Bridge, which has a clearance that is way shorter than these turbines. Plescia says this project would employ 17,000 people, and by the time it would be up and running in 2031, it could send out one assembled turbine every week.

These turbines would be particularly valuable because of when they produce energy. That's according to Adam Stern, executive director of the trade group Offshore Wind California. Adam Stern, Executive Director, Offshore Wind California The characteristics of the wind, which are the strongest in the late afternoon and evening, which is exactly when solar drops off, when the sun goes down, and electricity demand is the highest. And to those who are worried about the ocean view and the birds, these would be dozens

of miles from the shore, where the birds like to hang out. And that's just at a point where they hardly can be seen except on the clearest of days when they'll look like toothpicks in the distance. Those toothpicks would be unlike any turbine we've seen in the US, says David Hochschild. He is chair of the California Energy Commission. One reason, they're really big. One rotation of one of these turbines can power two houses for a day.

Compared to turbines you'd find in, say, the California desert, these would stand twice as tall and generate roughly 10 times the power. Then there's the whole floating on a tripod thing. It really enables the deployment of the infrastructure in waters that were previously considered sort of off limits. On the East Coast, the turbines are implanted in the seabed hundreds of feet beneath the surface. On the West Coast, seabeds are thousands of feet down. So the plans are in place. The question now is whether California can implement them quickly and protect its title as a green energy leader.

Hokeshield is feeling optimistic. I think this is like the next chapter in that story. And it's a pivotal chapter. The state's goal is for wind to produce about 13% of its expected power by 2045. That'll be vital in achieving California's overall goal to run on nothing but clean energy by then. In Long Beach, I'm Kayley Wells for Marketplace. We're answering your burning questions about climate change from how to electrify your home to why one and a half degrees Celsius is such an important climate benchmark. Check out the latest season of How We Survive. It's out now on our YouTube

channel at Marketplace APM or wherever you listen to podcasts. If you're looking for a good summer read, you might turn to one of a growing number of celebrity book clubs for a recommendation. Dua Lipa, Dakota Johnson, Emma Roberts all have book clubs, along with the Big Three, run by Oprah Winfrey, Reese Witherspoon, and the Today Show's Jenna Bush Hager. Here she is announcing her August pick. OK, are you all ready to help me count down? Ready? Three, two, one. And it's the Wedding People by Alison Esquire. These clubs wield a lot of power, as the majority of titles quickly become best sellers.

Journalist Sophie Vershbaugh wrote about how it all works for Esquire. Thanks for joining us. Thanks so much for having me. At the outset of your story, you say it's not going to be some kind of takedown of celebrity book clubs. You actually think they're a good thing for books and for reading. Why is that? It is increasingly challenging to sell books. I worked within the Big Five, the largest five publishing houses at

Simon & Schuster and Penguin Random House for about a decade. And even in my time in the industry, I saw such a shift to having some of those more traditional media sources become less influential in sales. And so ultimately, a lot of these book clubs have sort of taken that place and started selling a lot of books and that's really made them extremely influential in the industry. So how do books actually get chosen? You have a create line that's sort of, quote, an elusive blend of personal tastes, connections, cold pitching, and good old-fashioned luck. So what's the process for getting my book in front of these celebrities?

In the case of both Read with Jenna and Oprah's Book Club, it's a little bit more of a traditional path. So there are people within those organizations who publicists, editors, publishers, etc. can pitch. Reese Witherspoon's Book Club claims that they do not accept pitches and that they source all of the books through an independent scouting team that they work with. What's so interesting about this is I think a lot of people want there to just be one easy answer. Something sketchy is happening behind the scenes if one publisher has more books, but ultimately these are individuals with their own tastes. And I have an anecdote

in the piece that one of Oprah's book club picks was selected just because she happened to find a manuscript of it in her living room with no recollection of where it came from. And so as much as- And you said like that's the sound of a thousand publicist fainting or something. You had a great line about that. Exactly. And you know, I think that's because there's just so much competition for very few slots. And I think that's one of the reasons why I'm so supportive of these book clubs is because

they have become so impactful in an increasingly challenging media environment. And ultimately, more books being sold is a good thing. But even if the choices can be organic, like Oprah finding a manuscript, you do write that over the last seven or so years, more than 40% of book club selections come from just one publishing house, Penguin Random House. I mean, that doesn't happen by accident. Nothing, ultimately, with the very rare exception of an Oprah manuscript, happens by accident in publishing.

This is an industry based on connections and lines of power. So of course, if a publisher paid a significant amount of money for, let's say, a commercial, I hate this term, but women's fiction book, that seems like it might be very well aligned with one of the book clubs, they are most likely going to try harder to get that book placed in one of them through networks of connections than a book that they did not pay as much money for and were not expecting to sell as many copies. You cite a staggering statistic in your story that somewhere between 500,000 and a million

titles come out every year just in the U.S. I mean, it's really amazing how many books there are. And some kind of weeding out is going to happen. But do you think it's a problem that the big publishers are much more likely to have their books selected by these clubs and it leaves a lot of books overlooked from independent publishers, maybe authors who are underrepresented in publishing. Yeah, I want to be clear that I don't necessarily think it's any of these celebrities' responsibilities to have to care about this. They do not work for us. And this is great. This is a net positive.

I would like to recommend that it would be great if they could perhaps set internal quotas around featuring a certain amount of independent publishers per year. I really think the solution to all this is more celebrity book clubs. There's a huge void for other people with name recognition to step into this space, especially around, say, marginalized communities around. I mean, there's no current large male celebrity running a book club. Why do you think men haven't seized this opportunity?

Men like to read. People like famous men. Who's going to start the first male celebrity book club? A lot of people threw around the name Mark Ruffalo to me because he has posted a lot about his reading. I think he could be a great one. I would love to see a Gen Z male celebrity just really fall into this. Reading is, God, this is so silly, but cool gets considered a cool thing to be a part of.

I feel like that could be such a great look for a Gen Z male celebrity to say, hey, we're going to get more men into reading, especially something like reading fiction. Sophie Vershbaugh wrote about celebrity book clubs for Esquire. Thank you so much for sharing your reporting with us. Thank you for having me. This final note on the way out today, which I saw on Quartz, chocolate is out, salt is in. At least that's one takeaway from Hershey's second quarter earnings report, which said confectionary sales were down almost 21 percent, thanks in part to higher cocoa and sugar prices and customers pulling back on discretionary spending.

Meanwhile, salty snack sales rose 6.4%. Me? I like salt on my chocolate. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher, and Stephanie Seek are the Marketplace Editing staff. Amir Bivawi is the managing editor, and I'm Amy Scott. Hope to see you back here tomorrow. This is APM.