Marketplace - Manufacturing boomed in July. Thank all that AI money

Episode Date: August 4, 2026

In July, the manufacturing sector grew at its fastest month-to-month rate in four years. A new tax law likely boosted company spending to some degree, but AI investment packed the biggest punch — demand is strong and the money is flowing. Also in this episode: McDonald’s suffers a sales slump, the latest JOLTS data points to a steadily improving labor market, and Kai talks to one economist behind a Trump administration investment tracker.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.Read the stories in today’s episode:Manufacturing sector benefits from continued AI demandTracking down the Trump administration's $27.6 billion in investmentsWhy job openings have been rising slowly this yearMcDonald's sales soften as diners spend cautiouslyWhere did China's oil imports go?

On the program, today we are going to do this economy big picture, and we are going to do it small. From American public media, this is Marketplace. In Los Angeles, I'm Kai Risdahl. It is Tuesday, today for August. Good as always. To have you along, everybody. We turned today for our understanding of the current state of this economy to American industry. The Institute for Supply Management tells us that last month, the entire manufacturing

slice of this economy grew at its fastest rate in four years. There's higher demand, there are growing backlogs, there's more production on factory floors, and more manufacturing employment as well. That is noteworthy in and of itself. All the more so, though, because manufacturers still have a whole lot of challenges, higher energy costs, higher interest rates, tariffs, and both business and consumer uncertainty, staring them in the face. So Marketplace of Justin Ho gets us going with why American factories are so busy right now. The manufacturing sector has been picking up, in part, because manufacturers are building out their capacity. Matthew Miskin, with Manulife John Hancock investments, says last year's

tax law helped many businesses upgrade. Whether it's property plant equipment, whether it's investing in a new segment of the business. Miskin says the manufacturing sector is also seeing plenty of demand, especially from other businesses. And what is the big business expense of 26. It's this little herd of thing called AI. Miskin says data center development is creating demand for computers and other electronics. It's also creating demand for industrial equipment, says Bernard Yaros, lead U.S. economists with Oxford economics. You're seeing a lot of demand for engines, turbines, and power transmission equipment, because

the AI build out a key component of that is ultimately the necessary upgrades to the power grid. But Yarrow says it's not just AI. The Institute for Supply Management found that inventory levels right now are low for transportation equipment, food and beverages, plastic and rubber products, chemicals. Yero says that means all kinds of businesses are going to have to restock. That's also going to be a broad tailwind to manufacturing as businesses need to replenish their inventories of goods. Businesses also might want to restock because they're worried about the president's new round

of import taxes. But Scott Paul, with the Alliance for Immenters, American manufacturing says many manufacturers have gotten used to tariffs by now. Instead of either delaying some of these capital expenses or purchases or hoping that there'd be a different outcome, there's this realization that this is the new normal, but we can operate successfully in this. Paul says higher tariffs could cause the manufacturing sector to slow down. Same with an escalation in the Middle East or higher interest rates. But for now, he says, the sector is proving to be resilient.

I'm Justin Howe for Marketplace. On Wall Street today, well, I mean, clearly artificial intelligence really is the greatest thing since sliced bread and the Strait of Hormuz is going to open any day now. We'll have the details when we do the numbers. We talked a little bit on this program about how the Trump White House is inserting itself into private enterprise. Industrial policy is one way to put it. State capitalism is another. Probably the best known example is the government's 10% equity stake in Intel. Since January of 2025, the government has invested more than $27 billion in U.S. companies,

but not always in the most transparent way, which leads me to the U.S. government deal tracker that's being kept by the Council on Foreign Relations. It's being kept under the watchful eye of senior fellow Jonathan Hillman. John, welcome to the program. Good to have you on. Thanks for having me. A lot of people probably have heard about the government's stake in Intel. maybe one or two others. I need you, though, to sort of zoom out for me and give me the big picture. Where are we with government investment in these companies? Yeah, so I think it's important to

recognize the government taking equity stakes is not a new thing. The government did a round of this during World War II. We did it in the 80s with Chrysler. We did it in the aftermath of the financial crisis. But what we're seeing right now is, I think, notable in terms of the number of deals were tracking 37 deals since January 2025 involving equity or quasi equity stakes. And the vast majority of them seem to be focused on strengthening supply chains, so areas like semiconductors, critical minerals, or helping the U.S. compete in emerging technologies like quantum computing. I would also point out here, since you raised the historical perspective on this, those earlier

investments were done with and at the direction of the Congress. And while the executive branch in a lot of these instances is using the Chips Act, for instance, as its authority, this is being done at the direction of the President of the United States. That's right. This is a very interesting set of activities not only because of what's at stake, but also because in some cases the authorities that departments and agencies are using, they're operating in a bit of a gray area. The development finance corporation has probably the clearest authority of an ability to take equity stakes. And then you've got the Department of Commerce and the Department of Defense or Department of War, which may have the authority to do this. But this is an issue that would certainly benefit from Congress providing some more clarity. A couple of specifics here. First of all, these are both publicly traded and privately held companies, yes?

That's right. In terms of number, we've seen more private companies so far. getting these stakes. And we haven't yet see any of those investments go public, but that's also something we could see in the months and years to come. And then being privately held, just to dig in a little bit and get a little weedy, means we don't have a great deal of insight. We, the American public, who owns parts of these companies, we don't have a lot of insight into their financials and their performance, right? Right. And so in these cases, we are really relying on the government and the companies themselves to share with us details about what

has been agreed to, and essentially what the deal is. And how's that working out, them sharing that info? Well, we're doing the best we can in terms of collecting what's out there, but it's a little bit like investigative work. And I assume that we will get more details in the future as some of these announcements continue to mature. Right. One more thing just on the historical record.

$27 billion is nominally a lot of money, but historically speaking, and I'm thinking of the tarp here specifically, which was $700 billion, $27 billion, $27 billion is not all that much money. That's right. And this is in the scheme of the U.S. economy. If you look at just the volume of private deals that are being done in the U.S., we're on track this year. That amount will exceed probably a trillion dollars. So it's a drop in the bucket, but really when this works well, the government should be using small amounts of public resources in order to, you know, to catalyze larger pools of private investment. Yeah, well, keep going with that.

Is this working? So to date from the deals that have been announced, and again, we're scrambling to get more details about all of these. We've seen about 7.3 billion of private capital mobilized. Ultimately, a lot of these deals will take years before we know whether they're successful, even the best case scenarios. We're going to have to be looking at these closely in order to grade them and learn from them and revise them if needed. On the on the on the Intel investment which is near as I can tell

the most successful certainly of the investments that the the government has made so far it's in terms evaluation and and return on our investment. How troubling is it to you that basically that investment and some of these others happened because the president in the United States said hey that's a nice company got there I should have a piece of it. Well it's interesting and you know the president has also himself I think suggested that deals should be graded when they are financially successful. And this is going to sound a little bit counterintuitive, but a deal shouldn't be deemed to be financially successful if the government turns a profit. And I think it should be financially successful if the government is achieving the policy objective.

So, you know, for example, is the U.S. producing enough advanced semiconductors in the U.S. in the case of Intel? You know, the government should be there trying to address market failures or market impediments, but not necessarily to turn a profit as, counterintuitive as that might sound. Yeah. John Hillman, he's at the Council on Foreign Relations. John, thanks a lot. I really appreciate your time. Great tool.

Thanks for having me. I think I said this yesterday, maybe not, that the labor market is the economic through line this week. The July unemployment report's going to drop Friday morning. There's going to be a bunch of data points between now and then, including this morning the June report on hirings and firings, more technically called the job. openings and labor turnover survey. On the whole, same, same. Hiring picked up ever so slightly.

Separations, that's companies laying people off or workers quitting were pretty much static. And the number of job openings fell a bit. Since the beginning of the year, though, the number of job openings has actually been trending up. Marketplaces, Henry App, explains what that might tell us about where the labor market might be headed. Ever since President Trump took office again last January, employers have, like all of us, faced a lot of uncertainty. From tariffs and taxes and war and energy price spikes and changes to immigration. Aaron Sojourner is a senior economist at the Upjohn Institute for Employment Research. All that's made many companies and organizations reluctant to hire.

So they've been kind of frozen like deer in the headlights. Just like not sure what's coming at them. Don't want to jump left. Don't want to jump right. Just hold still. But as this year has gone on, some employers have finally decided they need to make a move and bring more people on board. We see that in the slowly rising number of job openings, says Twan Wen, an economist at RSM. Companies are looking to hire, he says, because the overall economy is doing okay and there's demand for their products.

We've seen over the past few months, sentiment is improving. Consumer are still spending and businesses are spending more when it comes to CAPEX. capital expenditures. And that, he says, is why we're seeing more job openings in industries like construction, transportation, and retail. If openings keep rising and they translate into actual hires, the labor market could break out of the pattern it's been in for a while, where companies don't hire much and they're also not firing many people. That pattern works fine for people who have jobs, but people who lose jobs are having a hard time finding new ones, says Pavlina Cherneva, an economist at Bard College. So there's a segment to the population for whom the labor market is not working, even if, as a whole, the labor market seems to be in a steady state. The number of long-term unemployed people has been slowly climbing, and Cherniva says job openings would need to rise a lot faster for more of them to find work. I'm Henriette for Marketplace. You know, sometimes amid all the hands, you know, sometimes amid all the hands, headlines and the data and the analysis, it's good to get an on the ground perspective on what's

happening out there in the actual economy. So we called one of our regulars, Philip Rollins. He owns Offbeat. That's a record store and a comic book shop in Jackson, Mississippi. Business is going good. Offbeat is steadily growing. We just got a new accountant to handle our books, so things are going on to up. Generally, I had one person for the past 12 years handle our taxes yearly, And so with this accountant, now I can finally get somebody on payroll. So we've grown enough to where we could actually get another body in a building besides mine to do some day-to-day stuff. And I'm ultimately excited about having another day off personally. I'm there almost seven days a week.

So I guess there's an adult milestone, I guess, to say, when you have an accountant. As of recently, we had to deal with like some tariff charges and stuff for supplies. I noticed that on one of my distributors that I get supplies from for records and comic clip boxes. They sent me a credit back for all the terror charges. And that was a surprise. So that's a big help. It wasn't a lot because I ordered a lot of stuff at bulk.

And so I wouldn't have to like, you know, occur so much charges. But something's better than nothing. Every penny counts in a small business. This summer has been extremely busy. I've co-founded a. Coalition of Black on Comic Shops called the Inc Alliance. The vision overall is really just to bring more light to Black on comic shops. There's about maybe 2,500 comic stores in the United States, and we only make up maybe less than 1% of that number. We have 10 founding stores right now,

and, you know, people are sending us in like, hey, what about this store? What about this store? So we hope to grow some more. We hope to, you know, educate some people who will want to open up a comic bookshop within their community. And we want to give more opportunities for independent comic creators to share their work with our stores and our communities. So we're kind of using it as like a centralized hub for these creators to send in their works. It's looking very positive, especially for my shop. I'm in a small market. I'm in Jackson, Mississippi. And so we don't get a lot of artists that come through to do signings and stuff like that for these books. It'll be a good opportunity to show kids and adults that, hey, you can actually

pursue this career in any point of your life. And I think that it's going to be great. Philip Rawlins, he is a busy, busy guy. Offbeat is his shop. It's in Jackson, Mississippi. If you run a small business, by the way, we do want to hear from you how things are going for you this summer. Let us know, Marketplace.org. Coming up. They say, look, I feel like I'm crazy. I feel like I should put all my tinfoil hat when I start talking about this. Well, okay then. First, though, let's do the numbers. Yeah, everything's fine. Down Deltreos up 907 points today. 1.7%. 54,085. The NASDAQ jumped 6701 points, 2.6%. 26,000, 584. The S&P 500 bounded up 136 points. 1.8%, 77 and 36. Can you bound it down, by the way?

Justin O' had the latest on manufacturing. One of the big stuffmakers in this economy, Caterpillar, posted quarterly earnings that were better than people had been guessing. shares of the heavy equipment maker based in Irving, Texas, by the way, rose 5.4%. SpaceX reported its Q2 results after the closing bell. Shares were up 9% during the session, down 7% after hours. You may draw your own conclusions. You're listening to Marketplace. This is Marketplace. I'm Kai Risdahl.

McDonald's had a not-so-great morning. The company reported today's second quarter sales did grow 8-10%. But that was less than analysts had been expecting. Also about a third of the growth it saw this time a year ago. Also, and related, McDonald's has replaced the leader of its U.S. operations to help accelerate performance, the company said. Marketplace is Kelly Wells explains what's going on there. Some of this isn't McDonald's fault. The burger chain industry has been struggling for a while now, says Rich Shank with the food service research firm, Technomic.

And he gives two reasons for that. One, beef's old news. Chickens all the rage. Chicken chains have been growing very well. over the last, you know, several years. Wingstop and Chick-fil-A are stealing away McDonald's customers. The other industry-wide pain point, when inflation spiked in 2022,

lower-income customers stopped eating out as much, and they still haven't come back. McDonald's certainly being the biggest player in the market is feeling that because they do cater to that market pretty well. But then there are the factors that McDonald's can control. Some of the marketing initiatives perhaps didn't resonate as well. Restaurant analyst Sarah Senned, tour with Bank of America says a big ingredient to McDonald's success is its collaborations with,

say, the Minecraft movie or Pokemon, but its Q2 campaigns fell flat. I think the World Cup was just probably too narrowly appealing. Another issue, McDonald's switched up its value menu and took away some of its digital promotions, and then fewer customers showed up. Jonathan Mays is editor-in-chief of the trade publication restaurant business. If you're not getting traffic growth, that means your existing customers. are paying less, and that means your stores are less profitable, and that is a long-term problem. And then there's the service, the drive-through automation, the ordering kiosks.

Stephen Zagor, who teaches food business at Columbia University, says human interactions are going down, and that matters. There's no substitute for good food, maybe a smile every once in a while, good service, and at a fair price. Next quarter might not look great either, thanks to cyclist-bore-scaring fast-food customers away, says Rich Shank with Technomic. But he says long-term, McDonald's will be fine. The brand loyalty is too strong not to be. I'm Kaylee Wells for Marketplace. The Strait of Hormuz is closed. It has been for basically five months now. And while oil prices have dropped the past couple of days and they never did get as high as everybody had been guessing,

what is as yet unclear is why that didn't happen. Roche Karma wrote about one reason in the Atlantic the other day. Welcome to the program. Great to be here. Thanks for having me. So let's go to the title of the piece. The Great Chinese Oil Mystery. What is it and why is it happening? Well, at the outset of the war, virtually every single energy expert out there, they said that if the Strait of Hormuz, that if that remained closed for more than a few weeks, then oil prices would spike to $150, maybe even $200 a barrel. And one thing that happened when the war broke out was that demand didn't stay constant. And the reason it didn't stay constant was that a single country, China, decided to slash its oil imports by almost half compared to pre-war levels. And because China stopped buying those barrels,

they were free to go elsewhere, which saved the world from this shock. But the most wild part is nobody knows why China did this. Nobody even knows how they did. it. Beijing hasn't said a word about this. All we do know is that this, according to basically every energy expert I've talked to, is the single biggest reason that oil prices never took off. All right. I need you to spitball this for me because even though the Chinese aren't saying how they're doing it, you've been reporting it, you've been talking to people. How are they running the world's second biggest economy without importing the oil they did, you know, five, six months ago? That is the real question, right? What you would expect,

if a country slash its imports by this much is they would just have to reduce their energy consumption. But we don't see that at all right now. And so, okay, well, maybe they're just using different energy sources. China has invested a ton in clean energy and electric vehicles over the past few years, but the country is still very heavily relying on imported oil. And that leaves one final theory,

which is China's oil reserves. But the weird thing about this explanation, is that the best estimates we have of China's oil reserves are from these giant outdoor physical storage facilities that we're able to monitor from space. And those haven't given any appearance of changing. And so that has led to a sort of Occam's razor theory among a lot of analysts that the only plausible explanation

for how this could be going on is that China is actually tapping into these sort of secret, to possibly underground reserves that the world didn't even know about. And when I talk to analysts about this, they say, look, I feel like I'm crazy. I feel like I should put on my tinfoil hat when I start talking about this.

But it's basically the only plausible explanation we have at this point. Why do you think, well, let me back up, actually, and point out that Xi Jinping, the Chinese president, does not hide his light under a bushel. He's very nationalist.

He's very proud of what China's been able to do. Why is he not crowing about their ability to do this and also with it the leverage that obviously now he is demonstrating over the global economy because if he decides to start importing all tomorrow, the entire global economy just changes. The explanation that I've sort of arrived at and that some analysts I talked to think is that China is actually doing this for its own economic self-interest, but in an indirect way. China's economy is fundamentally dependent on the exporting of a lot of cheap goods all over the world.

Well, who are the countries that it depends on to export all those goods? It's the biggest economies in Europe and the biggest economies in Asia. It's the very economies that would be the hardest hit by an oil shock. And so the idea is that China was actually realized when this crisis broke out that if these countries fall into recessions, they get hit by an oil crisis, it's going to rebound and undermine China's own economic model. And if that was the case, that would explain the silence. You wouldn't want to parade to the entire world that actually are economic models dependent on saving the world from oil shocks. It wouldn't set a very good precedent. So that's the best theory that I've at least come across.

Which, you know, stands to reason for the moment, but it is by definition a finite explanation because even if they've got a zillion barrels of oil underground somewhere way out west in China, it is finite. And there will come a time when they're going to have to start importing oil again. I think that is right. And I think that is both a problem for China, but also a problem for the rest of the world. Sure. The reason that this war has been able to drag on so long in part is because the pain has been relatively muted. And so it is a sort of twist of irony that the fate of Donald Trump and his

war are now actually contingent on the U.S.'s biggest rival continuing to do something that everyone to this point thought was unprecedented. And there's a certain beauty to that, right? Beauty, irony, disaster. It depends. Take your pick. Roje Carma, he's at the Atlantic. He writes the Work in Progress newsletter for them as well.

Roge, thanks a bunch. I appreciate your time. Interesting story. Thanks so much for having me. This final note on the way out today, just a quick follow up to Justin's story about American manufacturing. He was talking about the Institute for Supply Management's manufacturing survey. They literally go out and ask factory managers how things are going. And while, yes, things are going well, as Justin reported. He also reported there were a bunch of headwinds

and uncertainties, which gets me to the money quote from one of the survey participants about what's happening in this economy right now. Here you go. It makes me yearn for the coronavirus pandemic chaos, which was more manageable than whatever this is that, we are in. So there you go. Jordan Manjee Zanil Maharaj. Janet Wynn, Oga-Oxman, and Virginia K. Smith are the digital team. I'm Kai Risdon. We will see you tomorrow, everybody. This is APM.