Marketplace - Messaging matters

Episode Date: April 8, 2024

There have been mixed messages on interest rate cuts, and that uncertainty is weighing on consumers. As the Federal Reserve continues its effort to bring inflation down to 2%, economists watch how consumers interpret that kind of messaging and what their expectations are. Also in this episode: Black unemployment spikes, the impact of cyberattacks on small businesses and the growing use of psychometric assessments for job seekers.

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Will they or won't they? Should they or shouldn't they? How, oh how, is a consumer to know what's going on? From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Monday today. This one is the 8th of April. Good as always to have you along, everybody. Will they or won't they? That is the question.

We talk here, of course, of interest rate cuts and the Federal Reserve and the data on which the central bank relies, which honestly is adding to the general consternation. The job market we learned on Friday is quite healthy. Thank you very much. The economy is growing, but so too is the pressure on Powell et al. to back off. Will it be three rate cuts? None? Somewhere in between? And then when?

So you can understand consumer confusion, yes? In its latest survey of consumer expectations, the Federal Reserve Bank of New York said today households expect inflation a year from now to be 3%. That is not up from a month ago, true, but it's also not down. Marketplace's Kristen Schwab starts us off with the overall muddiness out there, how it's weighing on consumers, and exactly how important their expectations are in the Fed's long, long slog to 2% inflation. OK, maybe you are not hanging on every word that comes out of the Federal Reserve. But Randy Kroszner, a former governor of the Federal Reserve Board, says messaging has meaning. If the Fed can't figure out where things are going. I think it's very challenging for individual households to figure out where things are going.

And where we're going as consumers. Is it finally almost time to look for a house or start a business? Or maybe buy a washer dryer? Because, yeah, yours could hang on a little longer, but by the time it dies, a new one might be much more expensive. And oh, wow, gee, if prices are going to keep going up, I should ask for a raise. That is, I better ask for a little bit extra in my paycheck because I'm not so sure where things are going. Uncertainty can push people to take action or clam up. Carola Binder,

an economist at Haverford College, says the economy can withstand a bit of uncertainty, even from Fed presidents. I think I prefer that over, like, they kind of made in secret come up with a story that they can all sign off on and only that can come out. Because Binder says what's most important here is that the Fed communicates that it is weighing its every move, that it's committed to getting inflation down to 2 percent no matter how long it takes. The important thing now is keeping those longer run expectations down and stable. So far, so good. Households' five-year inflation expectations have decreased, according to the survey released today by the New York Fed. Economist Fabio Gomez-Rodriguez at Lehigh University says the Fed is playing the long game. And inflation? Well, it's a long game. Inflation is persistent. It's like a giant. Very big, but it moves slow, slow.

So slow that we can't even register it's moving anymore? Maybe. I'm Kristen Schwab for Marketplace. Fun fact, the Fed didn't even used to tell you what it had done on interest rates. Like 30 years ago, they just met and did something. And then the markets had to figure it out. Traders today seemed a little befuddled by the muddiness. We will have the details when we do the numbers. All right, so let's back up to Friday, the March unemployment report we got at the end of last week. Strong job creation, steady wage growth, a tick down in the unemployment rate, which has now been below 4% for better than two years.

One bit of bad news did catch our eye, though. Unemployment for black workers in this economy rose sharply in March, up eight-tenths percent to 6.4 percent, the highest in almost two years. For some context here, white unemployment steady at 3.4 percent, almost half the rate of black workers. We had Marketplace's Mitchell Hartman take a closer look at all that. It's possible the surge in black unemployment is just a statistical anomaly, says Jasmine Tucker at the National Women's Law Center. We're talking about a sample that's not huge. That's why we see a lot of these big month-to-month jumps when we're looking at groups by race and gender. Except Black unemployment's been rising since January.

If there's a three- or four-month trend upward, then there still might be something worth worrying about. Economist Gary Hoover at Tulane University says Black workers with on average less training and experience tend to be more vulnerable to job loss. canary in the coal mine, the first wave of unemployment before it hits the overall economy, then this could be a harbinger of things to come. But we haven't seen other signs of a job market downturn. So Hoover thinks there might be a more favorable explanation. You can't be unemployed if you're not looking for a job. Part of this could be that labor market conditions are conducive now to more individuals being willing to look for employment. The recent uptick in the black unemployment rate is worth watching, says Elise Gould at the Economic Policy Institute. But she points out, this is still quite low by any historical measure. And she says other

measures of black labor market performance are really strong following years of post-pandemic hiring and wage gains for low-wage workers. Gould reports that at the end of last year, a higher percentage of black workers aged 25 to 54 had jobs than ever before. And wages have improved more than any time in the last 40 years, growing nearly one and a half percent a year since the pandemic after accounting for inflation. I'm Mitchell Hartman for Marketplace. Cyber attacks. You can't live with them. You can't do business in the 21st century without them. And most of the companies targeted by said attacks aren't big multinational corporations with armies of IT workers. Most

of them, in fact, are small businesses. More than 40% of small businesses were the victim of a cyber attack last year. And most of those businesses don't have a big IT team to handle an attack, as I said, or, and this is important, the financial cushion that will let those small businesses deal with it. So when a cyber attack does hit, it can take a company right to the brink, as our special correspondent Stacey Vanek-Smith reports. Kyla Uli grew up near Los Angeles, and money was always tight. It was a big source of stress for her family. And when she was just five years old, Uli figured out how she was going to avoid that stress.

I learned that there was like 7 billion people on the planet. And I remember thinking, like, if I could get all those people to give me $1, my problem would be totally solved. And I started trying to sell rocks and pine cones. And I was like, I just need a dollar from all of you, OK? Just one. By her mid-20s, Yuli had become a bona fide entrepreneur. She created an online store called Brillies, which sold vintage sunglasses. But like a lot of vintage sunglasses. Four years in, Brillies was racking up more than $100,000 in sales a month. It had been featured in Vogue

and Sports Illustrated. And I was like, oh my god, what a dream. And then, boop. That boop happened in June of 2021, when Yuli woke up to something strange. There had been no sales overnight, and I was like, that is so weird. She checked a few hours later and still no sales. I was losing my mind trying to figure out what was going on. Yuli checked her website. And that is when she realized that she was under attack. A cyber attack.

Basically, an army of zombie computers or bots kept sending requests to Brillies over and over. The result? Her site kept crashing. Your site gets flooded with bot traffic and it overwhelms your servers. So the reason my sales were all gone was because I was knocked offline. Yuli did have cyber insurance. And when she contacted her provider, they said for an attack like this, she just kind of had to wait it out. So the first day I was like, this will be fine.

This will all pass and I'll just get back online. And then when it got around to like week two, I was like, this is getting really scary. Yuli checked her accounts. No money had been stolen. Customer data was safe. So what did the attackers want? And why her? Brillies was tiny. Yuli had just three employees. her. Brilly's was tiny. Yulee had just three employees. So if you're a small company thinking like, hey, nobody's going to notice me, that's not really the case. Chris Hodginowski is head of technology at Hiscox USA, which sells cyber insurance. He says attacks like this happen for all kinds of reasons. Sometimes money, sometimes it's a rival business, sometimes it's just to cause chaos. And while the headlines might focus on big public companies, Smaller companies get attacked regularly and with higher frequency just because maybe the controls aren't in place on these smaller companies.

Brillies did not have an IT department, and Yuleuli felt incredibly alone as day after day, the attacks kept coming. Months went by with almost no sales, no money coming in. Yuli tried recreating Brillies at another URL, but the attacks started up at that website too. And then I was like, I'm toast. I'm toast. Yuli closed Brillies for good. She'd never found out who attacked Brillies or why. I was just like, man, what did I do to deserve this? I thought I made it. I thought this was going to be my love of my life business. This kind of thing happens a lot.

One report out of the UK found that more than half of their small businesses that got hit with a cyber attack didn't survive. It's very hard to calculate the sort of financial losses. Jamie McCall is a fellow at the Royal United Services Institute, a defense and security think tank. He and a research team have been looking at the true cost of a cyber attack for businesses. Your reputation being irreparably damaged or months of downtime from your business or, you know, the psychological impacts on your staff. And on the business owners themselves. A few even confided to McCall that they felt suicidal after the cyber attack. For her part, Kyla Yulee thought she would just never feel that entrepreneurial spark again

after she closed Brillies. She started consulting a bit, which is how she came across a struggling business that was looking for a buyer, price to sell. It was an online store that sold slippers, big, poofy slippers. Just the most silly shoe you've ever seen. It's like a big old puffy moon boot slipper. The second Yuli saw the slippers, she felt that spark. I was like, I can do it. I can do it. Yuli used her savings to buy PuffySlippers.com. That is puffy with an I-E.

She was careful to build her business with cybersecurity in mind. Her site is locked down. And those puffy slippers are selling. The first month was $7,000 in sales, and then it just has kind of compounded every month since then. After all, there are now 8 billion people on the planet. That is like 16 billion slippers. In New York, I'm Stacey Vanek-Smith for Marketplace. Coming up. My biggest lesson has been being open to learn and being open to change. A big lesson indeed. First, though, let's do the numbers.

Dow Industrials off 11 points, way less than a 10% on that particular index, 38,892. The Nasdaq added five points, also way less than a 10% 16,253. The S&P 500 gave up one point. Do I have to say it again, people? 52 and 2 there. Spirit Airlines ascended six and a half percent after it announced its delaying delivery of some Airbus planes it has on order and, oh, by the way, furloughing 260 pilots. Warner Music Group tuned up five and three tenths percent today after it dropped plans to bid for the French digital music company Believe over in Paris. Shares in Believe attenuated nine and two tenths of one percent.

Oil prices went on a wild ride today. Brent crude finished down three quarters percent. West Texas Intermediate slid almost a half percent. And as went oil, of course, so went oil stocks. Sunoco dropped more than eight tenths percent. Today, you're listening to Marketplace. Hey there, I'm Bridget, co-host of Million Bazillion, Marketplace's podcast for kids about money. I want to tell you about our email newsletter course, Million Bazillion Academy.

In this new and improved course, we'll help your kids learn about crypto, credit cards, and inflation in just six weeks. and inflation in just six weeks. Each lesson comes with a podcast episode, a fun cartoon, discussion questions, and an activity that lets kids apply what they're learning in the real world. You can start at any time and work at your own pace. Sign up today at marketplace.org slash academy. This is Marketplace.

I'm Kai Risdahl. Today in things you probably did not expect to learn on this program. Did you know the two-year marriage anniversary is the cotton anniversary? Yeah, no, me neither. But it's germane because today makes it two years since the $43 billion corporate marriage of Warner Brothers and Discovery. And honestly, it's been a tough run. Its share price is off 65% in those two years. Ticker is WBD if you want to have a look. And Max, that is its streaming service Max,

is well behind Netflix in total subscriptions, the lifeblood of the new entertainment universe. Corporate marriages are, of course, hard. And as Marketplace's Matt Levin reports, corporate media marriages are often exceptionally so. One thing about Warner Brothers, they never give up on trying to find the right partner. AOL merged with Warner in 2000.

It was called Time Warner back then. You might remember that as the largest merger in U.S. history and a $182 billion disaster. Then AT&T acquired Warner in 2018 and after a four-year honeymoon decided to split. I think the reason it's always in the middle of these mergers is because they have absolutely fantastic assets. David Offenberg is a professor of entertainment finance at Loyola Marymount. Current Warner properties like Harry Potter or HBO or Batman

are very attractive to would-be suitors. There's just one small hiccup. Getting the money from the great stuff that they own has just been the problem. Merged media companies typically have elaborate plans to monetize all their collective content libraries. And then social media or streaming or some other tech breakthrough arrives. Neil Zuckerman is with Boston Consulting Group. You could go to sleep in the steel industry. And you know what? Things are kind of the same 20 years later. You take a nap in the media business. The industry is completely transformed. That makes

a successful media merger in the internet era tough, but not impossible. Adam Haller is a merger integration consultant at Bain & Company. Let's not forget that Marvel was a standalone comic book company, and Disney said, hey, we're really good at commercializing franchises. For its part, Warner Bros. Discovery is in merger rumors yet again, although it's bogged down by billions in debt incurred in previous acquisitions. But who doesn't have baggage from past relationships? I'm Matt Levin for Marketplace.

Exactly how artificial intelligence is going to change this economy is one of those known unknowns. What we do know, though, is that AI has already changed what it means to both hire and be hired. See, also for us today, pre-employment screening tests. They're becoming more common, if not already the norm in some fields. You'll have to demonstrate skills, coding, for instance, or do some kind of job simulation, perhaps. And there is another kind of digital test that's showing up, too, a psychometrics assessment, which aims to quantify characteristics

often thought of as intangible, personality, attitudes, integrity, emotional intelligence. These kinds of tests have been around in one form or another for more than 100 years. And as Marketplace's Megan McCarty Carino reports, AI is the latest iteration of it. James Klusaritz will never be able to look at a balloon the same way again. Yeah, it's like PTSD. About a year ago, he was graduating from the University of Pennsylvania with degrees in economics and philosophy and looking to join the corporate ranks. He put in dozens of applications at big consulting firms like McKinsey and PwC, and he'd often get the same automated reply. Which is like, OK, to complete your application, you have to spend 30 minutes playing these fun games.

Like the balloon game, part of an assessment from the company Pymetrics. It asks you to click on a digital balloon to incrementally inflate it, collecting more money the bigger it gets. Or if you click it too many times, it'll ultimately pop. He couldn't immediately tell what the test was measuring or what he could do to ace it, which is by design, says Tomas Chamorro-Premuzic, an organizational psychologist at Manpower Group. These assessments are about inner potential. Predicting whether somebody can do a job that they haven't done before, or whether somebody is likely to learn a skill that they haven't actually displayed or learned before. Psychometric tests date back to World War I,

when the military used them to identify recruits at risk of developing shell shock. The methods filtered into business, but were often impractical. You know, you would have to put somebody through an assessment center to spend four hours in the office doing an exercise or a simulation. Today's psychometric assessments are shorter and usually digital. The Tradify personality test from Paradox, used by large employers like McDonald's, touts itself as the world's fastest at about 90 seconds. It is very challenging to develop an assessment that is that short, but also has predictive value.

Heather Myers heads the psychology team at Paradox that developed the Tradify test. It asks users to swipe through images, like a driver in traffic with the caption unfazed, and mark whether they identify or not. To see kind of what the behavioral fit for an individual is and the roles that they're looking to apply to. Tradeify doesn't use AI in its assessments, but many other platforms do. The technology can make tests more efficient,

says Beth Bynum with Human Resources Research Organization. With machine learning, companies can analyze huge amounts of data to find the exact permutations of traits predictive of success. The challenges are with transparency. I think the more data you have, the more risk there is to not understanding what's going into your prediction, where you may have something that's not job relevant. Which could lead to unintended bias. Ben Poore is an executive at Harvard which acquired Pymetrics of the balloon game in 2022. He says their algorithms are not self-learning. They're set and then monitored

by real people. We're not saying that we're going to be completely bias-free, right, because it is humans developing this, but we can quickly identify if there is any bias and correct for that. Unlike the traditional hiring process, he says, where bias often goes unmeasured. All of the platforms I talked to for this story have teams of scientists that test their assessments for reliability and bias. They say the tools don't replace human decisions. But the demand for these tests is growing fast without much legal oversight and plenty of ways AI can go wrong, says manpower's Tomas Chamorro-Premuzic. There is a real risk that actually, at least in the short term, this increases inequality.

Recent college grad James Klusaritz never found out how he did on the Pymetrics balloon test. He's shifted his focus to doing comedy on TikTok. My best videos are ones that sort of like make light of things people hate or like things I hated. A sketch about the balloon test has about 20,000 likes. I'm Megan McCarty Carino for Marketplace. Immigration is once you strip away the politics and the baggage that comes with any discussion of how many people can come to this country and where they can come from, immigration is a labor market story.

Case in point, a UCLA study looking at entrepreneurship in this economy found the entrepreneurship rate among immigrants in 2023, found the entrepreneurship rate among immigrants in 2023, that is the rate that immigrants start businesses, is more than double that of the native-born population. So with that, today's segment of our series, My Economy. My name is Sarah Rastegar. I'm an artist, professor, and the owner of Point Studio Art, LLC. Point Studio Art is located in Bossier City, Louisiana. The activities that we offer here are focused on textile printing, hand printing designs on fabric-made products. We also offer printmaking workshops and classes. Point Studio Art was opened last August, August 2023, so it's almost eight months since we opened the business. I'm Iranian and I moved to the United States in 2015 to pursue for my second master's degree in fine arts.

So once I finished my education, I immediately started my job as a professor. And years after, I started to establish my own business, which is Point Studio Art. Being an artist and being a businesswoman wasn't that easy. I had to do a lot of background work in order to begin this business because, you know, I have been an established artist for years, but this was completely new. Way before I opened the business, when I started the idea to think about running a new business, I wasn't expecting that it would end up costing me a lot just to establish the studio. But I was secured because I have another full-time job. I'm a professor.

So I was actually bringing the money from that into my own business. And I will continue to do this until I don't need the money from my other work. I don't need the money from my other work. When I first started the business, the price range for the activities that I had to offer was ranging from $45 to $65. But now the price range varies from $30 to $300 per activity. Since I changed the price range, the customers have become doubled, I would say. So I think it has been a great decision to vary the price range this way. My biggest lesson has been being open to learn and being open to change. It's normal to say that

artists are not good in doing business, but I am here to prove it wrong. Sarah Rastegar, artist, professor, also business owner of Point Studio Art in Bossier City, Louisiana. We cannot do this series without you, no matter where you are, no matter what you do. Tell us how things are going with you, would you? Marketplace.org slash my economy. This final note on the way out today, I'm going to wait for the next beige book from the Fed to get the actual anecdotal skinny on this. But today's eclipse says the economic consulting firm, the Perryman Group, could have brought with it something more than $7 billion in total economic impact. A billion and a half in direct tourist spending, maybe another $6 billion in follow-on consumption, that's souvenirs and the like.

That's not nothing. in follow-on consumption, that's souvenirs and the like, that's not nothing. Our daily production team includes Andy Corbin, Elise Haasen, Maria Hollenhorst, Sarah Leeson, Sean McHenry, and Sophia Terenzio. I'm Kyle Rizdal. We will see you tomorrow, everybody. This is APM. A lot of people spend a lot of money on things like skin care, fast fashion, and even surgery, all in the name of self-improvement. But as the price of perfection rises, when is it time to call it quits?

I'm Rima Kheys, host of This Is Uncomfortable, a podcast from Marketplace. This season, we dig deep into the financial trappings of self-care and the real motivations behind our spending choices. Listen to This Is Uncomfortable wherever you get your podcasts.