Marketplace - One meeellion dollars!

Episode Date: June 11, 2024

Remember in “Austin Powers” when Dr. Evil conspires to hold the world hostage for $1 million? Not much cash, right? Well, it was a lot back in the 1960s — the last time Dr. Evil was conscious. In this episode, Dr. Evil teaches us how to adjust for inflation. Plus: Grocery stores want to be community meeting places, AI-fueled ad spending rockets up, and small-business owners aren’t sure what the future holds.

Did you know feelings can actually be measured with data? We'll take a look at how small businesses are feeling, how advertisers are feeling, and how much feelings influence how much we spend on our pets. From American Public Media, this is Marketplace. In New York, I'm Kristin Schwab and for Ky Rizdall. It's Tuesday, June 11th. Thanks for tuning in. Tomorrow is a big day for inflation. We'll get May's consumer price index, which will hopefully give us a bigger picture of where prices are headed. Then later on, the Federal

Reserve wraps up its policy meeting, which will hopefully give us a better picture of where interest rates are headed. Until then, all we can go off of is mood. The mood of small business owners, which by the way, collectively aren't such a small group – they make up 99% of American businesses – and their mood at the moment is apprehensive. According to the National Federation of Independent Businesses' Economic Trends survey that came out this morning, small business optimism is up just a bit over the last month. But big picture, it sits well below the survey's historic average. And business uncertainty has spiked to the highest level since November 2020. Which is kind of crazy because remember what life was like in 2020?

Marketplace's Savannah Marr called up some business owners to see what's making them feel so uneasy. Stich and Rivet, based in Northern Virginia, sells handmade leather tote bags and wallets. The kind of treat-yourself purchases people are thinking twice about these days. Things are going for me the way that they're going for a lot of people, which is meh. And owner Katie Stack isn't sure when sales will pick back up. In a more typical year, she'd be reserving her spot at big holiday markets right about now, which can run her business anywhere from $12,000 to $20,000.

You have to pay that money in the summer. I've decided I'm just not risking that kind of money this year. In southern Utah, historic Ruby's Inn is feeling the uncertainty too. General Manager Lance Siret says it sees some busy stretches until. Every time there's a new story that says,

well, maybe we're headed for inflation while people start hanging onto that money. Siret is planning for a soft summer with fewer families springing for a trip to Bryce Canyon National Park. That, plus high interest rates, means holding off expanding the inn. We're definitely concerned. You know, it's not like we're going out and borrowing money to build a new restaurant here at the resort or more hotel rooms. This wait and see approach is common in the small business world right now, says chief economist Bill Dunkelberg with the National Federation of Independent Businesses.

Uncertainty is the enemy of progress and spending. Another thing clouding business owners outlook. The presidential election I feel will have a bigger impact on my business. Alejandro Flores Munoz runs Combi Taco, a food truck and catering company in Denver. He worries about wholesale inflation, losing clients to menu price increases, and his DACA status. Without that work authorization, my future in this country is on a limbo. Flores Munoz says come November, the path forward for his business will be clearer. I'm Savannah Marr for Marketplace.

Like business owners, Wall Street today was feeling a little uncertain too. We'll have the details when we do the numbers. Music Data sets like Small Business Optimism and the Consumer Price Index, they can give us an idea of how the economy is doing. Another indicator of sorts is ad spending. According to the media agency Group M, global spending on advertising is likely to pass the trillion with a T dollar mark for the first time next year, crossing that threshold a full year earlier than expected. That total, by the way, it does not include any money being poured into election advertising. What's sort of confusing about all this is that ad spending has been shaky for a

couple years as companies wait and see what happens with the economy, and consumers aren't as flush with cash to spend on stuff between high interest rates and rising credit card debt. So what's behind the uptick in ad spending? Marketplace's Kaylee Wells has more. Group M's previous prediction reflected high interest rates, which usually slows down consumer spending. But… KAYLEE WELLS We didn't see that play out to the extent that we expected over the first quarter or half of 2024.

Kate Scott Dawkins with Group M says there's another factor forcing spending upward. The AI boom, of course. The report says AI could inform more than 94% of ad spending before the end of the decade. Ellie McDonnell-Fite is a marketing professor at Drexel University. She says AI is increasingly being used. To help advertisers find the right customer at the right time and place that ad in the right content. And so advertisers are willing to spend more because AI could make every dollar they spend

more effective. Bobby Joe at the University of Maryland says it can also customize any kind of ad from static images to TikTok videos. He's a marketing professor at the Robert H. Smith Business School. The level of micro targeting, the ads that you see, the ad copy that you see, will be substantially different from the ad copy that I see, Bobby sees. So even if Bobby and I are shown the same running shoes, I'll see them in my favorite

color with an explanation of why they'd be great for someone in my neighborhood living my lifestyle. That's the power of generative AI and it's already happening. Group M says the next big question is whether all of this AI generated content will prove to be as effective at getting people to buy stuff as human made content already is. I'm Kaylee Wells for Marketplace. Buying or adopting a pet is often an emotional decision. It's also a financial one. When Fido or Rover gets sick, many pet owners are willing to pay almost anything to help them get better. The American Pet Products Association estimates that last year, Americans spent

$38 billion on vet care and products. So in an attempt to avoid that sticker shock, some pet owners are literally paying a premium to ensure they're furry friends. Emily Stewart wrote about pet health insurance for Business Insider. Emily, welcome to the program. Thanks for having me. So we can buy insurance for a lot of things, ourselves, our homes, our computers. But I didn't realize how similar pet insurance is actually structured, at least at face value, to health insurance. Can you tell me about how it works? Yeah. So like you said, pet insurance is fairly similar to health insurance for humans. You

pick out a policy, you pay a monthly premium on that, and then let's say Fluffy, I don't know, gets hurt at the dog park or swallows a toy, you go to the vet, you pay whatever the cost is of the treatment, and then you submit your claim to the pet insurance company and they reimburse you a certain amount, depending on your plan. And how popular is pet insurance among pet owners? You know, it's growing. I think an important stat to note is that it's not as big as you kind of would think, but it's getting bigger.

So about six million pets in the United States were insured as of the end of 2023. That is a small fraction of all the pets in the US considering that there are 80 million dogs and 60 million pet cats in the country. So it's not a lot, but it's growing. According to the American Pet Products Association, Americans spent $147 billion on their animals last year, and about $4 billion went to health and pet insurance premiums in 2023. So that's a lot. People are spending a lot of money. Think about $4 billion on pet insurance premiums last year alone. Yeah, $4 billion is a lot. But how much does it cost an individual to cover their one pet,

say? You know, it really depends. If you have a young, healthy puppy, it can be pretty cheap. I made up my own pet, which I called Dan for some reason, to kind of game this out. So when Dan was a young, healthy, six-month-old puppy, it was like $25 a month, that's fine. When I decided Dan was 10 and had some maybe healthy conditions, all of a sudden it was $150, $200, $300. I think what people sometimes don't realize is that every year your premiums are going to go up.

And, you know, one expert I talked to for this story, the one thing he emphasized over and over is that pen insurance is quite expensive and it is, you know, a math problem that people really should kind of give a think to before they hit to sign up. Yeah. Well, let's talk more about that math because the whole point of insurance is to save you money in an emergency, but it didn't seem like that was the case for everyone you talked to. Yeah. So I think the rub for me with pet insurance is that it does not cover pre-existing conditions.

I talked to one woman who had a dog, you know, when she signed up and, you know, when you're signing up, it says, has your pet had any problems? And she says, oh, he's had some health, he's had some stomach issues. Cut to a year later, she's gone to the vet multiple times with this dog with stomach issues and none of the treatments have ever been covered. Now people have different levels of experience, right? And it really depends. And I think with pet insurance, what it comes down to a lot of the time is that you really do need to read the fine print.

So if your dog has diabetes, if it's ever had cancer, you know, I talked to one woman whose dog had a leg problem and her vet actually told her, listen, I'm not going to document this leg problem. You go get pet insurance right now because you will be back having to deal with this. And they did a little bit of insurance fraud. Oh, because of the pre-existing condition thing. Exactly. Yeah. And so basically her bet is that I will not document the problem because it will be a pre-existing condition. And the minute it's written down, it will not be covered

by your insurance. Wow. Last question. I assume you don't have a pet since you made up Dan. Is that right? Yes. I did make up Dan. Well after all this, if you were to get a pet someday, would you consider getting insurance? I do think so, depending on the price. But I don't know that it would be the first on my list. And I think the minute you get to a little bit more expensive and you know that's tough. If it's $100 a month, that's $1,200 a year. That's a tough math problem for me.

Yeah. Emily Stewart writing about pet insurance for Business Insider. Emily, thanks so much for talking. Thank you. Making an app has been like pushing a boulder up an icy cliff in slippers. AKA not easy. But first, let's do the numbers. The Dow Jones Industrial Average lost 120 points, 3 tenths percent, to finish at 38,747. The NASDAQ grew 151 points, 9 tenths percent, to close at 17,343. And the S&P 500 was up 14 points, 3 tenths percent, to end at 53.75. We were just talking about the wild world of pet insurance, so let's

look at some of the publicly traded companies providing that service. Lemonade rose 6 tenths percent. Synchrony Financial, which acquired PetsFest insurance in 2019, sank 4 and 2 tenths percent. Synchrony Financial, which required PetsFest insurance in 2019, sank 4 and 2 tenths percent. And Trupanion lifted 1 and 4 tenths percent. A few more pet stats. About 6.3 million pets enter animal shelters each year, according to the ASPCA. Some two-thirds of them are eventually adopted into new families. Monzeros, the yield on the 10-year T-note fell to 4.40%. You're listening to Marketplace. Seasons change. Why not your tech? Upgrade now during the Dell Technologies Summer Sale Event and save on select PCs like the XPS 16 powered by Intel Core processors. You'll be able to bring your most intensive projects to life with built-in AI, minimalistic design, immersive visuals, and cinematic audio. When you shop online at Dell.com slash deals, you'll have access to exceptional tech and electronics plus free shipping on everything. Amazing prices await you for a limited time only at Dell.com slash deals. That's Dell.com slash deals. At Alternative Access Funds, we believe that all people deserve the ability to invest in

a wide variety of asset classes. That is why we launched the NYSE-listed ETF ticker AAA, an ETF containing floating rate bonds that seeks capital preservation and income while mitigating the effects of changes in interest rates. NYSE-listed ticker AAA. Investing involves risk. Principal loss is possible. Brokerage commissions will reduce returns. Floating rate notes or variable interest rate debt securities have their coupon or principal

payments or both linked to a general price index for goods and services, such as the Consumer Price Index, CPI, to a benchmark interest rate, such as the secured overnight funding rate, SOFR, or a bond yield. The reference value fluctuates in response to market conditions. The fund's investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company and is available at www.aaaetf.com. Please read it carefully before investing. Distributed by ALPS Distributors Inc. This is Marketplace. I'm Kristin Schwab. As I mentioned earlier in the show, the latest

consumer price index comes out tomorrow. And of course, we pay attention to it because it tells us the rate at which the prices we pay for things changes over a given period of time. If you want to look at it another way, CPI gives us a way to figure out, say, what a dollar was worth once upon a time so we can better understand its value today. The jargony economics term for this is adjusted for inflation. Marketplace's Stephanie Hughes explains the concept and how it's used in policy and in your real regular life. You might not remember the first Austin Powers movie for its references to inflation adjustment, but University of Chicago economist Damon Jones does. There's the Dr. Evil guy and he gets like frozen in time. In 1967 and he's unfrozen in 1997.

Then he comes back and he's back to take on the world. So he devises a scheme. Here's the plan. And he's going to destroy the world. We get the warhead and we hold the world ransom for one million dollars. And they're like, that's it. That's all you want.

Dr. Evil didn't adjust for inflation. So one million dollars purchased a lot more in his time than when he was unfrozen. Jones says he should have checked the Consumer Price Index, or CPI, first. It shows that a dollar back in 1967 bought about five times as much as it did in 1997, and more than nine times as much as it does today. This is more than nine times as much as it does today. This is useful to know when watching old movies and when listening to U.S. Treasury Secretary Janet Yellen. Here she is on Marketplace in May. The typical American who does not have a four-year college degree has barely seen any increase in their real or inflation adjusted wages really in 40 or 50 years.

In other words, people in this group are earning more now, but they can't feel it. Alan Deppmeister is an economist for UBS who used to work for the Fed. They're able to buy basically the same thing they were 40 or 50 years ago, but they aren't able to buy a lot more than they were 40 or 50 years ago but they aren't able to buy a lot more than they were 40 or 50 years ago. Another way economists including Secretary Yellen refer to amounts that have been adjusted for inflation are by calling them quote-unquote real. Again Damon Jones at the University of Chicago. I think about real as measuring quantity of things and activities to kind of remove the part

that's just due to prices rising. For example, real GDP went up at an annual rate of 1.6% last quarter. The real means it was adjusted for inflation and there was an actual increase in economic activity, along with a jump in prices. But UBS's Alan Detmeister says most people tend to take dollar amounts at face value, what economists call nominal value. People think in nominal terms. So their wages moving up is good.

Prices moving up is bad. But those two things are usually linked. So Detmeister says we should be thinking, how much more does this wage increase allow me to buy? Detmeister says when you're going to negotiate for a pay increase, you can check how much the CPI has gone up since your last raise. That way you'll know how much more you need just to get by. After all, you don't want to pull a doctor evil

and sell yourself short. I'm Stephanie Hughes for Marketplace. Perhaps the place we most often weigh the value of a dollar is the grocery store. According to the US Department of Agriculture, a family of four can spend somewhere between $900 and $1500 per month on food. And yeah, that can make a trip to the supermarket feel like a tiring and mundane task. But in many communities, grocery stores can also be a cultural meeting place. From Salt Lake City, Sean Higgins has more. Chinatown Supermarket is in South Salt Lake.

Its long, wide aisles are filled with fresh produce and specialty Asian ingredients like lotus root and snacks like shrimp-flavored potato chips. Within the store and next to it, there are also bustling restaurants that serve everything from hot pot to sushi. John Nguyen is there eating a bowl of noodles with friends. I love that it's like a centralized location for Asian food. He's here a lot. Probably like two to three times a week at the minimum.

Nguyen moved to Utah from Virginia about a year and a half ago for work and to be closer to the outdoors. There's a pair of crutches leaning against the table. He's currently nursing a broken leg from a crash on the slopes earlier this year. He says places like Chinatown Supermarket and a few others help him feel more in tune with Salt Lake's Asian community. him feel more in tune with Salt Lake's Asian community. Me being Vietnamese American, I do love coming out here to eat at places like one more noodle house and the fall place and going to the grocery shop here to get things that you wouldn't find at like Trader Joe's. Online ordering and grocery delivery took off during the COVID-19 pandemic.

But people are now coming back to stores in force. Steve Miner is the vice president of store development for Associated Food Stores. They operate some of the smaller Utah grocery chains like Dans and Fresh Market and are trying to get people to spend as much time there as possible. We're expanding sit down areas. We're adding Starbucks inside, you know, from a franchise. We do Arctic circles and Dairy Queens.

We have Ace Hardware's now that we own and operate that are next to us. And so we call it the rides. By the rides, he means a place for people to gather and spend money as well as time. Tina Murray is thinking along the same lines. She's the corporate affairs manager for Smiths, which operates under the nationwide Kroger grocery store umbrella. She says the grocery store plays an important part in her life too.

I know what nights of the week or the weekend, what times of the weekend, I'm likely to see some of my friends and neighbors. And so I wanna make sure that when I do that, I'm keeping an eye out for those people and having great conversations about how the week has gone. Back at Chinatown Market, John Nguyen says it's those community connections that keep him coming back to buy lunch or just hang out. It's like just a nice relaxing area for people to congregate.

It's familiar. And that's what Chinatown Supermarket and others like it are trying to be, a familiar place, whether you're new to your neighborhood or not. In Salt Lake City, I'm Sean Higgins for Marketplace. Building a business from the ground up, maybe especially a startup, isn't easy, but it seems to have gotten even more challenging recently. According

to data from PitchBook, venture capital funding in the US dropped by 30% last year. And despite that, there's still plenty of competition out there. On average, more than 1200 new apps are released on both the Google Play and Apple App Store every single day. So if you're a founder, how do you survive, let alone thrive in that kind of environment? Here's the latest installment of our series, My Economy. My name is Joe Foster. I am a founder of Role Mobility based in Golden, Colorado, and we provide a platform for everyone to find accessibility information and connect with the disabled community.

All of our team has firsthand experience with this and really feels deeply connected to the community. But making an app has been like pushing a boulder up an icy cliff in slippers. We made the first iteration and it barely worked. The second week that we had it, we released an update and the update made it so no one could log in anymore. The first time we had a download that was not connected to us in any way was magic. It was like, oh my god, there's somebody who's not my mom who is downloading this and really likes it.

But for our first three months, we would have had more success had we stood on the street corner and just told people about it than, you know, what we actually saw. We posted a video on TikTok and it just took on a life of its own. We were completely unprepared. We thought that we'd have this steady trickle of more and more people using the app. And instead, what we saw was a hockey stick. And every search costs real money. It costs us like a quarter of a cent or an eighth of a cent per search. When we had our big spike, we had four searches a second. Everything that we have done since day one has been fully self-funded and

now that we are growing, we're at a point where we need to raise money. And so we know we're gonna have to keep pushing and we're forging ahead. I got an email from a lady who said my daughter is disabled and we have a really hard time finding places to go that are accessible. Are you available in Madison Wisconsin? And we pulled up the map and there was 20 or 30 reviews. And it was so cool to go back to her and say, yes, there is this community there and they're active on Roll. So connecting the community has been such a powerful experience.

Joe Foster with Roll Mobility out in Golden, Colorado. We can't do this series without you, so tell us about your economy at marketplace.org slash my economy. This final note on the way out today starts with a question. When you book a flight these days, do you make a point of looking up who makes the plane? I ask because it seems like airlines, at least, are thinking twice about the planes they buy. Boeing said today that it got orders for just four jets in May. That's down from seven in April.

And get this, down from 69 jets in May of 2023. Deliveries are also down, which is important because delivery is when Boeing actually collects a lot of its money. The Federal Aviation Administration is capping Boeing's production of 737s after a door plug blew out during a flight earlier this year and warnings surfaced from whistleblowers about safety concerns. Our digital and on-demand team includes Carrie Barber, Jordan Mangy, Dylan Mietinen, Janet Nguyen, Olga Oxman, Ellen Rolfus, Virginia K. Smith,

and Tony Wagner. Francesca Levy is the executive director of digital and on-demand, and I'm Kristin Schwab. We'll see you back here tomorrow. This is 8PM. Hey everyone, it's Rima Grace, host of This Is Uncomfortable. If you're looking for some good recommendations on books to read, well, you should join This Is Uncomfortable's Summer Book Club.

Every other week in our newsletter, we'll share a new book that'll make you rethink your relationship to money, class, and work, while also featuring an interview with the author or an expert on the topic. Plus, when you join, you'll be entered in a giveaway where you could win some This Is Uncomfortable merch. Be sure to check it out. Sign up today at marketplace.org slash book club.