Marketplace - Personal incomes rose in January

Episode Date: February 29, 2024

January’s personal consumption expenditures report showed that prices were up 2.4% from the same time last year, suggesting that  inflation remains in a cooling trend. The report also found that incomes jumped 1% last month — the biggest monthly gain in three years. Plus, why some customers with high-yield savings accounts aren’t getting promised rates, what Chinese electric vehicle tech could mean for national security and how Florida farmworkers are enforcing heat protection standards.

Hey, Marketplace listeners, you know around here we like to think you're never too young to learn about the economy and financial basics. That's why we're bringing the Million Bazillion Live Tour to schools to teach important lessons about budgeting, investing, saving, and more. It's all the fun of the podcast, but now live, immersive, and interactive. Special thanks to our tour partner, Greenlight, the debit card and money app for kids and teens. Learn more about Greenlight at greenlight.com slash million. That is greenlight.com slash million. Prices are up, but so is income. What to make of the latest inflation report?

From American Public Media, this is Marketplace. in baltimore i'm amy scott in for kai rizdahl it is thursday february 29th good to have you with us on this leap day we learned that inflation hasn't given up the fight yet that's the headline from the Personal Consumption Expenditures Price Index, PCE. Prices in January rose 2.4 percent from the same time a year ago, and 2.8 percent when you strip out the volatile food and energy categories. Those year-over-year inflation figures have been falling over the last few months, but they're still higher than the Federal Reserve would like to see. Here's the thing. The same report found that people's incomes have been rising. They're up 1% in January, the biggest monthly gain in three years.

Marketplace's Justin Ho has the details. Last month was a little unusual when it comes to people's incomes. For one, people's Social Security benefits went up, says George Perks, macro strategist at Bespoke Investment Group. January is when you see the adjustment to cost of living indices from the prior year start to hit social security checks. Perks says another factor pushing up incomes in January, almost $80 billion worth of dividend payments from stocks that people own. And when you strip those one-off factors out and look at actual wage growth, that didn't really move around that much. That basically

did what was expected in January. But even though wage growth didn't move around that much, it was still pretty resilient. Shannon Grein, an economist at Wells Fargo, says we can thank the job market for that. So even though the labor market is showing some signs of moderation, we continue to see firms hire at a decent clip and firms cite that they are having trouble filling open positions. And as long as the job market remains tight, Grein says wages are probably going to keep rising, just like they have over the last several months. The trend there has been pretty remarkable and I think still suggests that you're going to see a steady pace of consumption this year. Consumer spending has been decelerating over the last year as inflation has come down, says Michelle Meyer, chief economist of the MasterCard Economics Institute. And this year, she says that trend is likely to continue. There's still more work to be done for many

categories in terms of seeing cooling inflationary pressure, and that will filter into some moderation in spending as well. That said, moderation in consumer spending isn't the same thing as weak consumer spending. In fact, Meyer says she still expects the economy to expand this year. It'll just feel a little more normal. A newer normal than what we had prior to the pandemic, but certainly not the environment that we were in in 21 or 22 or even early 23 when we had rising and high inflation. And the more normal economy, Meyer says, is a pretty healthy outcome. I'm Justin Ho for Marketplace. Wall Street was looking on the bright side today. Didn't hurt that Congress is likely to avoid a government shutdown, at least for another

week. We'll have the market details when we do the numbers. The upside of the higher interest rates we've seen over the past few years is a bigger return on savings. In theory, anyway, the national average deposit rate as tracked by the FDIC is just 0.46%. But high-yield savings accounts, many offered by online banks, pay as much as 4 to 5%. Check the fine print, though. Some customers say they've been earning much less than they expected from their high-yield accounts. A few have even filed lawsuits. Rachel Louise Ensign wrote about it at the Wall Street Journal. Rachel, welcome to the show.

Thanks for having me. You open your story with an example of someone who started a savings account at an online bank in order to earn more interest as the Fed was raising rates, only to find out his interest rate didn't go up. What happened? So basically what this bank was doing was kind of pulling these technical tricks to make it so that you'd open an account, you'd think you were getting a really high rate, but then they would never increase your rate. With the Federal Reserve increasing interest rates, people kind of expect in these accounts, your rate will keep going up. But this man had a rate that he thought was really good and then expected that it would keep going up, but just didn't keep

that close of an eye on it. And then realized a while later that it had in fact not increased at all, even though the bank was advertising a much higher rate for new customers. How common is this? Well, it is pretty common. We had a story a few weeks ago about Capital One, which is an enormous online-centric bank, and this has happened to a lot of their customers. So it's something that with rates going up is happening more and more. You talked about one of these banks, UFB Direct, which was advertising higher rates than it was giving older customers. What makes UFB and other online-centric banks different from, say, the big traditional banks our listeners might be familiar with? centric banks different from, say, the big traditional banks our listeners might be familiar with? Yeah, well, this model of being an online bank kind of started out in the early days of the internet. And a lot of people flocked to these early online banks because they generally

offered much higher interest rates than traditional brick and mortar banks. And that has largely remained the case. It seems like there's been an explosion of these banks. One of my colleagues was talking about seeing all the ads on the interstate for online banks. What do you think is driving that growth? Well, the main thing that's driving that growth is that for the first time, you can actually earn real interest on your money, especially if you're a person with a lot of savings. After the financial crisis, interest rates were really, really low for a very, very long time, basically until 2022. During that period, you might use an online bank to get like 2% on your savings and that

was good, but that's really not much money. So a lot of people just thought, I mean, who cares? I'm just going to leave my money at my big bank, even though they're paying me nothing. But now with the Federal Reserve having raised rates a lot since early 2022, you can really earn a significant amount, especially if you use one of these online banks. How have the banks responded to your stories and to these complaints that they're basically offering much higher rates to new customers than they're giving to existing customers? Well, a lot of the customers themselves have reached out to the banks and asked for like back interest. And I haven't heard of a single situation where they have given that. I mean, they will increase the rate on your account. If you say, hey, why am I earning this low rate and

not the high rate that you're advertising? You know, the banks will say, okay, well, let's get you in that high rate account. And you know, each bank has responded differently to us. Obviously, we contacted them for comment. The bank that is doing this in kind of the most extreme manner, UFB, they didn't respond to us at all. So what can customers do about this, if anything? I think people just need to be pretty vigilant about their interest rates. You know, make sure you're checking your statements or your online banking portal and seeing what your rate is there. You might not be going to the actual website all the time.

And that seems to be how, you know, this fell through the cracks of a lot of customers. All right. Rachel Louise Ensign wrote about customers not getting necessarily the advertised interest rates on their savings accounts. Thanks so much, Rachel. Yeah, thank you for having me. I don't want to alarm anyone who's driving right now, but do you ever think about what your smart car knows about you? The Biden administration has some concerns. Today, the Commerce Department announced plans to investigate the national security risks of connected vehicles and could consider restrictions on auto technology from foreign countries, particularly China.

But the U.S. has other reasons to want to limit the flow of cheaper Chinese-made cars into the U.S. As Marketplace's Sabri Beneshor reports, it's a reminder that national security and economics are never all that far apart. Cars can for sure be national security risks. There's tens of computers inside cars, someday even hundreds of computers. Todd Moore is VP of Data Security Products at TALIS. Anytime you're dealing with computers and data, that data can be maliciously intercepted. There's always a threat. There have been cases where Internet-connected vehicles have been hacked,

government officials have been spied on. But that is not the only thing going on here. Looming behind this rule about internet-connected cars is the specter of Chinese electric vehicles that, to quote Elon Musk, could demolish competitors. Tu Li is with consulting firm Sino Auto Insights. He's a big fan of the U.S. auto industry. I grew up in Metro Detroit. My whole family works in the automotive space. My first job was at General Motors. But he travels to China.

He's driven the latest Chinese electric vehicles, of which there are many. To sit in these vehicles and drive them, that's what scares me. They're competitive today. Chinese EVs are at least just as advanced and high quality as any U.S. competitors, Lee says. But they are a lot cheaper. This is, he says, partly the result of subsidies and partly the result of intense innovation and competition within China. Wendy Cutler is president of the Asia Society Policy Institute and says so far the U.S. has been able to keep these cars out through a tariff. Which is now at the 27.5 percent rate, which seems high,

but given the price competitiveness of Chinese vehicles, perhaps it's not high enough. That defense is starting to buckle. Chinese EV companies like BYD are exploring setting up plants in Mexico to get around the tariff. That is setting off alarm bells in Washington. Emily Benson is with the Center for Strategic and International Studies. But it's forced policymakers to confront a more creative set of tools. Creative tools like regulating cars that connect to the internet with Chinese technology. National security, yes, but Benson says more than just that. In New York, I'm Sabree Beneshour for Marketplace. Coming up...

The policy that exists at the federal level really is kind of taking the most disadvantaged students and kicking them while they're down. The tyranny of the grade point average. But first, let's do the numbers. The Dow Jones Industrial Average added 47 points, one-tenth of a percent, to close at 38,996. One-tenth of a percent to close at 38,996. The NASDAQ gained 144 points, nine-tenths percent, to finish at 16,091. And the S&P 500 pocketed 26 points, half a percent, to end at 5096. Happy Leap Day. If you're an hourly worker, that means one extra day of pay for you.

Now, if you have a monthly gym subscription or public transportation pass, enjoy your bonus day. Sabri was talking about a potential hold on Chinese EV imports. That could be welcome news for domestic automakers. Ford Motor Company shares revved up one and one-tenth percent. General Motors accelerated one and two-tenths percent. Rivian Automotive ticked up two-tenth Tesla drove down 1.0%. Bonds rose. The yield on the 10-year T-note fell to 4.25%. You're listening to Marketplace. This is Marketplace. I'm Amy Scott. It may be tempting to forget at this point in the winter, but 2023 was the hottest year on record, and forecasters are already predicting this year could be worse. With no federal workplace protections for heat safety, a group of farm workers in Florida took matters into their own

hands and created the Fair Food Program. Workers at participating farms get mandatory rest periods, along with water, shade, and restrooms nearby. And in return, farms that comply are given priority to sell to big buyers like Walmart and Trader Joe's. Nicolas Rivero is a climate solutions reporter at The Washington Post. He joins me now. Nicolas, good to have you on the program. Thank you for having me. Tell me about the coalition that pushed for these protections for workers and how they pulled it off.

Yeah, so this all got started with a group of workers in Immokalee, Florida, which is a small, primarily tomato farming town in southwest Florida. They formed a group called the Coalition of Immokalee Workers in 1993. And originally it was to fight for even more basic protections. So fighting against things like forced labor, violent bosses, wage theft, sexual harassment, those kind of things. And they started out just protesting against farms that were violating some of these basic kind of rights. And then in the early 2000s, they changed tactics. So rather than targeting their protests at farms, they started targeting them at the companies that bought produce from those farms. So they had a kind of 10-year campaign of protests that eventually led

to the creation of the Fair Food Program in 2011. And they targeted some pretty big companies, McDonald's, Taco Bell. Why do you think that strategy was so effective? Well, these buyers have a lot of market power. I guess think about it this way. If you are OSHA, if you're a federal regulator, what you can do is basically try to investigate different workplaces around the country. And if you find a violation, then you can issue a fine. So for instance, last year in Fort Lauderdale, there's a farm worker who died of a heat stroke. And that farm was issued a fine of around $15,000. That fine may or may not change practices on the farm. Yeah, that's pretty small.

It's pretty small. But with a market-based kind of approach, you have a much bigger incentive, which is if you get blacklisted from selling to Walmart, Whole Foods, Trader Joe's, Burger King, McDonald's, all these other kind of fast food companies, it might have a much bigger impact on your bottom line and be a larger incentive to do the right thing. How are these rules enforced? So the Fair Food Program sends out an auditor to every farm every year. And while they're there, those auditors speak to a majority of the workers. It's a pretty high level of oversight. I mean, you really don't see every workplace being inspected every year outside of programs like this. In your story, you quote one of the organizers telling workers,

you don't have to risk your life while you're feeding the country. But that's what's happening, right? I mean, you report that farm workers are 35 times more likely to die of heat-related illnesses than other workers. Why do you think it's been so hard to get regulatory protections for these workers? Well, for a few reasons. I mean, one, there's been some industry pushback. Two, it's tougher for farm workers to organize and collectively bargain. But I also think it's a little bit out of sight, out of mind for people. We have protections from heat for people like high school athletes or soldiers, not so much for farm workers, who in many cases might be older, have other kind of pre-existing conditions like diabetes, kidney issues that also complicate being out in the heat

and are in some ways more vulnerable. How can consumers or can we know if we're buying products from companies that treat workers well and let them take a break, say, in 90 degree heat? workers well and let them take a break, say, in 90 degree heat? Well, one thing you can look out for, there is a sticker that goes on produce picked by fair food program farms, at least in some grocery stores. It's a picture of a worker holding a bucket over their shoulder. And so if you see that, you know that your produce is coming from a farm where workers have some kind of basic workplace protections. produce is coming from a farm where workers have some kind of basic workplace protections. You talk about an example of a county that considered stronger regulations to protect workers, Miami-Dade in Florida, but commissioners worried it could kill the industry. I'm curious,

though, is this costing companies any more to offer these protections for workers or to mandate these protections? Yeah, so the farm owners that I spoke to said, yes, there's some cost associated with it. They recoup some of that cost by having workers who are more productive and less likely to miss work because they had heat stroke the day before. struck the day before. And they also say it's the right thing to do. And whatever level of cost it comes with, it's kind of their obligation as employers to bear it and make sure that they're providing a safe place for people to work. All right. Nicolas Ribeiro covers climate solutions at The Washington Post. Thanks so much for sharing your reporting. Thank you again for having me. And you can hear more of our reporting

on climate solutions on our podcast, How We Survive. Follow us on your favorite podcast app. More than 40 million Americans have taken some college courses but never got a degree, according to federal data, which can make it hard to get ahead in this economy when more and more well-paying jobs require at least a bachelor's degree. For people who want to go back and finish school, a federal GPA requirement for financial aid can get in the way. WBEZ's Lisa Kurian-Phillip

has that story. Lately, Chicago native Brenda Brooks has had a tough time finding permanent work. She spoke to me over the phone after her shift at a temp job in data entry. She says prospective employers have told her, You have the qualifications, but this requires you to have a degree. And I don't have that degree. That's why she wants to go back to Chicago State University, where she started college in the 80s. But her grades from back then are a problem.

I don't think anybody should be penalized for something that happened 40 years ago. During her first attempt at college, Brooks was working nights to support her two young kids. Had a friend of mine watch them at night while I went to work. She'd get off her post office shift at eight o'clock in the morning, then race home to get her kids ready. Fix their breakfast, get them off to school, and had to be at class at about 1030. It was too much, she says. Her GPA dropped below a C average and stayed there. Federal rules dictate that students who fail to maintain at least a C average two semesters in a row lose their access to government

loans and grants. Debbie Rauscher leads a foster youth advocacy group in California. The policy that exists at the federal level really is kind of taking the most disadvantaged students and kicking them while they're down. She points out states and schools can get around this by offering students a flexible appeals process. That's what California does. Julie Peller leads higher learning advocates, which wants the federal requirements changed. Overwhelmingly, students who fail to meet these standards are more likely to be low-income, students of color. Who are more likely to be juggling caregiving and work responsibilities with class. Losing federal student aid like the Pell Grant can really just be detrimental to their journey.

It has been for Brenda Brooks. Now that her kids are grown, she wanted to try school again, even though she didn't qualify for financial aid. She enrolled in the fall of 2021 and got three A's and a B. She hoped her good grades would prove she was worthy of financial assistance. I was trying to show them at Chicago State, look, this is serious to me. This is my life. But the good grades didn't raise her GPA enough to get her back in the running for financial aid. Now she owes $5,000 to Chicago State University for those classes. Without a degree, Brooks says, she can't earn the money she needs to pay that bill. Nor can she pay for the classes she still needs to graduate.

I'm not looking for a handout. I'm really not. I'm looking for something that's going to make me a more productive human being. Some advocates say students like Brooks, who have been out of school for a while, should be able to get a one-time reset of their eligibility. In the meantime, Brooks has not given up. She keeps thinking about something her sister said before she died in early 2020. She just made me promise her that I would finish school. I said, OK, you know what? I promised her I'm going to do it. Once she does, she says she's going to get that manager or director position that she had the experience, but not the degree for.

In Chicago, I'm Lisa Corian-Phillip for Marketplace. This final note on the way out, shares in WW International, a.k.a. Weight Watchers, fell 18 percent today after the company announced Oprah Winfrey is leaving the board following nearly a decade with the company. Weight Watchers has been struggling to hold on to members as weight loss drugs like Wegovy and Ozempic have taken off. Winfrey recently told People magazine she uses such a medication, though she didn't say which one. She plans to donate her Weight Watchers stock to the National Museum of African American History and Culture in Washington, D.C. Partly, the company said, to eliminate any perceived conflict of interest around her taking weight loss medications. Also, it should be said, it's an amazing museum.

John Buckley, John Gordon, Rick Carr, Diantha Parker, Amanda Peacher, and Stephanie Seek are the Marketplace editing staff. Amir Bibawi is the managing editor. And I'm Amy Scott. We will be back tomorrow. This is APM. I'm calling for a renewed focus on literacy. We have gotten this wrong in New York and all across the nation. And it's happening because of a podcast. I think your podcast has changed my life.

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