Marketplace - Rents outpace wages in big cities across the U.S.

Episode Date: May 8, 2024

Over the past five years, rents in nearly every major U.S. city have risen faster than wages. In New York City, rent surged seven times faster than wages last year. But this spike isn’t confined to the Big Apple. Later in this episode: GE’s three-way split is the end of an era. Also: the WNBA pay gap, and the rebranding of an iconic Midwestern frozen-food delivery service.

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. On the show today, we'll talk about the health of small business, the health of household finances and end with a healthy balance of ice cream. From American Public Media, this is Marketplace. In New York, I'm Kristin Schwab in for Kyra's Doll. It's Wednesday, May 8th. Thanks for joining. Have you ever walked into your local supermarket or wine shop or hardware store and taken a look at what's on the shelves, like really taken a look. What's up for sale and how well stocked those shelves are can tell you a lot

about how a business owner feels about the economy. I say all this because we learned this morning that in March, wholesalers' inventories fell from the month before, down 4 tenths percent according to the Commerce Department. Meanwhile, in April, a different survey of business owners, called the Logistics Managers Index, shows inventories barely ticked up. So, Marketplace's Justin Ho called up a few small businesses to get the scoop on how they're thinking about what and how much they're stocking. Earlier in the year, Pat Whalen decided to bring in a lot of inventory for his grocery store and wholesaling business in Brooklyn called Sahadi Fine Foods.

He imports a lot of products from parts of the Middle East that are really unstable right now. The political climate there meant I had to bulk up inventory, put a buffer here and another couple of months to the inventory cycle. But Whalen says bulking up on inventory is a whole different challenge, because it requires borrowed money. And with interest rates as high as they are? Cost of your inventory is two to three times what it was a few years ago.

As a result, Waylon says he's trying to be a little smarter about his inventory levels. We're still going to continue to replenish, but we need to take that buffer down a little bit. A lot of other businesses had been loading up on inventory this year because they thought if the Federal Reserve cut interest rates soon, consumers would be ready to spend more. That's Dale Rogers, a professor at Arizona State University who helps put together the Logistics Managers Index. He says businesses have realized that it's not clear whether the Fed will cut rates at

all this year. As a result. They're making decisions in some cases to postpone purchases until they absolutely need it. That kind of just-in-time inventory management has a lot of advantages. Catherine Reynolds handles imports at Palmetto Towel Distributors in South Carolina. She's also ordering less inventory right now,

and she says that lets her stay nimble. And if I do see something that's not selling, then I can easily, you know, sell off the last part of it and not have to worry and not be stuck with inventory that's kind of gone stale, so to speak. Reynolds says keeping inventories low also lets her experiment a little more. For instance, she can bring in a small amount of new boulder tiles, where it's no big deal if they don't sell. But if they do, then great. We work with a lot of architects and designers,

and it's always good to kind of pique their interest and have the latest, greatest things to offer them. Reynolds says that can help her boost sales, even when the economy is uncertain. I'm Justin Ho from Marketplace. Wall Street today, a little up, a little down. We'll have the details when we do the numbers. Yesterday on the show, we talked about the tough spot aspiring home buyers and even some homeowners are in right now. Well, things are not exactly rosy out there for renters

either. In almost every single big city in the US over the last five years, rents have grown faster than wages. On average, about one and a half times faster. That's according to new data from Zillow and Street Easy. There are some exceptions. In Austin, San Francisco, and Portland, wage growth has actually outpaced rent growth. But here in New York, rent has risen seven times faster than wages, Marketplace's Samantha Fields reports. I'm going to say it again because I think it bears repeating. Rent in New York City rose seven times faster than wages did last year. And yes, New York is notoriously expensive.

But it's not just New York. It's also Boston, Cincinnati, Buffalo, Chicago. As long as there are people who are willing to pay those rents and prices, the market will keep going up. Jenny Schutz at the Brookings Institution says that's what we've been seeing in the last couple of years. People who own real estate, people who own stock portfolios, people in really high paid jobs are doing extremely well in this economy. That means they have a lot of money to spend on housing.

And increasingly, a lot of them are renting, partly because there are so few houses to buy. And that is driving up rents for everyone. David Dworkin at the nonprofit National Housing Conference says this is putting a particular strain on lower-income people. You're talking about the person who makes your coffee, the person who serves you lunch, the people in your doctor's office, the people who come to rescue you if you get into a car accident, the nurse at the hospital.

Over half of renters were cost burdened as of 2022, meaning they're spending more than 30 percent of their income on rent. Igor Popov, chief economist at Apartment List, says as rents have spiked, we've also started seeing fewer people forming new households. That means that folks aren't going out and getting that new apartment, aren't moving out from living with parents, with family at the same clip that they were because they're kind of looking at a market and saying, well, maybe it doesn't make sense right now. Things are starting to improve for renters in some markets, says Kenny Lee, senior economist

at StreatEasy and Zillow. Austin and Houston, Texas are great examples. In both of those cities, wages grew faster than rents. What's different about them is the substantial increase in the supply of new rental buildings. Really, simply put, building more can make such a big difference for renters. Only most cities aren't doing enough of it. In New York, I'm Samantha Fields for Marketplace. Let's go from wages and rent to wages and basketball. The WNBA preseason has been selling out games. More than 6,000 people bought tickets to see Indiana Fever rookie Kaitlyn Clark's

debut against the Dallas Wings. Clark and other high-profile members of her draft class – Angel Reese, Cameron Brink, Camila Cardozo – they're expected to draw record crowds and viewership when the regular season tips off next week. But for all the fans and media focus and money these rookies are bringing in, WNBA players have relatively low salaries. They fall in the mid $70,000 range. But as Marketplace's Savannah Marr reports, new fans and interest from investors could

help turn that around. The WNBA draft isn't typically appointment viewing, but this year 2.4 million people tuned in, more than four times the previous record. The Indiana Fever select Kaitlyn Clark, University of Iowa. Clark, who's dressed head to toe in Prada, by the way, has already made over $3 million in endorsements. ...fever after as decorated a collegiate career as we have ever seen. She's reportedly working out a $28 million deal with Nike. So it's not like she'll live off her WNBA earnings, but many of her teammates will. And news of Clark's five-figure salary

was astonishing for some fans. Not everyone. Welcome to the party. We've been trying to figure this out for some time. Faye LaVielle is with The Collective, which advocates for women in sports and recently did an audit of the athlete pay gap. What we found was that women athletes make 21 times less than men athletes on the field of play. That's on average in professional basketball. It's worse.

Women make 108 times less than their counterparts in the NBA. And of course, the NBA is 50 years older than the WNBA. It brings in billions more in revenue. But Laviel says the forces behind those disparities are entrenched. It's a challenge from needing enough eyeballs in order to get the dollars, but in order to get the eyeballs, you need to get the dollars. Let's start with the eyeballs problem. For decades, sports media was controlled by a

handful of old guard gatekeepers, says Alicia Jessup, who studies the business of sports at Pepperdine. If you look at who the decision makers are, they tend to be middle-aged white men. Men who long assumed there wasn't a market for women's sports. So they didn't get TV spots or coverage by sports journalists. But now? Technology, streaming, and social media, what it has done is it's democratized media. Athletes and teams can market directly to fans, who can watch and engage with women's sports more easily than ever. But Jessup says there's a lingering investment problem.

For so long, women's sport has been treated like a charity case or a side project. Investors might put a small amount of money behind an athlete or a league, but then back off when they don't immediately see a return. Jessup says leaders in this space don't need to play scared. What that means is you place your financial bet, but then you double down on it by spending appropriately on marketing and promotion so that your investment can make significant gains. Like how investors have always traded men's sports. Jessup guesses were years out from the Caitlin Clarks of the world making multi-million dollar salaries, but the true fandom and star power around Clark and others in this highly anticipated rookie class could help move things along. I tell you what, what a great

time to be a fan of women's basketball. Keetra Armstrong is a professor of sport management at the University of Michigan. She's also lived and breathed women's sports for decades and watched critics put the blame on women athletes for revenue shortfalls and their low salaries. There was a time that people thought, yeah, yes, women's sports is an inferior version. The media records tell us that's not the case. Armstrong hopes this wave of fan interest can put that conversation to bed and put a spotlight on the investments needed

to get women athletes paid. I'm Savannah Marr for Marketplace. Coming up. 20 years ago there was no Amazon. We are trying to compete with all of those service providers. Oh, how times have changed. But first, let's do the numbers. The Dow Jones Industrial Average rose 172 points, four tenths percent, to close at 39,056. The Nasdaq fell 29 points, about two tenths percent, to finish at 16,302.

And the S&P 500 barely budged, ending at 51.87. Samantha Fields told us about the gap between wage growth and rising home rental costs. Let's check in on some publicly traded rental companies. Invitation Homes shaved off 0.8%. American Homes for Rent subtracted 0.8% as well. Blackstone retreated 1.4%. Ride-sharing firms drove in opposite directions today. Uber shares fell 5.7% after the company reported first quarter results that were kind

of mixed. Lyft rose 7.1% after the company reported faster than expected revenue growth. Bond prices fell. The yield on the 10-year T-note rose to 4.49%. You're listening to Marketplace. Hey everyone, it's Rima Chavez, 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. This is Marketplace. I'm Kristin Schwab. Americans, generally speaking, built up a pretty good cash cushion during the pandemic. Economists at the San Francisco Fed found that by August of 2021, we collectively saved up to $2 trillion more than we would have had there been no pandemic. But now those very economists say all the extra savings are gone. So where did all of it go? Marketplaces Kaylee

Wells talked to some economists about how they spent their savings and where everyone else's might have went. Preston Moy earned his PhD during the pandemic. He was dipping into savings and the stimulus checks he got kept him from dipping too far. It really helped me out. I probably spent it on takeaway food when I was writing my dissertation. SONIA DARA Now he's a senior economist at Employ America, and he says smaller savings accounts aren't as worrisome for consumer spending as they

sound because there's an even more important factor here, wages. DARA And the fact that labor income growth is still strong, employment is still strong, and wage growth is still strong leads me to believe that consumption, at least for the foreseeable future is going to be healthy. Lots of higher income households saved and invested their money. That's what Scott Baker did. He is a finance professor at Northwestern University who says now that the savings are gone and interest rates are up, loan and credit card payments are more challenging, especially for lower income households with less financial wiggle room where the savings probably ran out months ago.

Those debt payments are going to start to bite a bit more and kind of continue to take a chunk out of the disposable income that households have. As for one of the economists behind the San Francisco Fed research, Hamza Abdulrahman. I bought the car. He says that's a good reminder of the fact that savings aren't the only indicator of wealth here. A lot of households like his used their money to buy more non-financial assets, think cars and houses.

And that was thanks to? A low interest rate environment and some influx of cash and financial support at the beginning of the pandemic. Those assets help people to feel wealthier, even as their savings dwindle. And Abdulrahman and his co-author say, the wealthier people feel, the more likely they are to keep spending.

I'm Kaylee Wells for Marketplace. General Electric has been a big piece of American business for 132 years. So big that it's almost hard to remember all of the industries the company has touched. It's made televisions and light bulbs and has even provided home mortgages. But that is the past, because GE is entering a new phase. Last month, it split into three separate companies, a wind power business, an aerospace firm, and a healthcare company. Marketplace's Sabri Benishor looks back at GE's long history. The first spoken words in human history to be recorded and replayed were from a nursery rhyme recited by Thomas Edison in 1877. The original recording was destroyed, but Edison

re-recorded it decades later. Mary had a little lamb, its meat was white as snow, and everywhere that Mary went the lamb would chew it all. Five years after inventing the phonograph in 1892, one of Thomas Edison's companies merged with another electric company to form General Electric. It wasn't actually Edison's idea. It was J.P. Morgan's, the original J.P. Morgan, like the guy. G.E. ushered in the age of electricity and it was big from the get-go. You have to think of it as sort of the Microsoft, Google, Apple of its time. William D. Cohen is author of Power Failure, The Rise and Fall of an American Icon.

Edison was a better inventor than a businessman and was quickly sidelined from leading the new company, but it continued to create. In the 1910s and 1920s, it quickly became a powerhouse of invention, innovation. GE Inventors developed radio broadcasts and an electric car. In the 20s, GE got into home appliances. By the 60s, it was making plastics and silicones for the boots and helmets in the moon landing. It also got into the credit business. and the moon landing. It also got into the credit business. It started during the Depression to help people buy GE products that they couldn't otherwise afford. By the middle of the 20th century, GE became seen as ubiquitous because it was. At General Electric, progress is our most important product.

GE had a long and tense history with unions from the beginning, and its desire to escape unions helped drive the company in 1956 to move its computing department out of what would become Silicon Valley and into Phoenix, Arizona. Elizabeth Tandy-Shermer is a professor of history at Loyola University. Phoenix, Arizona has anti-union laws of the more favorable labor and tax policy. That decision proved fateful. The company that made everything from A to Z ended up losing out on C, computers.

Because the GE computing was so removed from that hotbed of computer innovation, they really got left behind. But by 1999, GE employed 340,000 people worldwide, nearly 200,000 of them in the US. It was still the quintessential conglomerate, and there was a rationale for that. And this was this notion that some degree of the research

would be shared across these industries. Ted Mann is co-author of Lights Out, Pride, Delusion, and the Fall of General Electric. He's also a reporter at Bloomberg. He says while one tentacle of GE could theoretically help out the others, it could also bring them all down. GE's financial arm almost did both. Under GE's most famous CEO, Jack Welch, GE Capital had exploded.

That grew into what was essentially the seventh biggest bank in the country. At one point generating 50% of GE's earnings. When the great financial crisis hit, it began to implode and nearly took all of GE with it before being bailed out along with the too big to fail banks, William D. Cohen. Right then is when things really began to change. Under CEO Jeff Immelt, GE sold off NBCUniversal to help pay for the fallout of the Great Recession and return to its industrial roots. GE Capital was spun off. GE's different industrial tentacles were chafing at being tied to one another.

Again Ted Mayen. There was a realization that the only way for these companies to thrive and survive was to separate it all. It took two more CEOs to accomplish that. By 2021, General Electric's headcount in the U.S. had fallen by almost 75% from its peak. And finally, in April of this year, GE split apart into a wind power company, a healthcare company, and an aerospace company. It is no longer the great ubiquitous conglomerate whose products touched both Earth and Moon. It was this incredible industrial company and built truly incredible things and so it does feel like we're never gonna see a

company that looks like that again. It's a reminder that even the greatest of companies don't have fate on their side forever. In New York, I'm Sabri Beneshur for Marketplace. I grew up in rural Minnesota, and one of my core childhood memories is Schwann's. Schwann's has been around since the 50s, and it's an iconic brand in the Midwest. Its yellow trucks are like freezers on wheels, going door-to-door delivering ice cream and chicken strips. I always begged my parents for the orange Flintstones push-ups. If you know, you know.

Well, a lot has happened in the grocery industry since Schwan's heyday, like Instacart and Amazon. So in 2018, the Schwan's family sold most of its business to a South Korean food company, which renamed the brand Yellow. Harvest Public Media's Elizabeth Rembert has more on the company's transition. Since 1965, Mary Bartles has been looking forward to her Schwann's deliveries. She remembers her nine kids excited to see the delivery man drive his yellow truck down the driveway. They would get on the truck and climb all over it and they'd all come in with an ice cream bar or something and now I

realized he was giving those to those kids out of his pocket because I wasn't paying for them. One of those kids actually happens to be my stepdad, which is how I know that nearly 60 years later, Mary is still ordering ice cream, frozen food, and meals from Schwann's. And on this Thursday morning in Vermillion, South Dakota, it's time for another delivery. This is the one that's the manager.

Come in. Hi, Mary. Hello. How are you? Nate O'Grady lets himself in and takes a seat at Mary's the manager. Come in. Hi, Mary. Hello. How are you? Nate O'Grady lets himself in and takes a seat at Mary's kitchen table. He's her delivery man now. We have time to sit and talk and socialize with people. He says his favorite part of the job

is getting to know the customers along his route. You get to know the customers well enough, you know exactly what they want when you come to the door. You know exactly what they're gonna order. Mary's gonna get her peanut butter cups, you know exactly what they want when you come to the door. You know exactly what they're going to order. Mary's going to get her peanut butter cups. I know that. Oh, yeah, that's the best thing they have. Mary says it's the great service that's kept her buying from Schwann's for nearly 60 years.

She doesn't even have to get out of her recliner as O'Grady checks her freezer for what she needs, grabs the order from his truck, and packs it onto the freezer shelves. When the Schwanns' family sold most of their business, they kept the delivery service but changed its name to Yellow, spelled Y-E-L-L-O-H. Some customers, including Mary, didn't take much notice. When did they do that? The new name is inspired by the unmistakable trucks, according to Bernardo Santana, the

company's CEO. That's one of the reasons we kept the name as Yellow, because of the famous and recognizable Yellow truck, to bring back and to keep this connection with our customers. The makeover comes as Yellow contends with a much different market than when the company started in 1952. Its main competitors used to be local, family-owned shops. Now, online giants like Walmart, Costco, and Amazon are coming for its customers. Yellow is still delivering its own yellow-branded proprietary products. About a year and a half after announcing its new name, Yellow made another change. It cut 750 employees and closed 90 delivery centers. Santana says it's to keep up with new technology and a more competitive online grocery environment.

20 years ago, there was no Amazon. We are trying to compete with all of those service providers. The new brand and cuts are part of an overall strategy to modernize Yellow's delivery service, says Akshay Rao, who teaches marketing at the University of Minnesota. Akshay Rao, Executive Director, Yellow's Delivery Service The whole rebranding, cost cutting through the reduction in their workforce and so forth

is part of a strategic shift, which is emphasizing costs rather than customers. Yellow CEO Santana says customers are still the priority, but the cuts do leave some in the dust. The yellow trucks used to make deliveries in all 48 lower estates. Now it's just 18. Customers elsewhere can get orders via UPS. It's a loss for Deb Kuomodo. She's in Lincoln, Nebraska and won't receive deliveries anymore. It's really kind of ironic because here, Schwann's, they were kind of like the first grocery delivery. And now everybody else has kind of caught up to them.

Ordering from Schwann's and seeing the yellow trucks felt like stepping back into her childhood. I think it's the end of an era because I do miss the drivers. I really do. She says she'll go to the grocery store instead of ordering via UPS, even if the ice cream there isn't as good as Yellow's. In Lincoln, Nebraska, I'm Elizabeth Remberts for Marketplace. This final note on the way out today. Generative AI is certainly going to be transformative, but it looks like for now, a lot of people are just using it because they're tired. final note on the way out today. Generative AI is certainly going to be transformative, but it looks like for now, a lot of people are just using it because they're tired.

Saw this in Wired. A new report by Microsoft and LinkedIn says 75% of people who have desk jobs are using AI at work. The company surveyed more than 30,000 people in more than 30 countries. Nearly 70% of respondents say they struggle with the pace and volume of work, and many of them say they use AI to dig their way out of emails, web chats, and meetings. Our media production team includes Brian Allison, Jake Cherry, Jessen Dullert, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Turado, and Becca Weinman. Jeff Peters is the manager of media production, and I'm Kristin Schwab. We'll be back tomorrow.

This is APM. 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 can win some This Is

Uncomfortable merch. Be sure to check it out. Sign up today at marketplace.org slash book club.