Marketplace - Revised 1st-quarter GDP shows slower growth

Episode Date: May 30, 2024

Revised gross domestic product for the first quarter shows even slower growth than the original estimate. With U.S. GDP representing nearly a quarter of global output, what happens here can affect other economies. Also in this episode: why companies opt for machines over people, how cyberattacks affect small businesses, and what one South Gate, California, business owner thinks of prices.

From all of us at Marketplace, we wanted to say thank you to everybody that stepped up to donate and helped us stay on track this year. The support of our Marketplace investors is so important to keeping our public service newsroom running strong. We made great progress toward our goal and every donation is critical to helping us stay on track as we approach the end of our budget year. And if you didn't have a chance to donate, now's a great time to do that. Give now at marketplace.org slash donate. And thanks again.

On the program today, how the U.S. economy fits in globally, how to make sense of that economy, ours, not the globe's. And we'll finish with a beer. From American public media, this is Market Plans. In Los Angeles, I'm Conor Rizdall. It is Thursday, the 30th day of May. Good as always to have you along, everybody. One gets updates on the growth numbers for the American economy. Real gross domestic product is the technical term three times for each quarter of the year. A sneak peek a month after the quarter ends, the final version three months after the quarter

ends, and in between what's called revised, which we got today. Meh is a word one might use, even more meh than had been expected. Really 1.3% annualized was how fast this economy grew January through March. That's down a bit from the first estimate we got a month ago. And that mehness might turn out to be contagious

because US GDP is by some measures nearly a quarter of the global economy. So Marketplace's Elizabeth Troval starts us off today with the American economy globalized. When GDP is up and the U.S. economy is strong, Americans buy lots of stuff from all over the world. Portuguese wine or Swiss chocolate. But Tadevik Sekhbosyan with Texas A&M University says when our economy isn't doing well,

our major trading partners feel the pain. I used to work in Canada. So there they would say when the US sneezes, Canada catches a cold, because the US is a major export partner for Canada. But just how serious that cold can be depends on what's being traded and how much of it. Eric Lund with the Conference Board says considering today's softer GDP numbers, that could signify some sniffles.

Consumer debt levels are up, savings are down, pandemic savings are gone, inflation remains high, interest rates remain high. He says as U.S. consumers second-guess their spending, China, a major exporter, could feel the pinch. Slower demand growth from the U.S. coupled with what appears to be higher tariffs coming potentially out of the Biden administration, these are all problems from sort of the Chinese perspective. In addition to U.S. GDP data, there are other indicators

that the rest of the world should watch too, says David Wilcox with the Peterson Institute and Bloomberg Economics. The US economy has averaged adding about 240,000 jobs per month, and that's still indicative of the really healthy and robust jobs market. He says you could even think of slower GDP growth as the cooling the U.S. economy needs.

I'm Elizabeth Troval for Marketplace. On Wall Street today as we head downhill into the weekend, I'll tell you what, traders just got up on the wrong side of the bed again. We'll have the details when we do the numbers. We've had Kyla Scanlon on the program a couple of times over the past couple of years. She is a financial educator. She got her start blogging and making TikToks explaining the economy and the Federal Reserve and pretty much everything else.

She also, and this might be how you've heard of her, if not here, she's the one who came up with the term vibe session. She has now taken to the printed page Kyla has in a new book called In This Economy, How Money and Markets Really Work. So we have gotten her on the phone again. Kyle, it's good to have you back on. Yeah, thanks so much for having me. So we're going to do something a little different this time. I want to talk a little, you know, because it's your book

and you poured heart and soul into this for a couple of years. I want to talk a little bit more about you than we have in the past. How did economic literacy and financial education become a thing for you? Yeah, I mean, it really started in college. So I grew up in Kentucky, went to school in Kentucky on scholarship.

And in my journey throughout college, I had a blog about options trading, because I thought it was really important to tell people. Just because? You wanted to do a college blog about options trading? Yeah. I mean, because I was doing it and I was like, people need to know this is important information. And so that's kind of where the focus on education started. And then I went to Capital Group out in Los Angeles and kind of noticed even more so that there was a gap

between how people understood the economy and what was actually happening. And so when GameStop happened, I started making this content. But it was really like, you know, it was kind of this drive of coming from Kentucky and maybe not having access to economics education in the same way that I would somewhere else. And then going into industry and being like, wow, there's a really big need for the everyday person to at least have access to these tools. You made your mark in social media, right, with TikTok and sort of directly connecting with people. And I guess I wonder why have you decided that you're going to write a book now?

Yeah, that's a good question. So I wrote this book when I was eight years old about a penguin and wrote books all throughout growing up. And so like when the opportunity came to write a book, I love books, like I'm a big reader and to be able to even be considered for the opportunity to write one, I had to do it. And then number two, a lot of my social media videos are responding to the news. I try to do as much education as I can within, you know, 90 seconds, but books are static. And I think a lot of the knowledge that is in the book is static. And so I wanted a place for people to go

where they could use it as a reference guide. Like each chapter is relatively stand alone. And you can like read the inflation chapter without having to read the labor market chapter. And I just wanted something that people could go to outside of the noise of social media. Although, of course, you should read the inflation and the labor market chapters together because it's all a piece. Yeah, that's like the first chapters economic kingdom showing interconnectivity. Right? No, exactly. Right. And that's and that will look but that's the thing you have stressed. And look, I watch all your videos and I follow you on social and everybody here should.

It's a it's none of this happens in isolation. Right. People are the economy as you like to say and what we do really matters across everything in this economy. Exactly. Yeah, everything in this economy. Exactly. Yeah, people are the economy. And I think another reason why I wrote this book is because I think we do people a disservice. I think you do a great job helping people understand. But I think on large, we do kind of a disservice,

and we pretend that people don't need to understand the economy, when I think just understanding basic components is probably really important. So look, along those lines, and thank you for your kind words and right back at you, but you had a post, I don't know, like a week or so ago, talking about the disconnect in the recent, I guess it was Guardian-Harris poll,

about what the actual economy is doing versus what people think the economy is doing. And TLDR on this one is, people think the economy is doing and TLDR on this one is people think the economy is way worse than it is when actually it's pretty good although price levels are elevated and inflation is a pressure cooker and and we totally get that. What is the answer to to helping people understand the economy better because you can't just spout data at them and say here see it's not so bad.

Yeah, I mean, I think it's definitely hard. I actually was listening to you and make me smart about it. You were talking about the media component of this, and I think that's true. I do think it does boil down to how people are receiving this information, and you can't pound them down with data because I think that just makes it worse most of the time. You kind of have to be anecdotal, and you have't pound them down with data because I think that just makes it worse most of the time. You kind of have to be anecdotal and you have to be accessible and you have to give examples. But yeah, it's a really tough problem to solve and it's one that I've been wrestling with

since that survey came out because I was just so astounded with those numbers. It's really hard. Tell me about the title of this book, In This Economy? Yeah, that's a meme, you know. I think that a couple TV shows have used it as a line. When we were wrestling with the title, I was like, what if we just kind of made the title a meme? Because that's kind of how I got my start, and that's sort of a fun way to learn about

the economy is through meme. And so the title is meant to be fun because hopefully the book is a fun way to learn about the economy. So let's talk actually about the economy. Last time, maybe two times ago you were on, I forget, we talked about vibe session and was it over and yes, but maybe not. And now it's, I don't know. From where you sit and what you're trying to do with helping people understand this

economy, what do you see? Yeah, I mean, I think like consumer sentiment is still it's improved but like, you know, they're still funky stuff with measuring it I think that there's a lot of uncertainty going into the election I think that's going to create kind of an edge to the economy, but the economy is you know, it's it's moving along billion markets Okay Inflation is going down. Maybe not at the pace that we would, you know, it's moving along. The labor market's okay. Inflation is going down, maybe not at the pace that we would want it to, but it's improving. You know, the stock market's up. Stock market's not the economy, but like it's going okay. And so I think that's the thing with the economy is it's like, it's going okay. But I still think people are feeling relatively bad about it. And that's, yeah, where it gets kind of

hairy to talk about a good economy when no one thinks it's good. Is there a, you know, I asked you this last time and I'd be interested to see if your thoughts on it have changed. As we go about describing this economy, those of us in this business, and don't get a lot of traction with making people understand the subtleties of it, how do you think about that? One of my favorite lines is nuance doesn't sell. Oh, yeah, yeah, yeah, totally.

Yeah, yeah, and I think that kind of summarizes that. I think it's two things, right? Like, number one, it's hard, and you're telling people things are good, like things are fine, you should be feeling okay. And then also, number two, like the economy is such a personal experience like everybody has a personal inflation rate Everybody has a personal path with the living market And so I think it's really hard because we oftentimes talk about the the economy as a whole

When a lot of people interpret the economy not as a whole if your experience of the economy is not at all what people are Telling you, you know, of course, you're not going to believe them And I think that's where it gets really tough is like the economy is not at all what people are telling you, you know, of course you're not going to believe them. And I think that's where it gets really tough is like the economy is art. At the end of the day, it's humans. And art is hard to interpret sometimes. You should buy her book, you should follow her on all the socials. Shra Handler is at Kyla Scan. The book is called In This Economy, How Money and Markets Really Work. Kyla Scanlon, really good to talk to you. Thanks so much, Ky.

["In This Economy," by John Williams playing in background.] The beige book came out this week. the Federal Reserve's eight times a year summary of regional and national economic conditions. It's always full of interesting little tidbits the beige book is about where this economy is right now. Two of them caught our eye this time, two little tidbits. The Minneapolis Fed quoted one manufacturer who said, I don't expect to fill any of my open jobs. We are increasing our capital expenditures to adapt our processes to smaller head counts. Reading between the lines, more automation, fewer workers.

Meanwhile, the Federal Reserve Bank of Boston said this, quote, a large clothing retailer let go 150 workers by closing a call center, setting the shift toward more automated customer service technologies as the driver. Marketplace's Stephanie Hughes is on the replacing labor costs with capital expenditures beat for us today. Manufacturers have been dealing with a labor shortage for years. Some are frustrated either because they can't find workers or don't want to pay the higher

wages workers want to fill open jobs. And as a result might be turning to available technology to substitute for additional hiring. Lonnie Golden is an economics professor at Penn State Abington. He says there are all kinds of benefits to spending on machines. Less PTO, less payroll taxes, less managerial motivation techniques. Right now happens to be a good time for manufacturers to be taking down their done is better than perfect signs. Ron Wirtz, regional outreach director for the Minneapolis Fed, points out manufacturing has slowed down a bit. That means company leaders can take a minute to

think. And when you are really busy, you might not be able to afford the time component in terms of making that investment to get higher productivity and higher efficiency. Capital expenditures can be pricey, and right now even more expensive for manufacturers that borrow to pay for them. Still, Gusto principal economist Liz Wilkie says a labor shortage is a problem that isn't going away. I think by and large, they're looking at a future where they're just generally going

to have fewer and fewer available skilled workers. Wilkie says the dynamic's a little different with the retailer that decided to lay off its workers and use an automated system instead. I think generative AI has really been able to fill a lot of those gaps for things that are labor-intensive like call centers, right? And I think we can see that shift happening as a result of technology. There can be downsides to trading people for machines. Ron Wirtz of the Minneapolis Fed points out, if demand goes down, it's possible to let workers go. But with a machine, if

you bought it with borrowed money, you still have to make payments, even if you turn it off. I'm Stephanie Hughes from Marketplace. Coming up. One of our fish tacos will run about $12. Better really like fish tacos tacos I guess, huh? First though, let's do the numbers. Dow industrials off 330 points today, 9 tenths percent, 38,111. The Nasdaq subtracted 183 points.

That's one in a tenth percent on that particular index, 16,737. The S&P 500 gave up 31.6% and the things at 52.35. Cloud-based service provider Salesforce gave back 19.75% today after both its actual Q1 revenues and its projections for Q2 came in below expectations. Good day for the shoe trade on Wall Street. Sandlemaker Birkenstock grew 11.2% today after boosting its projections for revenue and profit for the rest of the year. Retailer Footlocker stepped up almost 15% after its Q1 revenues came in way above analysts' expectations. Bond prices were up too.

The yield on the 10-year Tinov thus fell 4.54%. You're listening to Marketplace. AI, minimalistic design, immersive visuals, and cinematic audio. Plus, complete your dream setup with deals on select monitors, mice, and more must-have electronics and accessories. 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. That's dell.com. For all of us at Marketplace, we wanted to say thank you to everybody that stepped up to donate and helped us stay on track this year.

The support of our Marketplace investors is so important to keeping our public service newsroom running strong. We made great progress toward our goal and every donation is critical to helping us stay on track as we approach the end of our budget year. And if you didn't have a chance to donate, now's a great time to do that. Give now at marketplace.org slash donate. And thanks again. My name is Lee Hawkins.

I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama, I get answers to some of the hardest questions about how things came to be for many black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama. What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many Black Americans. Listen now. This is Marketplace. I'm Kai Rizdal.

The good people at Merriam-Webster tell us that the first known use of the word ransomware was in 2005. In the nearly 20 years since, businesses being attacked by hackers, their data held hostage, has only become more of a problem, and it's not just big corporations being targeted. Increasingly, small and medium-sized businesses are finding themselves the victim. And while a cyberattack can be incredibly stressful and costly for a giant corporation, chaos and trouble for years, for a small business, a cyber attack can often spell the end. Our special correspondent, Stacy Vanek-Smith, has that story.

Brian Balzer remembers the exact moment he realized his company was under attack. It was just after Labor Day weekend in 2021. I got a phone call about 4.30 in the morning saying, something seems wrong. I'm getting an error saying file locked. File locked. To most people, this wouldn't mean much. But Balzer had cybersecurity at G&J Pepsi, an Ohio-based bottling company. And file locked set off a massive alarm.

I knew immediately we were under attack. Specifically, a cyber attack. Cyber attackers will look for a backdoor into a company's network. Once in, they spread through the system, blocking access, shutting down operations. File locked. I made the decision to shut everything down. All servers shut it down. Balzer hopes this would stop the contagion from spreading.

Then, he and his team of 10 spring into action. shut it down. Balzer hoped this would stop the contagion from spreading. Then he and his team of 10 sprang into action, jumping online to see how bad the attack was, jumping in cars to check out the physical machines, and at one of G&J's offices on one of its computers, there it was. A message. It said, you've been attacked. We will not, you know, unlock your files until you pay us the demanded ransom. Even scarier than the ransom note were the criminals who had written it.

Conti, ransomware. Conti was a Russian group, some of the most feared cyber criminals on earth. At one point, they shut down the government of Costa Rica. Balzer says Conte didn't specify an amount in that first note, but he knew they had squeezed millions, tens of millions, out of previous victims. And Balzer was determined not to be one of them. He ignored the ransom note. He told his little team to do what they had practiced. Isolate the contagion, shut everything down, then rebuild the system through backups in

the cloud. But as Balzer was working, this thought kept creeping into his head. There were 2,000 employees counting on him. My God, the company could potentially be shut down if I don't get this fixed. People's livelihoods and their families are at risk. This falls on my shoulders because the company's future could actually come to an end if we don't fix this. A family-owned company like G&J Pepsi might seem like an unlikely target for cybercriminals.

It is not flashy—puts Pepsi products into bottles—but these are exactly the kinds of businesses cyber attackers are after. Companies that have money and are likely not expecting or prepared for a cyber attack. Nearly half of small businesses are expected to experience an attack this year, we think. We don't really know just because it's very under-reported. Jamie McCall is a research fellow at Royal United Services Institute, or RUSI, a London-based security think tank. He and a team of researchers recently published a study on the cost of ransomware attacks

for smaller businesses. Since I found that report, I sort of got talking to someone in my local coffee shop and it turns out they've been a victim of a ransomware attack recently. For many, these attacks are deadly. A study out of the UK found more than half of small businesses didn't survive a cyber attack. People sometimes talk about cyber attacks as if they're like natural disasters. But says McCall, these are attacks. They destroy people's businesses, their credit, their livelihoods.

Kind of allegory for this is a group of organized criminals walk into their business with guns and say, you're not going to be able to function until you pay us money. McCall hopes his report will help inspire better laws and policing, and more support for workers and small business owners, because the stress and psychological damage are real. It can feel very existential existential and you've built your company up out of nothing and suddenly you're faced with either paying a criminal or your business folding. Ryan Balzer and his team worked tirelessly napping in the

storage room, barely seeing their families and the company itself never faltered, did not miss any orders. And after about six weeks, Balzer realized he had won. He and his little team had fought off one of the most feared cyber attackers on earth. But the victory was bittersweet. In some ways, it seemed like a failure, even though we were able to combat it. still hurts, still bothers me, right? The attack had cost G&J about $25,000. And Conti had gotten in because Balzer and his team took a few days to install a Microsoft security patch.

That tiny delay over a holiday weekend was all it took. And Balzer got that phone call, file locked. In New York, I'm Stacey Banach-Smith for Marketplace. It's at least semi-officially summer as we sit here on this side of Memorial Day. And between all those weekend barbecues and sporting events and picnics at the beach and what have you, Americans are going to be downing quite a few cold ones in the coming months. According to the Brewers Association, the U.S. beer market last year was worth $117 billion. That's up $2 billion from 2022. So maybe now is not such a bad time to be in the business of brewing.

Here's today's installment of our series, My Economy. My name is Victor Zabudio. I'm one of the partners of Brown Soul Brewing Company located in the city of Southgate, California. We're here in the back of the bar. We have 15 beers on tap. One of our most popular beers is Quiero Maíz. So we started scouting locations about five years ago, built from the ground up, and then COVID struck,

and we purchased our brewing equipment from a manufacturer that was based out of China and so our brewing equipment sat in China on a port for about six months before it was able to be shipped out. We were finally able to open on August of 2023. So what we have back here is our 10 barrel fermenters. We have four of them. They are big. Here is our 10 barrel fermenters. We have four of them. They are big. Probably about three to four people wide and maybe a little bit taller than Shaquille O'Neal. You know, initially we started with what we thought were low prices, especially with our

beverages. As we've evolved though, we've realized that the community is willing to pay for quality products and a quality service. And so we have slowly increased our prices to be able to offset some of the costs related to raw materials, labor. I mean, one of our fish tacos will run about $12. They can go across the street and get three fish tacos for $4.99. And so we want to be able to tell the story in regards to why the cost of our product is how it is. So this is our back loading dock entrance.

All the grains are delivered and enter into our production area through the back roll-up gate that we have here. This is the mall. We're still in the investment period and are paying off our debt associated with our build-out. We actually had anticipated about a year or two for the build-out. It took three years. about a year or two for the build out, it took three years. And so we're slowly working through our debts and look to be profitable within the next two to three years. Well I'm from the local community so I grew up here in the city of Southgate. So being a small business owner, entrepreneur in the community I'm from has been very impactful for me. It's exciting to be able

to show and demonstrate what we're capable of and to be homegrown, that for us is very exciting to be able to serve as a beacon for others to say hey they've done it, they're from the community, why can't we do it as well? it, they're from the community, why can't we do it as well? Victor Zamudio, owner of Brown Soul Brewing Company in Southgate, California, just south of where I'm standing right now. We cannot do this series without you no matter where you are, no matter what you do. Tell us what's going on with you. my economy. This final note on the way out today, good news on the tax front. You know, relatively speaking, the Internal Revenue Service announced today that its free

tax filing program, Direct File it's called, is going to be available nationwide starting in 2025. It was piloted this year by something like 140,000 filers and saved, get this, $5.6 million in tax preparation fees. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peetra, and Stephanie Seek are the marketplace editing staff. Amir Bibawe is the Managing Editor.

And I'm Kai Rizdal. We will see you tomorrow, everybody. 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 could win some This Is Uncomfortable merch. Be sure to check it out. Sign up today at marketplace.org slash book club.