Marketplace - The cost of Christmas past

Episode Date: November 29, 2024

Nearly half of Americans are still in debt from last year’s gift-giving season. That’s double the number of people who were paying off 2022 holiday debt in 2023. And carrying credit debt has only become more expensive. Also in this episode: If you drove to Thanksgiving festivities this week, you may be thankful for the multiyear low in gas prices. We’ve also got a snapshot of China’s economy and the history of college dorms.

It's Black Friday, so you know we're going to talk about shopping and the almighty American consumer plus Chinese consumers as well. From American public media, this is Marketplace. In Washington, D.C., I'm Kimberly Adams in for Kyra's Doll. It's Friday, the 29th of November. Good to have you along. The sales may have started weeks ago and the decorations have been out for ages, but today, Black Friday, is supposedly the official start to the holiday shopping season. And even though nowadays more of us may be swiping in our soft pants rather than scrambling for a TV in a big box store, it's still a very big weekend for

retailers. So for more on this and a look back at the economic week that was, I'm joined by Jordan Holman, a business reporter at the New York Times, and Rachel Siegel, an economics reporter at the Washington Post. Welcome, ladies. Hi, Kimberly. So Jordan, let's start with you since retail is your thing. How is Black Friday looking this year? What were you hearing from folks heading into the weekend? So for retailers, Black Friday is still so very important.

It used to be this peak. It's now more of a hill, as executives would describe it. So they still have to staff all of their stores, make sure all the merchandise is there. But the reality is they have been pushing deals since the beginning of November. And it's just kind of flattens out the day. It is still a big day that you're going to see the 60% off or 50% off and you're going to have higher foot traffic in store. And it kind of now is just important to set the tone for these next four weeks that they have before the Christmas holiday. A shorter shopping season than usual.

And Rachel, you know, I feel like I've been hearing chatter all year that consumers are going to finally just be over the inflation and actually pull back on spending. Any sense of that heading into this shopping season? You know, it's really something we've been talking about for what feels like years, right? What is the point in which we're going to start to see this frustration around inflation, you know, price tags that still have that kind of sticker shock? When are we going to start to see it translate into consumer behavior? And you know, surprisingly, it's not something that is expected to yank back sales this year

either. But I think what's important to note is that there's a bit of a bifurcation or almost like a split screen here, right, where we clearly saw in the last election that inflation still does feel very visceral to people. People are still frustrated that prices don't look like what they did before the pandemic. And also in many cases, it's the lower income brackets that just aren't able to just bite the bullet and keep spending. You're seeing that continued spending among wealthier Americans, people with more in their budgets, and increasingly, there's a gulf between the two that powers a lot of that spending that we just continue to see.

So then Jordan, what does that mean that people are actually going to do, especially those lower income consumers this holiday? So the overall picture for holiday sales is that it will increase as much as 3.5% according to the National Retail Federation. I think Rachel's making a really good point. Like right now, that number will increase largely because middle income Americans still have enough money to spend or in a good job situation. And because lower-income Americans aren't making up so much

of that percentage, it's kind of hidden. So there is still a lot of pain. I think about Dollar General for their last earnings report. They said that they can see those last five days of the month that their sales go down because their customer who makes an average of 35k a year just has no more money to spend. So there is a lot of strain there, but it just might not show up in this bigger number when you say, oh, it was a great Black Friday weekend. Right. Because all the wealthier people are spending and juicing those numbers. Rachel, there's another story that was big this week, which is that President-elect Trump

said that he is going to impose new tariffs on all imported goods from China, Mexico, and Canada. And you wrote kind of about the question that people often ask about this. Can he do that by himself? We're back to those questions. Yeah. And you know, in his social media post, Trump said very clearly this was something he planned to do as one of his many first executive orders. He said he would quote sign all necessary documents to make it happen. And this was a playbook that he also leaned on quite heavily during his first administration. And it really turns out that legally he has a lot of open doors to be able to act around Congress, to use that executive authority.

I think it's something that we're seeing his advisors around him really embrace too, really the, you know, testing the limits of what his executive authority could look like. And there are a lot of laws passed over the past few decades that on tariffs especially give him that kind of authority to move forward. Now, some of this will end up coming down to what exactly past few decades that on tariffs especially give him that kind of authority to move forward.

Now some of this will end up coming down to what exactly the tariff looks like, you know, what exactly it is that goes into effect on inauguration day, if that is indeed what ends up happening. But the expectation is that this is not something that will immediately be held up in court or immediately be challenged and that if he intends to follow through on these kinds of policies that he could be able to push forward in that way. Jordan, I think we all remember the first Trump administration and these sort of big policy announcements via social media post. But I mean, this threat of terrorists really has retailers and consumers worried. Are you seeing that show up in terms of preparations for this?

Yeah. You have heard retail executives, I'm thinking about Walmart, Steve Madden, talking about that if tariffs do go into place, that would likely result in higher prices for shoppers because they're also, they have experience of this. Seven years ago, they saw this, they had to change their business. I think about five below, which their whole thing is five dollars and less. Back in 2019, they said we might have to consider going up above five dollars. So companies are already running the numbers, thinking about what it could mean on the consumer side. When I go on TikTok, I already see people saying

they're planning on stockpiling or getting that new iPhone now or getting a really nice imported jacket or whatnot. Just in the anticipation, even though the details are still being worked out. And Rachel, you know, switch gears. Oh, go ahead. No, I was going to say, you know, another thing to be worked out is there's a lot of reason to think that this would violate existing trade agreements too, right? Namely, United States-Mexico-Canada agreement, USMCA, which Trump negotiated during his first term. So just under the umbrella of can he do that, I think that's an important piece too. Lauren Henry Rachel, sticking with you, one of the other

things we got this week was PCE, the Fed's preferred measure of inflation, up to 2.3%, very close to the Fed's target. What do you think this means for Fed actions moving forward, especially since one of the stickier parts has been like housing prices? Yeah, they're close but they are not there yet and housing continues to be the thing that economists and policymakers keep going back to is a thing that is just not budging. I really get the sense that Fed officials have kind of looked at the housing inflation figure as one that they obviously take seriously and that is part of their dashboard, but has really become separate from the other tools

and other metrics that they are really keeping a close eye on. These housing figures really are just not proving to be a very accurate snapshot of what's happening in the economy, which is showing progress on inflation. It's just slowing down. And I think that that means that they will not be in a rush to keep cutting rates. We'll certainly get a sense of what their forecasts look like when they update them at their December meeting. But they're definitely not in a rush.

And they're also not feeling the need to jerk pressure off the economy as they're continuing the rate paths moving forward. Rachel Siegel, an economics reporter at the Washington Post and Jordan Holman, a business reporter at the New York Times. Thank you both and enjoy the rest of your holiday weekend. Thank you so much. Have a good one. Wall Street Today closed early for this quasi-holiday.

We'll have the details when we do the numbers. Those on the road this holiday are getting a bit of a reprieve when it comes to filling up their tanks. Gas prices are averaging at about $3 a gallon this Friday afternoon. According to the Energy Information Administration, that's about 7% less than last year and the lowest price since 2020 when prices were really down due to the pandemic. As millions take to the highways to return home after this Thanksgiving holiday, Marketplace's Elizabeth Troval explains why we're paying less at the pump. When gas prices are down, first we have to look at what's happening with crude oil, says

Andrew Gross with AAA. The cost of oil accounts for about 55 to 60 percent of what people pay at the pump. West Texas Intermediate is trading today at under $70 a barrel. Which is fantastic. Anything under $80 is really ideal for keeping gasoline prices from surging higher. Crude prices are relatively low and stable despite conflict abroad, says Matthew Lewis with Clemson University. There have been times in the recent months when it looked like we might have oil prices

going up due to concerns, geopolitical concerns, but they didn't last very long. What's helped smooth things out is... Global demand is sort of low enough that small supply concerns can be handled. Refining capacity is also factoring into today's gasoline prices, says Ed Herz with University of Houston. We also have refineries pumping out a bunch more gasoline into the market than we did this time last year because we have more refineries operating. We had several offline domestically for turnarounds and because of upsets last year. He says that additional refining capacity has lowered prices.

It's not that grandma moved closer to you. There's also some seasonality to gas prices. So after Labor Day, prices tend to slide. Andrew Gross again. The days are getting shorter. Kids are back in school and you make that switch from more expensive summer blend gasoline to less expensive to refine winter blend gasoline. That's right. In the summer, we use a pricier gasoline that is better at preventing smog. But now? Because it's colder out, we don't have to worry about smog quite as much. So winter

blend gasolines require slightly less refining and they're always cheaper. Pushing down the price at the pump. I'm Elizabeth Troval for Marketplace. Tis the season of consumption, and like we were just talking about, since consumer spending drives so much of the economy, the government has an incentive to keep us all shopping. And not just here in the US. In China, the government has been trying to encourage people to spend more, including a raft of stimulus measures announced in recent months. Retail sales in China, which are often taken as a proxy for consumption, beat analysts' expectations and grew at 4.8% in October.

But even as retail sales have risen, the country's property slump continues. Our China correspondent Jennifer Pak has more from Shanghai. Finance worker Daisy Gu prides herself in being a savvy shopper. Recently, she took advantage of a government program that entices people to upgrade old products for newer versions at a discount. The government subsidies amount to 15, even 20 percent off for furniture and home appliances.

That's a huge discount. So I help my family and elderly relatives buy beds and sofas. I've saved them a lot of money. This subsidy program is partly why retail sales growth in October was the highest in eight months, according to Fu Linghui with the National Bureau of Statistics. But in a recent news conference, he said there were other factors too. In October, the National Day holiday, early promotions for a shopping festival called Singles Day, as well as active

transactions in the stock and property markets, all these have boosted consumer confidence. Whether it can be sustained depends a lot on the real estate slump. Most household wealth in China is invested in property and these days homeowners don't feel rich. Yan Yuejing is with the Real Estate Research Institute e-house. Housing prices have dropped by an average of 30% since 2021. That's when Chinese officials made it much harder for property firms to borrow money. And the housing bubble popped. In the first 10 months of this year, real estate investment dropped by 10.3%.

But the government is making it easier at the other end of the real estate transaction, buyers. And Yan Yuejing sees demand picking up, especially among first-time home buyers. The main reason is government rules on home buying are the loosest they've been in history. Like there are fewer barriers on who can buy condos in cities and the minimum down payment has been lowered. Some analysts say Chinese leaders need more substantial stimulus. And fast. U.S. President-elect Donald Trump has threatened more tariffs on Chinese exports. Meanwhile, unemployment in

China remains high. Finance worker Gu is newly out of a job, so she's spending less overall. In the past, I've spent $2,800 to $4,100 a year on beauty and skin care. Her consumption, she says, has been cut by at least half. In Shanghai, I'm Jennifer Pak for Marketplace. Coming up... You could teach the entire history of American architectural style just using dormitories. They've changed right along with us. But first, let's do the numbers. Markets closed early today, the day after Thanksgiving.

The Dow Jones Industrial Average gained 188 points, four tenths percent, to finish at 44,910. The NASDAQ picked up 157 points, 8 tenths percent, to close at 19,218, and the S&P 500 added 33 points, 6 tenths percent, to end at 60.32. For the holiday week, the Dow grew 1 in 4 tenths percent. The Nasdaq and the S&P both improved 1 in a tenth percent. Checking in with some retailers this Black Friday shopping day, e-commerce giant Amazon plumped up 1 percent.

Walmart, the nation's largest retailer, advanced two-thirds percent. Now some chip-related stocks rose after Bloomberg reported that the Biden administration's expected sanctions on sales of semiconductors to China may be less strict than expected. Applied materials appreciated 2 percent, Nvidia picked up 2.1 percent, and then bonds rose. The yield on the 10-year T-note fell to 4.19 percent. And you're listening to Marketplace. This is Marketplace. I'm Kimberly Adams. Even if Black Friday is the official start of the holiday shopping season, we're really

well into it. And many people are still paying off debt from the holidays last year. According to a recent survey from WalletHub, nearly 50% of Americans are in that position. That's double the percentage of people who were still paying old holiday debt this time last year. Marketplace's Samantha Fields has more. Everywhere you look these days, someone or something is encouraging you to spend money. I get daily messages that remind me of all the wonderful stuff that I can buy.

Islet Fishback at the University of Chicago Booth School of Business says some of those messages come in the form of ads on social media or TV. Others are more subliminal than movies or books. This is very much part of our culture, even in places where we don't expect someone to influence us to buy. Everything is influencing us to buy, to consume. And she says those kinds of messages really ramp up around the holidays. There is a lot of advertisement that tells us that this is the right way to celebrate.

By buying a lot of gifts. Ted Rossman at Bankrate says the winter holidays are the number one time of year we tend to splurge. People want to have a good holiday. They want to celebrate with their kids and other family members and friends. And we always see credit card balances go way up in the fourth quarter. And then typically they go down in the first quarter of the new year. But increasingly, Rossman says people have been carrying balances on their credit cards.

Six in 10 people with credit card debt have had it for at least a year. That's up 10 percentage points from three years ago. It's easy to see how somebody would be paying off this holiday season a year from now, or worse, unfortunately. Especially these last few years, with inflation and interest rates both high, says Chi-Chi Wu at the National Consumer Law Center.

Carrying debt on a credit card has gotten a lot more expensive. The average interest rate on credit cards is now over 20 percent. That can be hard to keep up with if you don't pay it off right away. And Wu says not only are more people carrying a balance these days, those balances are also rising. It's a sign, I think, of consumers struggling financially, barely making it. For some people, Ted Rossman at Bankrate says buying things for themselves and others might be partly a reaction to the financial stress of the last few years.

That whole idea of whether you call it revenge spending or doom spending, you know, sometimes people are saying, hey, I'm not feeling great about things. But at least I can treat myself or my kids for the holidays. I'm Samantha Fields for Marketplace. For many college students, Thanksgiving and its associated break means coming back home. And for some, it's their first escape from the dorm since the start of the semester. With all those college kids back in town, we thought now would be a good time to take a trip down memory lane and look back at college housing over the years

for our series, Adventures in Housing History. I'm Carla Jani. I'm a professor of architectural history in the art history department at Rutgers, New Brunswick. And I'm the author of, Living on Campus, An Architectural History of the American Dormitory. Some of the colleges in the early years, even before the American Revolution, colleges were very small,

and some of them were in remote rural locations, like, for example, Williams College or Dickinson. These were small colleges that were in towns that simply weren't big enough to house the students. Therefore, the colleges had to build one large building. Usually it was a building that contained all of the functions, a place for the boys to sleep, the president's apartment, professor's apartments,

classrooms, kitchens, a dining hall, a chapel, a library, all in one building. a chapel, a library, all in one building. You could teach the entire history of American architectural style just using dormitories. The early ones were colonial boxes, red brick with white trim. A little bit later, we see Gothic revival dormitories. An abrupt change occurs with the arrival of modernism.

These were very plain, utilitarian buildings, but they suited the need for housing after World War II. A lot of universities built skyscraper dormitories, tall dormitories that could efficiently house 500 people in one building. The history of who could live in college housing and who could not is fraught and complicated. So you can always find out who the first African-American graduate of any university was.

That's gonna be right on the website. But they often don't tell you that the person had to live in a boarding house or had to live with relatives because they weren't allowed in the residence halls. Sometimes there was a gap of decades between the first African-American graduate and the first time an African-American man or woman could live in a residence hall. I know a lot about this subject, and I would love for my son to live in a college residence

hall because I think it's important. Many people know rationally that you do not need to live on campus to become educated. There have always been commuters. There are community colleges that do an outstanding job. We don't really need dormitories and yet Americans are far more dedicated to this building type than in other countries and places. And I think it's because Americans see colleges as an opportunity for networking. I gave a book talk when my book first came out in New York City and I was talking about colleges as networking

opportunities and there was a woman in the audience who taught art history at Juilliard and she told me that before they built a residence hall the dance majors used recorded music for their dance recitals and once they built the residence hall, the dancers met the musicians and they worked together, which just strikes me as a perfect example of how important the residence hall is for collaboration and personal development. Carla Jani, a professor of architectural history at Rutgers New Brunswick.

Have a question about housing history or want to tell us a housing story of your own? You can write to us at Marketplace.org. This final note on the way out today, some shopping trends that are changing this holiday. According to a survey from Online Resale Marketplace OfferUp, about 68% of shoppers plan to spend at least some of their holiday budget buying secondhand. And with one in three shoppers trying resale for the first time in the last year, 83% of folks surveyed said they are open to receiving a pre-owned gift.

Our theme music was composed by BJ Liederman, Marketplace's executive producer is Nancy Fargalli, Donna Tam is our executive editor, Neil Scarborough is the vice president and general manager. I'm Kimberly Adams, have a great weekend and we will be back on Monday. This is APM.