Marketplace - The Fed’s evolving data diet 

Episode Date: March 20, 2024

“More good data” is what the Fed wants to see before it declares victory over inflation and cuts interest rates. The central bank looks at a lot of data from different sources.  And as the economy changes, so do the Fed’s preferences regarding the facts and figures that inform its decisions. Plus, Intel secures $8.5 billion in CHIPS Act funding, Alaska faces looming gas shortages and e-waste holds troves of scarce resources.

We pretty much knew the Fed wasn't ready to cut interest rates just yet. Still, there was plenty to digest during Jay Powell's 45-ish minutes at the podium today. From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott, in for Kai Risdahl. It's Wednesday, March 20th. Good to have you with us. As expected, the Fed decided today to keep its target for the federal funds rate unchanged, between 5.25 and 5.5 percent,

though officials are still penciling in three interest rate cuts later this year, pending, of course, what happens with inflation. In remarks after the announcement, Powell addressed the question many are wondering. Are the higher inflation numbers we've seen so far this year a fluke or part of a worrisome pattern? We're going to let the data show. I don't think we really know whether this is a bump on the road or something more. We'll have to let the data show. I don't think we really know whether this is a bump on the road or something more. We'll have to find out. In the meantime, the economy is strong. The labor market is strong. Inflation has come way down. And that gives us the ability to approach this question carefully and feel more confident that inflation is moving down sustainably at 2% when we take that step to begin dialing back our restrictive policy.

As for what will give them that confidence, Powell repeated a familiar refrain. It's all about the data. The committee wants to see more data that gives us higher confidence that inflation is moving down sustainably toward 2%. Thing is, Powell and his colleagues keep an eye on a lot of different data sources. So Marketplace's Justin Ho looked at what kind of data the Fed is looking for and how that's changed over time. The Federal Reserve looks at a lot more than the monthly inflation figures

and other big government reports. I like to refer to the Federal Reserve as the Hoover vacuum of data. That's Claudia Somm, the founder of Somm Consulting and a former Federal Reserve economist. She says that vacuum also sucks up non-government data from banks, payment processors, and research companies. The Fed even gathers its own data on factory output and consumer credit. Somm says when she started working at the Fed, all of that data was pretty overwhelming. And I told the more senior person who was trying to train me,

what am I supposed to do with all these numbers? And she looked at me and she said, you just breathe it all in. Somm says what the Fed is good at is spotting patterns in the numbers, recognizing whether those patterns are just noise or if they show a trend. all in. Somm says what the Fed is good at is spotting patterns in the numbers, recognizing whether those patterns are just noise or if they show a trend. And even though the Fed puts the most emphasis on the official government reports, you can think of a lot of these other data sources as giving nuance, right? Like that unemployment rate is low, but what is the hiring rate look at? Or what does some regional number look at? Certain private sector data can also give the Fed a quicker read on the economy.

Eric Swanson, an economics professor at UC Irvine, says early in the pandemic, when things were changing quickly, the Fed looked at online rent prices, anonymized cell phone location data, and credit card transactions. Because consumer spending data comes out at the end of the next month, whereas credit card transaction data can come out within a day or two. But now that things have settled down, the Fed is keeping a closer eye on parts of the economy that are still too hot. Tim Dewey at SGH Macro Advisors says that includes the number of job openings.

It's not that we weren't following that data before or didn't think it was important, but it can be a new life as circumstances change. In other words, as the economy evolves, the Fed's data diet does too. I'm Justin Ho for Marketplace. Wall Street gave a big thumbs up. We'll have the details when we do the numbers. Today, the Biden administration announced the latest round of funding from the CHIPS Act. That's the massive effort to build up the U.S. semiconductor manufacturing industry. Under today's preliminary deal, Intel would get up to $8.5 billion in federal grants, along with other incentives, to help build new plants and expand operations in several states. Marketplace's Kimberly Adams has the details. There's more than $50 billion in the CHIPS Act to support

domestic chip manufacturing. So Intel potentially getting up to $8.5 billion of it is pretty significant. This announcement is mostly direct funding, but there is also a loan envisioned as well. Ryan Mulholland is a senior fellow for international economic policy at the Center for American Progress. With the direct funding and the additional $11 billion in loans plus tax credits. This will help Intel build facilities in four different states and really be an investment in sort of leading edge semiconductor manufacturing. Including in election year swing states like Arizona and Ohio. Intel will also be investing in expanding operations in New Mexico and Oregon. Bruce Blonigan is dean of the Lundquist College of Business at the University of Oregon.

And those are really high-paying jobs and so excellent for the state of Oregon economy. Even though this tranche of funding is expected to create tens of thousands of construction and manufacturing jobs... Of course, this is going to be touted as important, but it's much more the geopolitical considerations. Remember, the whole point of the CHIPS Act was to make the U.S. less dependent on chips from outside the country. There is a sort of a competition and research agenda to make ever smaller chips that power new applications,

particularly in emerging technologies like artificial intelligence. Sujay Shivakumar is a senior fellow at the Center for International and Strategic Studies. Yielding that leadership will have enormous consequences for our economics, our growth, our independence, our national security in many, many ways. The Commerce Department has set a goal of having the U.S. produce 20 percent of the most advanced chips in the world by 2030. In Washington, I'm Kimberly Adams for Marketplace. By the way, Kai is currently in Arizona reporting on the CHIPS Act. We'll have more on how this legislation is playing out in a few weeks. True story. Right before this show went live on Monday, my printer broke.

I read off the screen, no problem. But now I've got a broken printer, which, if it can't be fixed, will become what's known as e-waste. The United Nations has a report out today finding that globally, only 22% of electronic waste is properly collected and recycled. And for those of us just wanting to do the right thing with, say, an old broken printer, figuring out what that right thing is can be, an old broken printer, figuring out what that right thing is can be tough. Marketplace's Stephanie Hughes has more. I have moved old electronics across state lines in order to avoid dealing with them. Now there's a not small pile

of them in my closet. Digging through it makes me feel both guilt and nostalgia. Oh, my laptop. Oh, geez. That's from like 2009. Oh, this feels old. This pile of electronics is what Rochester Institute of Technology Sustainability Professor Callie Babbitt calls an urban mine because it's filled with precious metals. There's actually a higher concentration of gold like in smartphones than there is in natural ores. Babbitt says we need to stop looking at our old electronics as a chore and think of them as being filled with scarce materials that could be harmful if just thrown away, but worth a lot to the right people. So there's a big economic driver for recycling these valuable materials.

And once they actually get into the system, they do get recycled. But Babbitt says a lot of consumers don't know how to get into that system. It varies depending on where you are. There are no federal regulations, and about half of states have what are known as take-back laws, where companies that make devices also have to accept old versions. Jason Linnell leads the National Center for Electronics Recycling. The brand that you might see on a TV, those manufacturers are required to set up or fund recycling locations. But Linnell says e-recycling options run by either companies or local governments

aren't always well publicized. And that's why we end up hanging on to an obsolete laptop for 15 years. That's not ideal for anyone, says Perg's Nathan Proctor. The longer it sits in the dusty corners of our basements or whatever, the less value it has for the recyclers. Proctor says it's a lot easier to sell a motherboard if it's not wildly out of date. And he says we shouldn't automatically put something in the broken pile the minute it stops working.

You don't have to take broken for an answer. You know, there is somebody who can help you fix that thing. So, Amy, maybe it's worth tinkering with that printer? As for my old laptop, I'll let you know where it ends up. I'm Stephanie Hughes for Marketplace. Alaska has long been known for its vast reserves of oil and gas. With the U.S. pumping more fossil fuels now than ever, Alaska's maybe the last place you'd expect to face shortages. But as Alaska Public Media's Eric Stone reports, it's one thing to have gas and another to get it where it needs to go. Three hours south of Anchorage sits a natural gas storage facility.

It's filled with pipes and whirring machinery. So what we have here, this is one of our 2,500 horsepower compressors. John Sims is the president of NSTAR, the utility that provides gas powering hundreds of thousands of residents. 100% of our gas since 1961 has come from Cook Inlet, which is right in our backyard. And the gas here is stored right next to a major production field that is crucial to the state's energy needs. This facility plays a massive part in making sure that the utility can meet those demands. Demand for heating and especially for electricity. About three quarters of Alaska's

population depends on natural gas to keep the lights on. Sim says the state used to have plenty of natural gas and enough left over to export to Japan. So it's a critical piece. It's one of the reasons why we've been able to have energy independence for 60 plus years. But Alaska might not be energy independent for much longer. Gas production has dropped dramatically. Sim says a couple years ago, the biggest producer started warning companies that supplies are starting to dry up. And so hearing that information and that news obviously was quite a shock to the utilities. Shock might be an understatement. By 2027 or 2028, local natural gas production won't cut it. So utilities immediately started looking for options, including at the remote North Slope.

There are gobs and gobs and gobs of gas on the North Slope. Problem is, it's almost 800 miles away. Larry Persily is a columnist who writes about oil and gas in Alaska. He previously worked in the Obama administration and looked at building a North Slope gas pipeline. It's across a couple mountain ranges, frozen tundra. It's far away. He says it just doesn't make economic sense. Alaska is big. Imagine a pipeline that runs from New York City to Jacksonville, Florida. And that's what you'd need to supply a market that makes up just about one fifth of one percent of the U.S.'s total gas

consumption. Even a pipeline the size of a garden hose would cost billions. And that means the cheapest option is probably to import natural gas. It's kind of ironic. In Alaska, the land of oil and gas, the state that pays its residents $1,000 or more every year just for living in a state with lots of energy, personally says importing gas would be embarrassing. It'd be the equivalent of importing peaches into Georgia or importing avocados into Mexico. Plus, gas imports are 30 to 60 percent more expensive. Still, that increase in cost, plus some supersized tax credits from the Inflation Reduction Act, are likely to lead to a transition towards renewable energy for Alaska's grid, according to a new study from the National Renewable Energy Laboratory. But that's a ways off. It'll take some time for

utilities to stand up new wind farms and solar panels. And John Sims with the gas utility Enstar says it could be a painful transition. There is no market-based solution that's going to reduce the cost of energy to consumers. And that's the unfortunate reality. And I think something the state of Alaska needs to accept. In the meantime, while utilities deal with the coming natural gas shortage, he says Alaskans should brace for higher energy bills. In Juneau, Alaska, I'm Eric Stone for Marketplace. While utilities deal with the coming natural gas shortage, he says Alaskans should brace for higher energy bills. In Juneau, Alaska, I'm Eric Stone for Marketplace. Coming up.

A lot of banks don't take chances on small businesses. They're considered too high risk. An unfortunate reality. But first, let's do the numbers. The Dow Jones Industrial Average was up 401 points, 1%, and at 39,512, the Nasdaq gained 202 points, 1.25%, to close at 16,369, and the S&P 500 grew 46 points, 0.9%, to finish at 52.24. Boeing lifted three and two thirds percent despite predicting a big cash drain for the first quarter related to slower production of its 737 MAX jetliner and regulatory scrutiny. Bloomberg reports the planemaker is considering the sale of at least two of its defense businesses. Rival Airbus picked up one and a tenth percent. Stephanie Hughes was telling us about the recycling of electronic waste.

Major electronics retailer Best Buy sparked up four tenths percent after an upgrade from research firm Telsey. Bond prices rose. The yield on the 10-year T-note fell to 4.28 percent. You're listening to Marketplace. This is Marketplace. I'm Amy Scott. Hard to believe it's been four years since the arrival of COVID-19 essentially shut down the U.S. economy.

And life has, in many ways, gone back to something like normal. Most people have stopped masking, testing, and keeping up with vaccines. And crowded indoor events are the norm again. But recent data from KFF shows that nearly 1,000 people are still dying from the virus every week in the U.S., and an estimated 18 million are living with long COVID. For those who are still actively trying to avoid getting sick, it's become more difficult and expensive, Marketplace's Samantha Fields reports. About a month after Forrest McDonald got COVID,

they developed such intense fatigue that they couldn't even walk a block without needing to lie down. And then it turned into chest pain and heart palpitations. And then it settled with kind of a constant shortness of breath. Two years later, at 34, McDonald is still living with long COVID and actively trying to avoid getting sick again. Living in New York City and working as a music teacher, that's tough and expensive. I invested in an e-bike so I can get to my lessons. And avoid the subway.

They've also spent a lot on air purifiers and good masks, as well as on nasal sprays, eye drops, and mouthwash that, at least some research shows, might help to protect against COVID. Maybe. I don't know if they're even working, but it just is partly like peace of mind and one extra thing I can do when I feel like I don't have a lot of control. A lot of people are doing this, trying to keep up with the latest medical and scientific research, sharing studies on social media, and buying any products that show promise. Many people are searching for solutions individually because

the government isn't doing enough to address the long-term impact of COVID. Lucky Tran at Columbia University says he understands, but for a lot of these tools like nasal sprays, the evidence is mixed on how effective they are. So we really need governments to invest in solutions. Both new solutions and tools we already know work, says Akiko Iwasaki, a professor of immunobiology at the Yale School of Medicine. For example, the air filtration is something that can be implemented in buildings and hospitals and schools. And there are many other measures like UV light that may be implemented in buildings to try to prevent transmission. She says investing in prevention yields clear returns.

Companies would benefit economically by making the buildings safer for their own workers, right? That way there are less sick days and people are more productive and just better for their health. So far, though, Iwasaki says there has not been widespread investment in improving indoor air quality to reduce the spread of COVID. It shouldn't be up to the individual to have to spend their own money and trying to do this. But right now, that's the reality. David Kroenig lives in New Jersey. He's 40. And he has primary immunodeficiency, which makes him high risk. So he spends a lot of money on N95 masks,

HEPA filters, and high-quality at-home tests. And still? I have avoided it by basically giving up going anywhere. He operates like most people did in 2020. He'll only go indoors if he has to, to the doctor or the grocery store. He avoids public transportation. And I've worked remotely since 2020. At first, that wasn't an issue. Croning is a voting rights and non-profit attorney, and his last employer in Wisconsin was happy to accommodate. But when he left that job last year and started looking for a new one, needing to be fully remote slowed down his search. There are some jobs that I simply

chose not to apply to because they seemed like they would require in-person work. And there was one where it seemed like he was about to get an offer until he was told at the end of the process that the job required travel. Had I not needed to protect my health, I'm fairly confident that I would have had that job in November. So literally, I would have been working for four months that I then continued to have to search for a job. Kroening did finally land a remote job that he just started this month. In Brooklyn, COVID is also affecting Forrest McDonald's career. I decided to go back to school to become a mental health counselor because I want to be able to work virtually and have lower exposure.

McDonald also worries that if their long COVID gets worse and they couldn't keep teaching, they'd be stuck without income. I'm Samantha Fields for Marketplace. Did you know tea is the most consumed beverage in the world after water? That's according to the UN's Food and Agriculture Organization, which also says tea consumption has been growing. Good news for those in the business of selling the stuff. With that in mind, here's the latest in our series, My Economy.

My name is Ariel Clark, and I am the owner and founder of Sis Got Tea. Sis Got Tea is Louisville, Kentucky's Black-owned, woman-owned, queer-owned, disability- owned tea business and cafe. While we serve a lot of really delicious drinks and a lot of awesome vibes, we also serve as a community space with access to resources from social events all the way to resource fairs and clinics like expungement clinics and name change clinics. As a young Black queer woman growing up in Louisville, Kentucky, even though I met other Black people and met other LGBTQ people along the way, I never necessarily felt fully accepted because of the intersection

of my Blackness and my queerness. On top of that, I'm also sober and we are in the middle of bourbon country. So SysCoutT was registered as a business on August 2nd of 2019. The plan originally was to get a very large loan from the bank and have the cafe open by December. That didn't happen. I was denied bank loans because of my lack of generational wealth, among other things. A lot of banks don't take chances on small businesses. They're considered too high risk. And so I shifted my focus to online store sales and I ended up getting my first business to business relationships, opening my online store around March of that year. And long story short, through

donations from the community, through successful online sales and growing business-to-business relationships, we signed a lease on the cafe in September or August of 2022. And here we are now. So Syscot T does not pay me. The moment I was able to fit some type of wage into my budget, I hired someone. So, I also work full-time at the University of Louisville as an IT systems engineer, and I also teach part-time. It has been a sacrifice. There have been a lot of very late nights and very early mornings trying to balance it all. My ultimate goal is to work syscati full-time and be able to pay my bills with that and teach part-time. Am I there yet? No, and that's okay. My team has been really supportive of what I'm doing, and that's just kind of part of

the business is you have to make some sacrifices and you have to do some things to make things work so that you can sustain yourself. There have been ups and downs, and we're learning a lot along the way, but I wouldn't change anything for the world. Arielle Clark, owner of Siscot Tea in Louisville, Kentucky. We can't do this series without you. Tell us what's happening in your economy at marketplace.org slash my economy. This final note on the way out, a little more color from that Fed presser. Mark Hamrick from Bankrate noted in the conference that April 27th will mark the 13th

anniversary of the Fed chair holding press conferences to explain interest rate decisions. Ben Bernanke started it. In 2019, Chair Powell made them a regular post-meeting feature. Hamrick asked the chairman about that increased transparency and whether more can be done, to which Powell said a few things, including this. We're very transparent. We have no shortage of FOMC participants speaking to the public through the media. And so that that channel is full, I would say. So I think I think it's generally broadly helped and made things better, but not every day and in every way. Well, to follow up, has there ever been a day where you wanted to put that genie back in the bottle somewhat?

Of course not. Very diplomatic. Our media production team includes Brian Allison, Jake Cherry, Jessen Duller, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Torado, and Becca Weinman. Jeff Peters is the manager of media production, and I'm Amy Scott. Kai will be back tomorrow. This is APN. All over the country. We need to improve reading in Wisconsin. Schools are changing the way they teach reading. 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. And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.