Marketplace - The information industry takes a hit

Episode Date: August 2, 2024

Job creation slowed sharply in July, the Labor Department reported today. One sector that took a hit is information and entertainment. That includes data processors, moviemakers, software publishers and — ahem — broadcasters and news websites. Do  those job losses signal a meaningful change or was it just an off month for the field? Plus, shipping rates may come down next year, the Spanish-language interpretation industry is expected to grow, and remember when cellphones had antennas?

Well, the market sure didn't like that jobs report, but how worried should we be? From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott in for Kai Rizdal. It's Friday, August 2nd. Good to have you with us. Has the Fed waited too long to cut interest rates? That's the question looming over the markets today after the Labor Department said job creation slowed sharply in July.

Employers added 114,000 jobs down from an average pace in the past year of 215,000 and the unemployment rate climbed to 4.3%. Here with me to talk about the details and the rest of the economic news of the week are Amara Amokwe, reporter at Bloomberg and Gina Smilick at the New York Times. Welcome back you two. Thanks for having us. All right, so lots to talk about today, but let's dig into this jobs report first. Amara, the economy is still adding jobs. I think this was the 43rd straight month of job growth, continuing the longest streak on record.

So why is the market panicking? Well, I think it's because there's a slowdown that's been going on. And the concern is that the slowdown could continue and pick up, and that the Federal Reserve's policy stance is maybe behind the curve at this point. Fed Chair Jerome Powell was asked about this a lot at his press conference earlier this week, and he expressed confidence that the labor market was kind of normalizing back to sort of where it was pre-pandemic and that the cooling that we've seen so far wasn't overly concerning. But that was before we got this jobs report that showed like a really weak pace of job gains last month. It showed that the unemployment rate rose

for the fourth straight month. And the concern is that because the Fed has not started pulling back its policy stance from this restrictive place where it is, that they could be behind the curve and really open up the labor market to a much more severe and broad slowdown than what we've seen so far. Right. And both of you were at that press conference with the Fed chair. Gina, you asked Chair Powell when the Fed opted not to cut rates, basically why wait? Do you think this jobs report suggests maybe they shouldn't have waited? I think they're going to get that question a lot more in the coming days in light of this jobs

report. Yeah, I think, I mean, I think we're clearly at this moment where, you know, Mike Froehle, I think, thought, who is the chief economist, US economist to J.P. Morton, I thought put it really well in his note. And he basically said, in hindsight, it seems obvious that not going in July was a mistake. It also seems obvious that they're going to be cutting rates very soon. And I think that that's really the takeaway here. They didn't move in July,

probably had they known this data was coming, they would have preferred that they had. But I think now, you know, this just very much cements the case for that September cut. And it's actually making a lot of people in markets question whether they might do a supersize cut when it comes to the September meeting. They're going a little late, so maybe they'll go a little bit more aggressively. Right. But, Amara, this is just one report. And Powell did take pains this week to say

that the Fed is data dependent, but not data point dependent. It's looking at the totality. We did have some other data this week. How is that totality shaping up? I mean, I think the totality of the data is showing that things are clearly slowing down, whether you look at manufacturing data, some spending data, all of those things show that things are cooling off from the red hot levels where they were earlier in the pandemic recovery. But you're right that Chair Powell has really emphasized the fact that Fed officials are thinking about sort of the balance of their responsibilities

very carefully, right? So they're not only going to be looking at what's happening in the labor market, they're also going to be looking at inflation data. They're going to be considering all the things. And you saw Austin Gouldsby, the president of the Chicago Fed come out and say, you know, you never want to overreact to any one number. And so I think you're going to see Fed officials continuing to emphasize that they are considering a lot of things as they figure out sort of not only when to cut rates, but sort of what the pace, the size, and the cadence of cuts should be. Yeah.

So, Gina, you did talk about some growing consensus that maybe we'll see a larger cut in September than we might have. But if the Fed, if it turns out the Fed did wait too long and, you know, we'll have another jobs report before that September meeting, how hard is it to get back ahead of the curve or has that ship sailed? Yeah, so that's actually a great question. I think the real concern with unemployment is, as economists will tell you, shoots up like a rocket, comes down like a feather. So when it moves up, it tends to move up very quickly and it tends to kind of get some momentum.

And so I think that's why economists are so concerned and that's why you've seen the market move so much today is people are taking the fact that the unemployment rate has risen quite a bit over the last year, but really notably this month and saying, oh, we might be at that tipping point. We might be at that moment where unemployment starts to really shoot up. And if it has enough momentum, if the job market is slowing and that's feeding on itself, the Fed might struggle to really quickly arrest that because Fed policy does work with somewhat of a lag. And so I think that's the real concern here. I think it's obviously an open question, but it's got to be the thing that Fed officials

are worried about today. And if you're watching the bond market, you've seen that yields are already falling. They're down well below 4% for the first time in months. And Powell also talked about this, that markets move in advance of the Fed. And so I'm wondering if that's the case and the market's already pricing in a September rate cut and maybe now a bigger one. Was the Fed right to wait? Is the market kind of doing the Fed's job for it?

I think the Fed would be very hopeful that that's the case. You know, I think that they certainly this is something they'll often say is that really we move when we start signaling, not when we actually move. I think there are kind of two big problems with that. A, when you signal it's not fully priced. It's typically not fully priced and it takes a little while for markets to get around to the not fully priced. It's typically not fully priced and it takes a little while for markets to get around to the totality of what it is you're about to do. And then B, from a sort of like historical legacy perspective, nobody remembers when the Fed signal and the market moved. People remember when the Fed did the thing. So for example, the Fed reacted to the inflation taking off quite a bit before they actually moved, but everybody kind of

starts the clock on that when the actual rate hike started. And so I think this could be a similar case. I think that argument's a little tough to make. So, Amerah, I think we'll end with you. Not to get too deep into the weeds here, but the July report triggered a recession indicator known as the SOM rule. Can you talk about what that is and whether it applies here? Well, it's interesting. It's a way of looking at the unemployment rate, sort of the average over the last couple of months. And when it does, when it hits a certain level, that has typically historically been an indicator of a coming recession.

And so people, that rule was sort of triggered today and people are talking about how, you know, why that's significant. But Claudia Sam, who sort of came up with this rule has also kind of cautioned that this is kind of a different time, right? Like we're in a post pandemic place. A lot of the trends that led to the inflationary surge that we saw were really specific to the pandemic.

A lot of the normalizing we're seeing now is related to things from the pandemic unwinding employers sort of finding a new balance after the pandemic. And so she's warned that perhaps historical rules don't necessarily apply in the situation that we find ourselves in now. So when I asked how worried should we be, maybe not too worried yet. I mean, I think the- All right, we talked with- Go ahead, yeah.

No, I think economists that I spoke to today are talking about the downside risks, right? They don't say that the labor market is falling off a cliff. The question is, what's going to come in the next couple of months and what is the Fed going to do to ensure that we don't? All right. Amara Emokwe is at Bloomberg. Gina Smilich is at the New York Times. Thank you both so much and have a good weekend.

Thank you. Thank you. On Wall Street, well, I already spoiled that one. We'll have the details sector again led the way with 55,000 jobs. Construction added 25,000, hospitality 23,000. One of the biggest losers last month though was the information sector. That includes data processors, software publishers, movie producers, and yes, hi, broadcasters.

Information employment fell by 20,000 jobs in July. Marketplace's Kaylee Wells has more on what's going on. There's a short-term answer and a long-term answer. The long-term answer is pretty straightforward, says economics professor Tara Sinclair at the George Washington University. She says the job loss isn't surprising because that's been the trend in the information sector for decades. It's now quite a bit lower than it was. It actually peaked in the 1940s. There aren't switchboard operators and scribes like there once were, and computers can do

a lot of the data analyzing we used to do ourselves. Sinclair says information sector jobs in the 1940s accounted for 4% of jobs. Now it's half that, at just 2%. I don't know how much further down as a share of the labor market it could go. So if you wanted to have some good news, maybe it's going to level off here. But the short-term picture is unclear. Josh Hirt says the decline in information sector jobs

last month is a big deal. He's a senior US economist at Vanguard. This is actually a pretty meaningful deterioration from previous months where we had been, you know, sort of much more neutral. It could just be a bad month. After all, other indicators suggest the labor market and tech and entertainment isn't struggling as much as it might seem. With information specifically, the wage gains have actually been quite good. So it is something that doesn't necessarily align with us seeing broad weakness in that sector. But Hugh J. Martin is worried that there's even more weakness to come. He's professor

emeritus at Ohio University's E.W. Scripps School of Journalism and says now a major player could gobble up even more jobs. Artificial intelligence, which is clearly an enormous threat. To all kinds of jobs in entertainment, communications, media, and Martin expects the demand for AI in the information sector to increase. If you have a journalism job writing someone said something on the internet stories, I think your job's going to go away first. But he says original reporting like that on, say, a public radio economic show, not that

I asked out of personal interest or anything, he says those jobs will likely stick around. I'm Kaylee Wells for Marketplace. Yes, we've talked a lot about jobs already, but stick with us because we're going back in time to a story about one job in the age before cell phones for this next installment of our series, My Analog Life, about how technology has changed the way we work. My name is Christina Azob. I live in San Diego, California, and currently I am a field business manager for an oncology company. For my entire career, since the 90s, I have been in field sales. I have actually had every iteration of communication device that exists.

When I first started out in 1993, I had a pager and it was important that my customers could reach me, so I would literally have to stop the car, find a payphone, look at the number on the pager, call them back. You know, my first mobile phone was a huge suitcase that I would put in the seat next to me and plug into my cigarette lighter in the car, which even cars don't even have those anymore. You know, other iterations of the cell phone, I had one with an antenna that I had to pull out of the body of the phone.

And eventually my favorite was actually my Blackberry. I loved my Blackberry, got very fast with typing with the little keyboard, and almost had to pry it out of my hands when I had to give that up for the iPhone. I mean, it made a huge difference when I could actually have a mobile device in my car, even though it was as big as a suitcase. It still meant that I didn't have to stop the car, go find a payphone. One of my customers was the Washington State Ferries, and I could even get on the ferry finally and have communication from the ferry, which was amazing.

Now of course, everything is mobile. I had a Zoom call the other day with my boss from the parking lot of a Costco. So now I can be reached anywhere, anytime. And really the advancements in mobile communication have moved business at speeds we never even imagined in the 90s. That was Christina Azob in San Diego, California. You can write to us about your analog job at marketplace.org

slash my analog life. Coming up. I didn't really realize like the difference in languages at home and school. That's a useful skill. But first, let's do the numbers. Ooh, like I said, not too pleased with that job report. The Dow Jones Industrial Average fell 610 points, 1.5% to finish at 39,737. The Nasdaq subtracted 417 points, 2.4% to close at 16,776. The S&P 500 lost 100 points, more than 1.8%, and at 53.46.

For the week, the Dow retreated 2 and 1 tenth percent, the Nasdaq declined 3 and 1 tenth percent, and the S&P 500 weakened almost 2 and 1 tenth percent. The bad news started after the bell yesterday when amazon.com reported that consumers don't seem to feel like doing as much consuming as they have been. Even though the company reported profits and cloud computing revenues that beat expectations, Amazon gave back just shy of 8 and 8 tenths percent today. Bonds rose, as I said, the yield on the 10-year T-note fell to 3.79 percent. You're listening to Marketplace. This is Marketplace. I'm Amy Scott. Ocean shipping rates, as we reported a couple weeks ago, have been surging in recent months.

The diversion of container ships from the Red Sea to avoid attacks, plus a rush of early orders and bad weather combined to double or triple prices. Those rates have eased slightly in the past few weeks, according to maritime research firm Drury. And a bunch of new ships coming online should help in the longer term. Marketplace's Sabri Benishor has that story. Sabri Benishor Remember when we ordered so much stuff during COVID that it helped break global supply chains, ships were lined up at ports, nothing arrived on time, shipping rates jumped eight-fold? Well, that was kind of a good time to be in the shipping industry. The ocean shipping lines being worth more than they ever could have dreamed, I think, before the pandemic. Tim DeNoyer is a senior analyst at Act Research.

In 2022, shipping giant Maersk brought in $81.5 billion, more revenue than in any year ever. Its net income went from around $5 billion in 2019 to nearly $31 billion in 2022. Across the industry, those profits were put to work. The ocean carriers have huge order books of new ships. Ryan Peterson is CEO of logistics company Flexport. And those were placed during the COVID boom years where they made so much money. They reinvested that in new ships and new cargo capacity. More ships, ships that take two and a half years to build. Meanwhile, the boom years turned into bust years for the freight industry. After 2022, consumers moved on from binging on patio furniture and new TVs. Retailers had too much stuff lying

around, so they stopped ordering as much. According to data from Freitos, the cost of shipping a container crashed from a peak of $11,000 down to a low of just about $1,000 towards the end of last year. Profits sank too. People called it the Great Freight Recession. The container ship orders, though, they were still there. Ships still being built. And those ships are being delivered every week. We have new ships coming online from the world's shipbuilders.

A record amount of shipping capacity was added in 2023. And as these ships started sailing, it seemed like the world was getting way more ships than it needed, says Jean-Paul Redrigue, Professor of Maritime Business Administration at Texas A&M Galveston. But now with the Panama issue, with the Suez issue, this oversupply was captured, was accommodated. The Panama Canal lowered its water levels this spring because of a drought. Ships had to offload cargo to make it through. The war in Gaza has spilled into the Red Sea, so shippers are avoiding the Suez Canal. Retailers all rushed to get holiday orders shipped early

to avoid trouble later. And suddenly, all those new ships were not enough. International trade needed more ships and more time. The weighted average cost of shipping a 40-foot container went from $1,400 at the beginning of the year to nearly $6,000 now, according to maritime consultancy Drury. The question for shippers is how long will this last?

If this is a long term situation, they might decide yes, we need extra capacity. Containership owner Denaus Corporation recently announced it's ordered five new container ships due in 2027 and 2028. Meanwhile, other ships ordered years ago are still coming online, adding to supply, all while demand is an open question. So it looks like shipping rates will come down for 2025. An ocean freight in general may be headed for another bust year. And that, says Flexports Peterson, is just kind of how the shipping industry is. The ocean freight industry is inherently a boom and bust industry because

the assets last for like 30 years. You know, you buy one of these ships and it's got a really long life cycle. And it's hard to predict trade patterns over just six months, much less 30 years. In New York, I'm Sabri Banishor for Marketplace. By 2060, the U.S. Census Bureau estimates one in four Americans will be Hispanic or Latino. And that means the need for Spanish-language interpreters is likely to grow. Big cities in California, New York, and Texas are already hot spots for interpreters. But now there's a need in smaller, booming resort towns in the Mountain West, where Latinos are often

a big part of the labor force. Working long hours in construction or hotel and restaurant jobs doesn't always allow time to learn English, Wyoming Public Radio's Hannah Merzbach reports. HOST 1 Celia Perez has been going back and forth between English and Spanish since elementary school. HOST 2 I didn't really realize like the difference in languages at home and school. HOST 1 Perez moved here to Victor, Idaho back in the 90s. It's a bedroom community for Jackson Hole, Wyoming

and is nestled in the Tetons. Perez was born in Mexico and raised in the US. And as a kid, she stepped in to interpret for her mom. I noticed like she needed help at the store or my dad needed help, you know, with asking for something. Now, Perez has a career as an interpreter. Her skills are especially needed in this resort community. The Census Bureau says the population

is about 15% Hispanic, but local nonprofits say that's probably an underestimate. We're such a diverse community now, so we have to be able to bridge that gap or how are we going to be able to understand each other? Language interpretation is still a small industry. The Bureau of Labor Statistics estimates there's about 50,000 interpreters and translators nationwide, mostly in big metro areas.

But in the next decade, the industry is expected to grow by upwards of 20% in places like schools and health care offices where interpreters are legally required. And that means more interpreters will need to be trained. So it's not only listening, it's active listening. Jovana Carillo-Contreras leads a workshop for new interpreters in an air-conditioned conference room in Jackson Hole. She's training bilingual health workers, police officers, airline and hotel staffers.

She tells the class it's not enough to simply repeat a Spanish speaker's words in English or vice versa. We have to understand, process, analyze, convert, and deliver. Interpretation is not just about what someone says, but how they say it. There's emotion or pauses, regional dialects, idioms that Google Translate or AI might miss. And on top of that, at government meetings or public events, interpreters have to do on-the-spot translations simultaneously. Honestly, that's very hard. On this day, Blanca Moye is interpreting for a Jackson Hole meeting of a housing nonprofit. ...season suddenly that's much bigger job.

Moye sits in the back of the room, speaking Spanish into a small microphone during a presentation in English about affordable housing. A handful of Spanish speakers listen to Moya's interpretation through headsets. Moya says more organizations are making events accessible through interpreters. Still, this is a growing region, and new people are moving in from all over. It's not just Spanish. I think it's important to see the huge need

because the population is growing and growing everywhere. And she says the region should be ready for those newcomers, too. In Jackson, Wyoming, I'm Hannah Mosbach for Marketplace. This final note on the way out today, ugh, is it back to school shopping time already? CNET has a rundown of the sales tax holidays happening in many states this summer that could take the edge off for inflation-weary families. Nine states are offering tax-free shopping on school-related items this weekend,

including Arkansas, Iowa, Missouri, New Mexico, and South Carolina, with others coming later in August. The National Retail Federation says families with school-age children plan to spend about $870 dollars on supplies this year on average down from last year's record of eight hundred ninety Our theme music was composed by BJ leader man Marketplace's executive producer is Nancy Fargoli Donna Tam is the executive editor Neil Scarborough is the vice president and general manager and I'm Amy Scott Have a great weekend. We'll be back on Monday. This is APN.