Marketplace - The wages vs. inflation horse race

Episode Date: July 4, 2024

The May jobs report said wages had risen about 4% over 12 months, while inflation was 3.3% over the same period. Good news, right? Then why did consumer sentiment hit a 7-month low in June? In this episode, other wages-related measurements that might explain that economic pessimism. Plus, a Yale legislation-scoring group focuses on outcomes, and precision agriculture technology adoption is slow.

On the show today, we'll feel all the feels, or at least take a deeper look into how Americans are feeling about the economy. Also, we've got ag tech, mobile homes, and charcuterie. From American public media, this is Marketplace. In New York, I'm Kristin Schwab in for Kyra's Doll. It's Thursday, July 4th. Thanks for tuning in on this holiday. All eyes, at least around here, will be on the June jobs report tomorrow, as the Federal Reserve weighs where it stands on its path to bringing down inflation. A cooling labor market, just a reminder, is an unfortunate but often necessary piece of making that goal a reality.

Another important piece of the puzzle? Wage growth. It's been tracking ahead of the rate of inflation for the last year. As of May, average wages had risen about 4% over 12 months. The consumer price index rose 3.3% over the same period. That means workers' spending power should be improving. Yet, and this is a big yet, how people feel about the economy doesn't really reflect that. Consumer sentiment hit a seven-month low in early June, and survey after survey has shown Americans are pessimistic about the economy. Marketplace's Megan McCarty Carino has more. You can think of workers' spending power as a horse race between wages and inflation,

says bank rate analyst Sarah Foster. Out of the gate in 2021, this inflation horse started running a lot faster. But now wages are running a lot faster in this scenario. By some measures, like the one in the monthly jobs report, that wage horse has caught up and even passed the inflation horse. But the Fed is actually watching a different horse, the Employment Cost Index, which does a better job of tracking wages for the same job over time. That horse is still behind. There is ground to be recovered, and it's probably why many Americans just feel so down

about their income. We also have to remember that the average wages in the monthly jobs report are just that, says Liz Wilke, principal economist at Gusto, a payroll services firm. That average masks a lot of variation in the experiences of both businesses and workers. For instance, the small businesses Gusto works with have raised pay by just 1% over the last year, which is actually a decline when you adjust for inflation. Meanwhile, in industries that are still struggling to find workers, like food services, wages have grown much faster. So how it looks to you really depends

on what industry you are in. There's also variation by income level, says Valerie Wilson at the Economic Policy Institute. While wages have grown across the board, we've actually had the strongest wage growth among the lowest earners. But their baseline incomes are lower, so any increase in expenses is a bigger burden, says Michael Strain at the American Enterprise Institute.

Those workers are more exposed to the high price of essentials like food and shelter. He stresses prices for most things have increased more slowly, not gone down. So they continue to give consumers sticker shock. I'm Megan McCurdy-Corino for Marketplace. Four hundred billion dollars. That's how much the Congressional Budget Office, or CBO, bumped up its federal budget deficit projection for this year. In total, the estimate for the 2024 fiscal year is $1.9 trillion. Remember, the CBO is nonpartisan, and its analysis of proposed legislation is widely respected.

That's known as the CBO score, and Congress uses it to make decisions. It's been this way for 50 years. But there's a new organization housed at Yale experimenting with different methods of budget scoring. Marketplace's Maria Hollenhorst has more. Let's start with an example. Think about something like the child tax credit. That costs the government money. But also it does impact children's development. Martha Gimble is executive director of the Yale Budget Lab. Economists like her refer

to stuff like child development in a typical economist manner as non-monetary outcomes. Catchy. That is something that policymakers might care about, but that might not at least immediately be reflected in economic statistics. But 25 years from now, those children could be workers. And which tax credits their families received, how much food and support those kids got at home, could impact their future earnings and the economy for decades. That's not necessarily something the CBO would calculate. For most cost estimates, the information we provide is at the 10-year horizon.

Phillips Weigel is the director of the CBO. We have a particular mandate to provide budgetary information to the Congress. These other organizations, including the Yale Budget Lab, can take a broader perspective, and I think that's great and it's a useful complement to what we do. Notice he said complement, not substitute. Gimble said she and her colleagues are by no means trying to undermine the CBO's work, and the Budget Lab is far from the first entrant into the bill scoring game. A handful of other think tanks and research organizations produce cost estimates of proposed legislation. But

the Budget Lab is particularly focused on long-term societal outcomes. We're partly just trying to pull together a proof of concept for expansion of what budget scoring could look like. The CBO has a specific mandate, rules set by Congress. The CBO is often described as the referee, that it is neutral, it is not trying to have either team win, not trying to achieve any particular policy outcome. It's just calling the balls and strikes. Doug Elmendorf at Harvard Kennedy School knows a thing or two about that. He ran the CBO from 2009 to 2015, and he pointed out that rules can change. Until a video review

came along, a referee could not say, let's just stop. I want to go over and take a look at what the ABC cameras show me. That was just out of bounds. Economists are always coming up with new tools for analyzing proposed laws. And not every possible change in what CBO does would be a good idea, but it's worth experimenting, I think. And these outside organizations can help to do that. In that sense, you could think of the Yale Budget Lab as a sports analyst, providing information to Congress and the public that goes beyond the official scoreboard. I'm Maria Hollenhorst for Marketplace. that goes beyond the official scoreboard. I'm Maria Hollenhorst for Marketplace.

Wall Street took the day off today, so we farmers have been waiting on the promise that precision agriculture would revolutionize the process of growing and harvesting crops. That new technology would give growers granular information about what's happening in their fields. Now, some of this has come to pass. Farmers today have more sophisticated equipment like self-driving tractors. But some of the loftiest visions of precision agriculture are still out of reach and probably will be for many more years. Harvest Public Media's Erich Schmidt has the story on what's taking so long. Eric Schmidt In a basement lab in St. Louis, a small team of scientists make the final adjustments to a prototype soil sensor.

Sensor 1 Right, targets in place. Sensor 2 Firing in 3, 2, 1. Sensor 3 Those clicks are from a powerful laser that can determine the elements in soil. Pablo Cebrón is the founder of Impossible Sensing. And every clack, clack, clack, every light bullet that you heard gives you data points. Data points on nutrients like nitrogen, phosphorus, potassium, even water conditions and indicators of soil health. Sabron says his team is designing the sensor to hook onto the back of a planting machine

to let farmers see exactly what's happening in their soil as they drive across a field. He says this could help them apply the exact right amount of fertilizer or water that each plant needs. The real value and the real need here is to give insights, give knowledge, prescribe what to do when. Sobrón says this is the promise of precision ag, knowing what's happening with individual plants to boost productivity. That will also reduce the overuse of fertilizer, which pollutes rivers, lakes, and groundwater.

But he says the hype hasn't delivered, at least not yet. And it'll likely be years before promising tools like Sabron's laser are adopted on thousands, let alone millions of farming acres. Experimentation is a risk. Bill Lee farms about 2,200 acres of corn and soybeans with his brother in central Illinois. Since he started farming

in 1982, he says he's slowly added more precision tools to boost his farm's efficiency when applying fertilizer or planting seeds. It's not a jump in with both feet, it's a process. Because it's just too expensive and there's too much at risk to take that flying leap and realize there's not a high jump pit at the end, it's a piece of concrete. New technology for a farm can cost tens, if not hundreds of thousands of dollars. Lee says he's more than happy to make that kind of investment as long as he sees an economic return. It's a financial equation lots of food producers have to think about, because most of the time,

farms operate on slim margins. Chad Zimmerman is the agri-food director at the non-profit BioSTL in St. Louis. He says there's still a gap between the new technology available and the farmers who put it to use, because many can't foot the bill to try something new on all their fields. We can't be asking them to take on more risk, to just take a decrease in their profit to accomplish somebody else's goal. Zimmerman says new agricultural technology can help growers, but it won't fully deliver the widespread cost and environmental benefits until it's on millions of acres. That puts pressure on big and small companies to prove their precision ag tech really delivers. And many companies are working on just that.

Allison Doyle from the Iowa State University Research Park says it's a trend right now in agriculture. Allison Doyle, Iowa State University Research Park, says it's a trend right now in agriculture. Allison Doyle, Iowa State University Research Park, says a lot of the ag companies are positioning themselves more in the tech space than they are traditional egg. She says labor is a big driver. There just aren't as many farm workers today than in the past. And Doyle says today's farms are much bigger than they used to be.

When you have an operation that large where commodity prices and all the input prices are where they are, you're looking for a tiny little bit of margin wherever you can find it. She says those slim margins inherent in farming will make new precision tools even more necessary in the future. In St. Louis, I'm Eric Schmid from Marketplace. In the rental housing market, it's normal to expect a range of property possibilities, and with that, a range of rental prices. For, say, a place with an updated versus older kitchen, or a unit facing a quiet backyard versus a busy street. But what if

you own your home and all you're renting is the land it sits on? We're talking about mobile home parks. Typically, these renters pay for the same kind of plot and land services as their neighbors. But in Massachusetts, there's a legal battle unfolding over whether park owners must charge all tenants the same rent. From Boston, WBUR's Simone Rios has more. Ed Bartok shows off the bit of land between his home and a winding brook in central Massachusetts. We have a nice little yard back here. After he and his wife retired from the Air Force, they sold a single-family house and decided to spend their golden years here in this mobile

home park. They had a brand new place, paid off already, and maybe the best part, their monthly lot rent was just $650. We're very, very happy. We love the little house. It's perfect. Still, the Bartok's found out some of their neighbors were paying hundreds less in rent, apparently in violation of state law. So Bartok and a resident at a different park sued the owner. It's called Hometown America, and it owns roughly 80 mobile home parks across the country. Robert Bartok, Bartok's Neighborhood, New York No one has twice the lot that someone else.

We all get water and trash and taxes and everyone gets the same access to the clubhouse. We should all be paying the same. It's the second lawsuit the company has faced here in Massachusetts, which bans price discrimination in parks. In 2020, the state's highest court ruled against hometown and upheld rent uniformity. Even so, Hometown continues to argue it should be able to charge new residents more than renters who have been in place for decades. The company declined to comment because of the ongoing lawsuit. They pointed us to Leslie Guch of the Manufactured Housing Institute. She says price uniformity comes with unintended

consequences. I would tell you Massachusetts is an outlier and this idea while good on its face, right, always in that nice everybody pays the same rent, it does impact the ability to manage the community. Because over time, she says, having to equalize rents could result in higher prices for those least able to afford it. But of course, there's also big money at stake for park owners. In court documents, Hometown claims the inability to raise rents for new residents at one park could cost it more than $80 million over two

decades. This is going to sound bad, but you want to extract as much money from customers as a pool as you can. Marketing professor Eric Dylansky at Brock University in Canada says charging different prices for the same product is typical. Like when a new iPhone comes out, the most enthusiastic customers pay most to get it first, then prices go down over time. And you do that by getting the customers who are willing to pay the most to buy it.

But smartphones and ballgames are one thing. Delansky says there are ethical questions when you're talking about a basic human need. The government will step in where they feel that, for example, there may be predatory practices in situations where it is something that is needed by everyone. Like a place to live. In addition to making their case in court, Hometown America is trying to change Massachusetts law to do away with price uniformity. And Ed Bartok, the park resident, says mobile homes are a great way for retirees like him to live affordably. The state has been talking a lot about affordable housing. Well, how about modular or manufactured homes?

And Hometown America says it agrees. The company just says it wants to be able to raise rents as it sees fit. In Boston, I'm Simone Rios for Marketplace. Coming up. What a terrible problem to have. But first, let's do the numbers. U.S. markets are closed today for the Independence Day holiday, so let's look at travel. Triple A predicts 71 million travelers will take trips of more than 50 miles from home this week, outstripping even the pre-pandemic record. That's an additional 5.7 million people traveling this year than in 2019.

Most, around 85%, are traveling by car. The Automobile Association says more people are taking extended trips around the holiday because more people are working remotely. AAA also found about 8% of travelers will be flying this week. The Transportation Security Administration had already counted 2.5 million people passing through airport security on Tuesday, about half a million more than in 2023. You're listening to Marketplace.

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electronics and free shipping on everything. Don't miss out on Black Friday and July savings at dell.com slash deals. That's dell.com slash deals. The planet is heating up, sea levels are rising, and if you're feeling overwhelmed by it all, you're not alone. There are things we can do to make a difference. That's why we're answering your burning questions on this season of How We Survive, a podcast for Marketplace.

Whether you want to reduce your home's carbon footprint, eat a climate-friendly diet, or you just want to ease your dread about climate change, How We Survive can help you navigate our changing planet. Listen to How We Survive wherever you get your podcasts. This is Marketplace. I'm Kristin Schwab. I'm going to go out on a limb here and say that, along with burgers and hot dogs, some Fourth of July spreads include some kind of meat and cheese board. They've grown in popularity over

the last handful of years. Google searches for the phrase, how to pronounce charcuterie, reached peak popularity in December of 2020, which for the chronically online might not come as too much of a surprise because charcuterie making videos and images had a moment during the pandemic. A moment that some people saw as a business opportunity. That's the setup for today's installment of our series, My Economy. I am Chandra Turner and I am the owner of The Bougie Grazer and we are located in Atlanta, Georgia. The Bougie Grazer is an elevated snacking experience where we are located in Atlanta, Georgia. The bougie grazer is an elevated snacking experience where we are specializing in all things, shark hootery.

I spent 25 years in property management. COVID definitely tested my resilience in the industry and I ended up abruptly leaving. I always tell people that my business started from as a creative way to get off the couch. So when I first started, I had no idea what I was doing. I just knew that it was therapeutic for me. I knew I enjoyed doing it. So I was just putting everything in the box, you know, anything that I can

think of. And I was charging $10 for it. I never thought about, you know, how much the packaging costs, how much the label cost, how much all these different components to build that box costs. I probably paid like $15 per box and only sold it for 10 bucks. But now that same box size will go for 35 to $40. And my profit margin is roughly around 20 to 25%. I originally, going into the charcuterie business, did it as a side job or side hustle. I was working full-time and it quickly turned into my full-time gig. However, I also knew that it could be a trend. So for me, it's always been about what that pivot looks like.

And so some of the side things that have kind of grown legs outside of my charcuterie business is catering. So I'll do small bite catering for corporate offices and box lunches. There are a lot of perks to being an entrepreneur and there's also a lot of stress. and there's also a lot of stress. Some days I'm like, gosh, I wish I did work nine to five instead of 24-seven, but would I go back to the corporate environment? Maybe when I'm like 65 or something like that, but probably not. Right now I'm having fun with my business. I'm meeting so many people.

This is best for my mental health right now I'm having fun with my business. I'm meeting so many people and you know, I this is this is best for my mental health right now is to be in my my own space and and run my own business Chandra Turner runs the bougie grazer in Atlanta. We can't do this series without you Tell us about what's happening in your economy at marketplace.org slash my economy. Scent can be a powerful thing. It can evoke feelings, create a sense of place or identity. So it's no wonder that next year, the global fragrance market will be worth around $52 billion, according to market research company Statista. Scent, though, isn't just about the perfume or cologne you wear. It can be a compelling tool

in business. The BBC's Elizabeth Hodson has more. Smell is a very personal thing. Some like woody citrusy notes, others prefer a big floral bouquet. But what if you could harness the secrets of smell to influence people's mood and behaviour? Matt Johnson is a marketing professor at Holt International Business School in Boston, Massachusetts. He says if we could do that, it would be a really powerful tool in the workplace. We can utilise scent as a major context cue.

Johnson says starting from scratch is the key. We can create a novel scent and then use that to create states of mind which can incur specific types of workplace behaviour. So how would that work in a real life scenario? Every time that scent is put in, we have these brainstorm sessions and over time there's going to be a learned set of associations between that specific scent and this creative state.

That's backed up by research from Northumbria University in England, which found a rosemary aroma can boost memory, while sage and peppermint smells can help with decision-making and problem-solving. The global French drinks company Pernod Ricard has gone one step further and created its own unique brand smell to pump around its Paris headquarters. Ginny Dixon, the company's HR director, explains why. It's very simply to bring to life our identity and to create an emotional link with that. Pernod Ricard owns brands like Plymouth Gin and Martel Cognac. That puts me in mind of boo-soaked corridors and tipsy reception areas in offices. But Dixon soon puts me right.

What we've created is called Les Ambrans. Ambrans means sea spray and it's really a huge tribute and a nod to a place that is at the heart of our identity and that's the islands of Paul Ricard and Provence down in the south of France. So what exactly does that smell like? It is like that wave of a sea spray that comes into your face when you're taking a walk through Provence. And behind that, it carries laurel and thyme and aniseed, or anise, which is the heart of the Ricard brand itself.

It's not just major corporations using scent strategically. Some people are using smells to sell their home. Jeremy Carpell owns Realtor TK International, based in the exclusive London district of Hampstead. He shows me around a seven-bedroom house with three bathrooms that's valued at $15 million. The first thing that hits me is the scent of a rose candle. Jeremy says that's a good strategic move. You're trying to say this isn't a palace, this is a home. Jeremy says that even if you're marketing a more modest abode, some everyday scents

can make all the difference. It's a wonderful thing, the smell of bacon bread. And for me, not everybody likes coffee, but the idea of freshly brewed coffee is very compelling, incredibly welcoming. So I'd certainly encourage that. But is there anything Jeremy would steer clear of that might lose you that sale entirely? Don't go for anything too rich, too sickly, you know, something that smells like your great-grandma's, you know, sort of boudoir.

Well, I'll certainly be avoiding eau de boudoir. Next time you schedule a meeting or put your home on the market, make sure to check the smell in the air. It could be the deal breaker. I'm the BBC's Elizabeth Hodson for Marketplace. This final note on the way out today related to my love for the Olympics. Like, I'm that person who will wake up at 4am or whatever to watch Simone Biles in real time so the internet doesn't spoil it for me. Saw this in Axios. This year for the first time ever,

an equal number of men and women will compete in the games. Women first participated in the Olympics in the year 1900. Back then, they made up just over 2% of all athletes. At Tokyo, it was 48%. Paris will be 50-50. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher, and Stephanie Sieck are the marketplace editing staff, Amir Babawi is the managing editor, and I'm Kristin Schwab. We will see you tomorrow. This is APM. Hey everyone, it's Rima Grace, host of This is Uncomfortable, here to let you all know

about our summer book club. Every other week week we're going to recommend a book that our team loves that gets at some uncomfortable topic around money, class, our relationship to work. We'll feature a wide range of recs including classics like E.M. Forrester's A Passage to India, page turning novels like Naomi Alderman's The Future, and personal finance books like Paco de Leon's Finance for the People. Join This is Uncomfortable's book club by signing up for our newsletter. Be sure to sign up today at marketplace.org book club.