Marketplace - “This is the time to be a saver”

Episode Date: April 2, 2024

Interest rates on savings accounts have climbed in recent years. And high rates are great if you have money to squirrel away. With the Federal Reserve signaling it’s likely to cut rates, people can expect their banks to do the same. In this episode: how Fed rate cuts would impact high-yield savings and CDs. Plus, February job openings data, the cost of the Key Bridge collapse and the problem for TikTok-dependent beauty brands.

It's day two of jobs week, but if that's not your jam, we have updates on everything from the car market to the potential TikTok ban. From American Public Media, this is Marketplace. In New York, I'm Kristen Schwab in for Kyra's Doll. It's Tuesday, April 2nd. Good to have you with us. Today, we got the latest Job Openings and Labor Turnover Survey, or the JOLTS report, for February. The takeaway is that the number of job openings basically didn't change from the month before. Neither did the number of people quitting their jobs. But just because the data kind of implies that nothing's happening doesn't mean there's nothing happening on the ground. Marketplace's Justin Ho called up some

small business owners to find out what they're seeing on the jobs front. Some business owners have a lot of positions to fill. 2-0-20. I have 20 positions open. That's Marcia St. Hilaire Fenn, the owner of Bright Start Early Care and Preschool in Washington, D.C. She recently opened a couple of new locations and she's trying to staff up. But finding qualified candidates with degrees in early childhood education has been difficult. So she's been hiring less qualified candidates so she can work them up towards getting that degree. We can have that person come in. They can sign up for a scholarship. We help them. We walk them through the process. We give them a mentor. Other employers are having some luck finding candidates who can hit the ground running. You know, like people that, you know, might have taken themselves out of the workplace during COVID and they want to get back in the workforce.

That's Ken Giddens, the president of Rothmans, a men's clothing store in New York. He's trying to fill a few marketing positions right now, and he's finding a lot of talented candidates. You know, I'm getting approached by a lot of people, which I haven't been since the pandemic. But even if more people are looking for jobs, not every business wants to bring them in. We are very lean right now. I've actually been working more hours in the store as well to help with that. That's Frankisha Watkins, the owner of Be Polished Beauty Supply near Dallas, Texas. She says she's holding off on hiring because business has been fairly slow this year. A lot of people are having to choose between groceries and do I want this new wig or,

you know, gas or do I want these extensions? Still, Watkins is leaving one job posting up. She says it doesn't cost anything, so she might as well keep her options open. In fact, Watkins says she started leaving a position basically permanently posted two years ago, back when people were quitting jobs all the time. Because I earmark every employee, unfortunately, to stay with me for probably eight months. I'll be lucky if I have a year. In other words, the number of job openings the government counts can overstate

the number of people employers actually want to hire. I'm Justin Ho for Marketplace. Speaking of hiring, we'll get the March unemployment report on Friday. Today on Wall Street, traders were feeling as gloomy as the weather is here in New York. We'll have the details when we do the numbers. The slow and steady cleanup is still happening at the Port of Baltimore. An alternate channel recently opened so barges and tugboats can bypass the wreckage and help with the efforts. There's still a long way to go on a lot of fronts. Yesterday, we talked about how the state of Maryland is trying to figure out some financial relief for people who work at or near the port. Today, we turn to the big question of who will pay for

the disaster itself. Money for the families of the workers who died, for the businesses affected, and for the repair of the Francis Scott Key Bridge. Marketplace's Sabri Beneshour sorts it out. The collapse of the Key Bridge could well be the most expensive maritime insurance loss in history. Something in the ballpark of $2 to $4 billion. Nadia Dreff is Senior Vice President

for North American Insurance Ratings at Morningstar DBRS. There are, Dreff says, roughly 100 different insurance companies involved. The boat's owner has maritime insurance. Everyone who sent cargo has cargo insurance. The bridge itself may be insured. The Port of Baltimore likely has insurance for business interruption. For now, all of those insurance policies are likely going to pay something. Over time, as the investigation continues and there's more clarity about exactly

what happened and who's ultimately responsible, insurers themselves will start recuperating some of those losses. Meaning the insurers will sue whoever's fault this is and the insurance company behind them. The Dali's owner is Singapore-based Grace Ocean. The company that manages the ship is Synergy Marine. They have both filed a petition in Baltimore under a law from 1851. It lets them argue their liability should be capped at the value of the ship, $42.5 million, they say, if they weren't aware of whatever issue caused the incident.

I doubt that the ship owner will be able to limit its liability. Martin Davies is professor of maritime law at Tulane University Law School. Filing that petition may not end up limiting the shipowner's liability, but, Davies says, it does set in motion a legal process where all claims against them get filed in one place, Maryland, rather than scattered around the world. And that's a benefit in itself. If a court does find that the ship's owner knew or should have known that there was a problem, blame will rest at their feet. But it won't stop there, says Lawrence B. Brennan,

adjunct professor of admiralty and maritime law at Fordham University. There can be third parties. Third parties, like a fuel supplier that supplied defective fuel, a bridge owner that didn't put up the right lighting. That's what you look for, is as many people as possible to share the responsibility financially. That, he expects, will take two to four years. In New York, I'm Sabri Beneshour for Marketplace. So Sabree was just telling us about the mess of figuring out who will pay for the bridge collapse in Baltimore.

For people who work in the trade and logistics business, there's also the mess of dealing with the cargo. Cargo stuck on the container ship and cargo that's now being rerouted away from the port. So we gave one of our regulars, Gretchen Blau, a call. She's a customs broker at Logistics Plus in Erie, Pennsylvania. When we got the news about the key bridge coming down, that was a huge shock. We're all still processing it, I think. We had one shipment that was on the dolly. We're just waiting to see how the claims process will take place. It's just kind of a long process where they tow it, they offload everything.

They have to take care to make sure if any of those containers have been breached, that they don't collapse or anything like that. Photographs would have to be taken of any damaged cargo. It's kind of a long, involved process of documenting everything. It's kind of a long involved process of documenting everything. We did have a few ships that were sitting outside of the Baltimore Harbor waiting to see what to do and where they were going. So those have been rerouted to New York. Once the ships offload, our domestic team will be looking for, you know, trucking solutions. We already have, you know, a shortage of trucks as it is. It's going to be a

challenge to, you know, build those relationships and maybe ports and terminals where we don't have a lot of contacts. Maybe we'll have to bring more stuff into the West Coast. Since the West Coast was so congested, we had kind of shifted to the East Coast. And with the Panama Canal and everything, maybe we're going to have to, you know, totally and completely switch up how things are done, depending on how everything shakes out. On a personal level, we were all kind of horrified. A number of our staff has visited the Port of Baltimore, has seen that bridge. I went on vacation.

I think it was 2018 with my son, and we took the water taxi. We didn't go under the bridge, but we went clear up to the bridge, and we know how high up it is. We know how very fragile some of our infrastructure is. On a professional level, we're just all in, okay, let's solve these problems and find some solutions for the routing. We don't like what causes the challenge, that's for sure, but we do like solving the problems and working our way through these problems and conflicts and whatnot and making sure that freight arrives when it needs to and people are well supplied. That was Gretchen Blau, customs broker at Logistics Plus in Erie, Pennsylvania. High interest rates are not so great if you want to, say, buy a house or start a new business. But they are pretty great if you've got money to squirrel away. Because not long after the Fed

started hiking interest rates, many banks started hiking theirs, too. Rates on savings accounts and CDs have climbed over the past couple years. Now the Fed is preparing to cut interest rates. Just today, Fed officials said they expect three rate cuts by the end of the year. Marketplace's Samantha Fields looks at how that might affect savings. This time two years ago, the Fed had just started raising interest rates. And according to Ted Rossman at Bankrate, the best high-yield savings account out there was offering less than 1% interest.

Today, you can find accounts offering over 5%. These rates have really run up very quickly. And he says a lot of people are benefiting. We actually recently did a study and we found that 22% of Americans who have short-term savings are earning at least 4%. Last year, just 7% of people were earning that much on their savings. This is the time to be a saver. Margarita Chang, a certified financial planner near D.C., says she's had clients of all ages coming to her asking how to take advantage of today's rates. Like, hey, can you tell me, should I open a high-yield savings account or a CD?

I am having conversations every week with clients about this. Every week. It's pretty exciting because that means that people are more engaged. These days, Cheng is also getting questions about when the Fed might start cutting rates, mostly from clients who want to see mortgage rates come down. The flip side of that is as the Fed is cutting rates, then the healthy interest that you have enjoyed on your high-yield savings accounts, those will go down as well. Interest rates on almost everything move when the Fed raises or lowers the federal funds rate. Both the interest you pay on mortgages,

credit cards, and car loans, and the interest you earn on savings accounts and CDs. But some move faster than others. Joseph Gagnon at the Peterson Institute for International Economics says CDs are among the first to follow the Fed when it raises rates or cuts them, partly because they're in a competitive market where people shop around. It's pretty quick for CDs. And then as you get to other types of bank accounts, it gets slower and slower. And when you get to checking accounts, it gets, you know, glacial, or if that. Banks have already started lowering interest rates on

some longer-term CDs, even though the Fed hasn't actually made a move yet. It's just signaled it probably will. Anastasia Fedek at UC Berkeley's Haas School of Business says that's because CD interest rates are fixed. What that means is that it can actually be a little bit more responsive, right, in a forward-looking way. Because if, you know, you're locking in, right, somebody for five years, then you know that the rates might be cut in a couple of months. Already, you're not going to be offering them that high rate. Whereas banks that offer high-yield savings accounts with variable interest rates, they can afford to respond pretty much in real time or

close to real time with a little bit of a lag. Once the Fed does cut rates, though, you can expect your bank to cut your rate, too. But FedEx says chances are high-yield savings accounts will still be high-yield, at least for a while. A few cuts is not going to get us anywhere near the zero-rate environment that we were in for so long. The Fed is looking at maybe like three cuts by the end of the year. Most likely, FedEx says, they'll be in the vicinity of a quarter of a percentage point, which would keep the federal funds rate and interest on many high-yield savings accounts above 4%. I'm Samantha Fields for Marketplace. Coming up, there's a lot of jokes. There's just a lot of funny voices.

Keeping things light, one TikTok at a time. But first, let's do the numbers. The Dow Jones Industrial Average slipped 396 points, 1%, to close at 39,170. The Nasdaq lost 156 points, 0.9%, to finish at 16,240. And the S&P 500 sank 37 points, 7 tenths percent, to end at 52.05. General Electric officially ended its long run as a single corporate entity today. GE is now officially three publicly traded companies, one focused on healthcare, another on energy, and a third on aviation. GE Aerospace declined 2.4 percent,

on aviation. GE Aerospace declined 2.4%, GE Healthcare slid 1.6%, and renewable energy company GE Vinova dipped 1.4%. Sam Fields was telling us about interest rates for high-yield savings accounts, so let's look at some banks. Citigroup fell 1%, Wells Fargo dwindled 4.1%, JPMorgan Chase ticked down less than a tenth of a percent. Bonds fell. The yield on the 10-year T-note rose to 4.35%. You're listening to Marketplace. I'm Kristen Schwab. The market for new and used cars has been pretty wild for the past few years. There was the chip shortage, which led to a vehicle shortage, and more and more companies have announced they'll stop making compact cars to focus on bigger and more expensive SUVs. to focus on bigger and more expensive SUVs.

But after years of high prices and interest rates, affordability is top of mind for a new wave of buyers, and companies like Toyota and Honda are benefiting. Marketplace's Savannah Marr has more. A lot of people have been putting off buying a new car for years since the pandemic chip shortage tanked inventory and drove up prices. David Whiston, an auto analyst with Morningstar, says the market is starting to smooth out. Even now, though, a monthly car payment can be well over $700, which is obviously a pretty large monthly expense for a household.

But everyone has their breaking point, even Whiston himself. Family needs and whatnot and me just getting tired of coordinating our one vehicle between my wife and I. I've decided I want to get a second vehicle this year. Consumers can only make do without a car or keep an old one running for so long, says Jessica Caldwell, head of insights at Edmunds. If people need a car, they need a car. There's not any substitute for it. And Caldwell says those necessity shoppers are willing to make some sacrifices when it comes to size and fancy features to avoid that massive monthly car payment. People want that basic, affordable, reliable transportation with not a high price tag right

now because that's what they can afford. But that basic, affordable car is sort of a unicorn on today's market. Something like a Honda Civic, for example. Or a Toyota Camry or really any lower cost sedan. It's pretty hard to get. This is a big change from what manufacturers and dealerships have been dealing with, says Sean Tucker with Kelley Blue Book. During the pandemic, what we saw was that higher income, better credit shoppers were the only ones who could car shop.

So automakers built what those shoppers were willing to pay for, luxury trucks and SUVs, and cut production of budget vehicles. Now that everyone's coming back into the market, their lineups are not very well designed for what the market is looking for. Tucker says some manufacturers are ramping up production of smaller, more bare-bones options, while others are waiting out what's likely to be a short-term focus on affordability that'll turn around when interest rates start to drop. I'm Savannah Marr for Marketplace. A few weeks ago, the House of Representatives passed a bill to ban TikTok unless its parent company, ByteDance, sells the app to an American company. Right now the bill is in the Senate. It's sort of unclear how things are going to turn out. Well, as TikTok awaits its fate, so are brands. Brands that have come to rely on the app's shareable short videos as affordable advertising. One of our Friday Wrap regulars, Jordan Holman at the New York Times,

she recently wrote about the potential TikTok ban and what it means for the beauty and fashion industries. Jordan, welcome to the program. Thanks for having me. So if TikTok is banned, I imagine it will be a big blow to any company that advertises anything. But why focus on beauty and fashion brands in your story? How has TikTok become particularly important to them? So, specifically for beauty retail, it's a great platform to be able to quickly show people, hey, this is the newest serum or lipstick or, you know, eye makeup in a quick, short video and hopefully get them to buy it. And it's just this kind of unique platform where a lot of personality comes through. And so beauty

brands have quickly gone to TikTok and wellness and fashion brands have followed. Yeah. Tell me more about what these campaigns look and sound like, because sometimes, at least to me, they don't even look like advertisements, or at least I guess what we traditionally think of as ads. Yeah, and that's kind of the magic that brands say. You don't have to have like the celebrity or recognizable person to kind of front your product. A lot of smaller brands, it's the founder who's saying, hey, I developed this. There's a lot of jokes. There's just a lot of funny voices. And so while you're scrolling, it kind of just falls within all of the other type of content you get on TikTok. Yeah, I feel like that's led to a lot of discovery. And you talk about that a bit in your piece, how it's actually become a place where people go to shop first, like they totally just go by Google and go to TikTok first. Can you talk a little bit more about that?

Yes. I was talking to an influencer who's big on TikTok. Her name's Kara Springs, and she's 25 years old. She mentioned, I don't even think about going to Google first when I'm shopping. I think about going to TikTok. And I just thought that was such an interesting thing because for so long, Google has been the default. You know, you say you Google it, but for this new generation coming up, TikTok is that default. So brands see that as the place they need to be talking about what they're selling. Yeah, you TikTok it. Maybe that's not the verbiage, but... We'll work it out, yes. Yeah. Well, it seems like, I mean, part of this is you go where the people are if you're a brand, and younger people are on TikTok. But what else drives brands there instead of like traditional advertising or other social media apps? The other thing that smaller brands in particular told me was that they like TikTok because it's relatively inexpensive compared to when you're working

with Google or Meta, which owns Instagram. And part of that is if they're working with TikTok shops, which is the specific part on the app that's dedicated to selling things, they can do a commission structure. So you're only handing money over if you sell this product versus like, So you're only handing money over if you sell this product versus like this is the cost to advertise when it's on Google or Meta. So for smaller brands, that's one of the reasons they like TikTok. Interesting. I didn't know that. But it's not just the Sephoras and Ultas, right, using TikTok. There are a lot of other smaller businesses.

What would a ban mean for those? So for the smaller businesses I talk to, it's almost inconceivable that TikTok would go away or be banned. Because one woman I talked to who's in the beauty space, she was like, this is our marketing strategy. This is how we find new customers. So this is right now the most formidable way that people are selling products. And it doesn't seem like they actually have a backup plan if TikTok is banned or changes in some way. Yeah, well, that was my next question is what would be the alternative if this ban happens? And how seriously are these brands preparing for a world without TikTok, whether they're small or bigger? preparing for a world without TikTok, whether they're small or bigger? So I talked to the CEO of Frida, which is a brand that sells postpartum products and baby products,

and she made a very good point. She said, you know, algorithms change all the time on social media. Brands have to get really nimble when it comes to that type of change, and maybe brands right now should be thinking of it in that way if something happens to TikTok. And what she meant was post the video you were going to post on TikTok, do that on Instagram Reels. You got to maybe go on Snapchat. So the reality is most of the brands play on these other platforms. But time and time again, talking to people, they're like, I don't want to do that. TikTok is special and I go viral and I find new customers in ways that other platforms don't give me. Yeah. Although someday there will be maybe the new TikTok, whatever the new thing is, I guess.

Absolutely. Jordan Holman writes about retail at the New York Times. Jordan, thanks so much. Thanks for having me. This final note on the way out today, an interesting factoid as more localities have or consider minimum wage requirements for companies like Uber and DoorDash. 7.3 million people in the U.S. participate in app-based work. That's 4.3% of the total workforce. Axios analyzed this data from a new study published by a consultancy called Public First. The study was commissioned by a trade group that represents some major gig apps. States with the biggest makeup of gig workers are Nevada at 6%, Florida at nearly 6.5%, and Washington, D.C. at 9%.

Our digital and on-demand team includes Keri Barber, Jordan Mangy, Dylan Miettinen, Janet Wynn, Olga Oxman, Ellen Rolfes, Virginia K. Smith, and Tony Wagner. Francesca Levy is the Executive Director of Digital and On-Dand. I'm Kristen Schwab. We'll see you again tomorrow. This is APM. All over the country. We need to improve reading in Wisconsin. Schools are changing the way they teach reading.

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