Marketplace - When the going gets tough, just keep spending

Episode Date: June 17, 2026

Retail sales were up 0.9% in May, which is a generally positive economic sign. But it doesn’t square with our reality, in which price inflation outpaces wage growth. That is, until you look at that pesky personal savings rate. In this episode, YOLO consumers in a grim economy. Plus: Fed Chair Warsh holds rates steady, the rate of new households is falling, and what would happen if the U.S. lost its global reserve currency status.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.

Programming supported by Trinity Exteriors, a local team working to help neighbors across Minnesota maintain safe, comfortable homes, offering roofing, siding, and window renovations. Information and more at trinityexteriors.com. The economy is changing at a dizzying rate. Entered the chart topping and critically acclaimed managing the Future of Work Podcasts from Harvard Business School, hosted by me, Bill Kerr, and by managing the future of work project co-chair, Joe Fuller. This show explores workforce development, technology trends, demographic changes, and many other forces transforming the landscape of work. Follow the HBS Managing the Future of Work podcast wherever you get your podcasts. What happened at the Federal Reserve meeting today, you ask? Well, here's what happened. You get a task force and you get a task force and you get a task force.

From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizzdahl. It is Wednesday. Today, this one is the 17th of June. Good as it always is to have you along, everybody. We begin today with the Federal Reserve's new chairman, Kevin Warsh, and his first press conference. And as he promised, changes are coming. We've got a task force for that. This was a more bureaucratic than usual press conference. The economics of it in a minute, of course. But the main takeaway was that Warsh, as he said during his confirmation hearings, is bound and determined to change the way the Fed does business. Telltale sign number one, five, count them five new task forces on, should you be curious, communications, the Fed's balance sheet, economic data, productivity and jobs, and inflation frameworks. So that.

Also, though, and more immediately, At this moment in time, it doesn't feel as though providing forward guidance is right. Forward guidance. That thing the Fed's been doing for the past, I don't know, 15 years or so, letting everybody, which mostly meant markets, letting them know which way the Fed was thinking monetary policy interest rates were going to go well in advance of actually voting on them. This is a big deal. So I think it's important to hear Chairman Warsh's rationale. I think the financial markets work less efficiently when they ask a question, how will the Federal Reserve react to that incoming information?

the more that markets are paying attention to what's happening in the real economy, deciding what's good data and what's less good data, the more financial markets can price what they believe is the most likely, and what are the tail risks? Financial market prices are probably the most important source of information to guide central bankers. But when all the financial markets are doing is reflecting back what we've said, then we're taking the most important source of information, and we're being blind to it. All right.

So the economy and Warsh's thoughts on it? Inflation is too high, he said. The Fed's going to get it under control, he said. He did not, though, say anything about forward guidance on how the central bank was going to do that, except for this. You've heard me say before, I tend to focus on the left of the decimal point. Well, the two is the left of the decimal point for now. zero is to the right. I see no reason until we have reestablished our commitment and ability to deliver on the 2% inflation objective to revisit that. So that will be outside the scope of what we're

taking on. Two decimal point zero is where the Fed wants inflation to be, as Chairman Warr said. The decimal placement on inflation right now, according to the most recent consumer price index, has a four to the left of it and a two to the right of it. For those wondering what President Trump had to say, about the Fed's decision not to cut interest rates today, as he has made clear is his monetary policy choice? I'm going to give it to you. This is a quote. It really is. Whatever. Wall Street today. Traders didn't think too much of the new guys' press conference. We'll have the details when we do the numbers. Interestingly enough, or at least it was to yours truly,

the word consumer was, by my count, said only once in Chairman Warsh's press conference today. It's interesting because, say it with me now, spending by or on behalf of consumers accounts for, give or take, 70% of everything that happens in this economy. So it was reassuring and interesting to get this morning's report on consumer spending for the month of May. Overall, up 9-10% from April, way more than people had been guessing. Some of that was gas, yes, of course, but not all of it. So how, oh, how, in the face of rising prices and high interest rates, and economic and geopolitical uncertainty, how are consumers finding the capacity to keep on,

keeping on? Here's Marketplace's Mitchell Hartman. The May retail rebound was more than a pleasant surprise for economist Kathy Bus Jansick nationwide. It was strong and broad-based. Consumers continued to spend quite freely despite higher gasoline prices. Now, keep in mind, retail sales are not adjusted for inflation. So they go up when people buy more and also when prices rise. But in May, says Thomas Ryan at Capital Economics, this wasn't just the case of people being forced to spend more on gasoline. There was also strength everywhere where you look.

Motor vehicles were up, furniture sales. We've seen this pattern repeat over decades, says Ryan. When the American consumers faced with a hit to their real incomes, they tend to sort of absorb that hit, lower their saving rate, and maintain spending levels rather than cut. back on discretionary spending. That's exactly what happened in April. When gas shot up, the savings rate went down.

Cathy Bostjansik expects it fell even more in May. Consumers do feel miserable. They're not happy with higher energy prices. But they're still spending it up, backed by some strong economic tailwinds. Larger tax refunds this year, strength in employment, and also continued gains in the equity market. Which especially helps upper income households. who are key to this retail resurgence, says Kayla Brune at Morning Console. Each individual higher-earning household kind of can punch above their weight.

Like, they have more spending powers added up into an aggregate of total retail sales. High earners account for a lot of that spending. It's that K-shaped economy again. The wealthy, unworthy about gas prices and inflation spending on high-priced airfares and new cars, while everyone else is operating way closer to the bone. For lower income adults, the labor market is really essential to whether they even can do discretionary spending. As long as unemployment remains low, this strong retail run could last a while. I'm Mitchell Hartman for Marketplace.

So as I said, setting up Mitchell's story, it wasn't all gas prices that drove that retail sales report. Spending was up in clothing and health and personal care products. Also, at stores that sell, and this is the official category, sporting goods, craft supplies, books, and musical instruments. hobbies, in other words. Sales in that category up 11.3% in May from the same time a year ago. Marketplace is Stephanie Hughes when shopping today in Baltimore. At Tocterman's fishing tackle, Travoris Hipkins stops in to buy new line for his rod. A boat snagged all in my lines, so that's all I had. Around is propeller? Yeah.

Well, salesperson Craig Brewer puts the line on, Hipkins shops for another rod, a longer one that'll let him fish in deeper waters. And it's really nice, and I kind of just want. I wanted it. So. Pipkin says he spends at least $1,000 a month on fishing, including bait, gear, boat fuel. He's 24 and has been fishing since he was six. It keeps me out of trouble. Like, it's a way that I can get away from the internet. And I love being outside.

And it's just honestly peaceful and relaxing. The store's owner, Tony Tocterman, says revenue has been up this spring. He says some of that is inflation. They were hit by tariffs and had to pass those costs on. But also, people are buying more. I think that the hobby business was up because people weren't to escape. They weren't away from the pressures of work or the pressures of the news. This tracks with the research of Katie Thomas, who studies consumer behavior at the consulting firm Carney.

People are seeking community, belonging, and physical experiences. So they're spending on sports and books and hobbies that bring them together with other people. And so I think, you know, maybe I can't afford to go to the World Cup, but I can buy myself some gear or buy my kids an outdoor activity. Or an indoor one. In Baltimore, just around the corner from Tocterment, is a brand new store called Local Stitch. It sells yarn and books. Nicholas Medina stops in because he wants to try an embroidery technique called Sashiko. It's visible mending, so you can mend your clothes as they get worn in, but like in a very, I guess, I don't know, stylish way. Medina's interested in making his clothes last longer because he's spending more on other

necessities like food and insurance. It's kind of like wearing your hobbies on your sleeve. The store's owner, Natasha I'm teaching classes here. I frequently notice this light goes off in people's heads. The first time they make something with their own hands and they're like, I can do this. And she says, as they improve, they can make things that are better than what they can buy. In Baltimore, I'm Stephanie Hughes from Marketplace. There's a report out today from Harvard University Joint Center for Housing Studies that's worth spending a couple of minutes on. In 2021, the report says about two million new households were formed in this country. That's people moving out of a family home or some other kind of group housing setup. In 2025, the report says, just over one million

new households. Marketplace's Samantha Fields has more on why and what it's going to mean for this economy. You can probably guess the major reason so many more young people are living at home with their parents or sharing apartments with roommates these days. Housing affordability is very, very major in that. Lori Goodman at the Urban Institute says in the years since the pandemic hit, housing costs have risen much faster than wages. Not only costs of buying a home, but also rental costs have accelerated much faster than wages. And more recently, it's also gotten harder to find a job. Household growth follows job growth. And I think the trend in job growth of the last few years, years has been slowing. Daniel McHugh at Harvard's Joint Center for Housing Studies says if you can't

find a job or you're not confident the job you have is solid, you're less likely to want to sign a lease or buy a house and move out on your own, especially if the cost of everything else is rising too. Right now, a lot of the forces are negative. They're working against housing demand, whether it's rising unemployment, slowing job growth, inflation, the return of student loan debt payments. But McHugh says it's not just young people living at home or with roommates who are keeping household growth down. In the last year or so, since President Trump returned to office, immigration has also slowed way down. And so we're expecting that drop in immigration to translate into a further drop in households. All of these factors add up to less demand for housing.

And Rob Warnock at apartment list says less demand tends to lead to less new construction. The housing market is kind of cyclical in that way, right? like supply chases demand, demand chases supply. The problem, he says, is that if new home construction slows down too much, when things inevitably do turn around, and when housing, demand and household formation does come back positive, we run the risk of not having homes for that new formation to move into. And that, Warnock says, could just push housing prices up even higher. I'm Samantha Fields for Marketplace.

Coming up. It's not as if the world would suddenly come to an end. No, but it would look pretty different. First, though, let's do the numbers. Yeah, the wah-waz, but barely. Downed Deltreles down 506 today, 1% finished at 51,492. The NASDAQ subtracted 354 points. That's about 1 in a third percent there.

Closed at 26,021. The SP 500 down 91 points, 1 and 2 tenths of 1%. 74 and 20 retailers you ask sure target gave up four and two tenths percent walmart down two and four tenths percent macy's dropped about four and two tenths percent as well that's a lot of fours and two allbirds is no longer in the sneaker business and now it's not called allbirds anymore either the company changed its name to smart bird because it's now an ai company because that's the way it works these days the company formerly known as allbirds accumulated 39 and a tenth percent today you're listening to marketplace right now

we are living through some of the most tumultuous political times our country has ever known. I'm David Remnick, and each week on the New Yorker Radio Hour, I'll try to make sense of what's happening alongside politicians and thinkers like Cory Booker, Nancy Pelosi, Liz Cheney, Tim Walts, Katanji Brown Jackson, Newt Gingrich, Robert F. Kennedy Jr., Charlemagne the God, and so many more. That's all in the New Yorker Radio Hour, wherever you listen to podcasts. This is Marketplace. I'm Kai Rizda. It's a fair bet that most of you didn't think about this much today, but the U.S. dollar got a little bit stronger against a basket of global currencies on the open markets today.

You didn't think about it much unless you're going to a place like this. Did you want to buy or sell the pesos? Tell me again, it's not a global economy. Foreign Currency Express, tucked into a hotel lobby in downtown Los Angeles, is one of those exchange counters you might visit if you're going overseas. I got this business back in 1991. That's Michelle White, and on the wall behind the counter and the bulletproof glass, she's made art out of the tools of her trade, cash money,

as well as pictures of some of her celebrity customers. You recognize this guy? Oh, it's Lou Farigno, the Hulk. Of course, of course. And obviously you. Pretty much every transaction Michelle does here, even for the Hulk, involves U.S. dollars. Does it matter for you whether the dollar is weak

or strong? Yes, we had to watch our market when dollars a week is strong, so we know accordingly how to quote the rate and buy. You must read the news, too, because all the geopolitics now and the war and the trade wars and the China and the Europe, I mean... We watch all of that because it does have a very strong influence on the market. If you don't cover your sale, you don't watch the market, you can lose your shirt. Michelle literally wakes up thinking about exchange rates, because that is her business. She trades currencies every single day. Most of us don't, in part because the United States has what is sometimes called the exorbitant privilege of having the most important currency on the planet.

If I go Asia, I bring dollar down there because every down in Asia, they want dollar. Even you go down to Mexico, sometimes they want dollar down there. That international demand for dollars lets the U.S. government borrow more change. cheaply. It helps shelter the economy from global turbulence, and it gives the U.S. powerful geopolitical leverage. About 90% of all international transactions. Think about that. 90% of all international deals have the dollar on one side. Close to 60% of the reserves held by foreign central banks are in dollar-denominated assets. We are really right now supporting everybody, Asia, Europe, everybody. If we collapse, then what?

Then what is what we're going to tackle in the next couple of minutes? What would happen if the dollar wasn't the dollar? To be clear, it still is. But the world's relationship to it is changing and it has been for decades. The dollar's share of foreign reserves has gone down. And we're in a moment right now where conversations about the dollar's role in the global economy are picking up. Some countries, Russia and China among them, have payment systems that. that avoid U.S. dollars. There are reports that ships have gotten through the Strait of Hormuz

by paying fees to the Iranians in Chinese Rennman B. So imagine with me for just a second what a world without U.S. dollar dominance might be like. Well, it doesn't look radically different from where we are today, but I think it'll be different in important ways. The global economy looks like more chaotic. But it's not as if the world would suddenly come to an end. Well, that's good. That was Moray Obsfeld. He's a senior fellow at the Peterson Institute for International Economics. Also, Zoe Liu at the Council on Foreign Relations, and Jay Shambaw, professor of economics and international affairs at George Washington University. As an economist, we sometimes joke about the fact that people like me are a rarity. People who grew up in America who study exchange rates are unusual because we didn't have to grow up thinking about them. We didn't grow up thinking about them, but we're going to today, in this hypothetical less dollar-centric world.

To be clear, we're not talking about a de-dollarized world. We're just, you know, no one wants to hold treasuries. No one wants to hold dollars. And, you know, at that point, we're in a global financial crisis. And it's the international role of the dollar is the least of our worries. That's a really important point. The sudden loss of confidence in the U.S. dollar, where demand dries up overnight, that would be so catastrophically bad that trying to map it out as a hypothetical would be impossible.

So we're not going to try. What we are going to do is imagine a scenario where the dollar just doesn't have the dominant international position that it does right now. Mori Opsfeld. You know, in any world we can think of in the medium term, the erosion of the dollar status would be gradual. Unless what the government does speeds things up. Those include, you know, pressuring the Fed to lower interest rates, running very, very large. federal budget deficits, you know, the U.S. behaving in a way that is not cooperative and, you know, predatory to other nations, which makes them want to insulate themselves from the

levers of power that the dollar endows the U.S. with. I hear you saying, I hear what you're saying on the whole gradual thing, but you, of course, know that saying, and I forget the attribution. Things happen very slowly and then all at once. I mean, those three things you just rattled off are happening in real time right now. Yeah, I mean, one of the big factors, I would argue the biggest factor that supports the dollar are what economists call network externalities. You know, I use the dollar because everyone else uses the dollar. An analogy that's useful here is thinking of the dollar as kind of like the English language. You know, I don't need to speak Swahili, and people who speak Swahili doesn't need to speak Japanese or Chinese.

We can all speak English in order to communicate. In other words, if you want to exchange Argentine pesos for Turkish lira, you'll probably turn the pesos into dollars and the dollars into lira. Right now, Argentine banks don't have to hold Turkish lira to do business with Turkish companies. They all just trade in dollars, which, makes things more efficient for everybody. Now, you take dollars out of that equation? There's an efficiency loss there on an ongoing basis. But it's actually a cost on the entire world because the entire world benefits from having the dollar as a global currency. I'm going to say that again. The entire world benefits from having the dollar as the global

currency. The first big difference of our hypothetical less dollarized world is a less efficient system with more currency risk for businesses and the expense of more currency transactions. You know, effectively like having a small tax, very small tax on all transactions. The second big difference? America's borrowing cost will go up. The federal government's debt held by the public, that's investors and other countries, is more than $31 trillion, which is in turn more than the entire American economy is worth. We spent a trillion dollars on interest last year, which makes the higher borrowing costs that would come in our less dollar-dominated world.

Well, it would be real money. And the paralysis that Congress goes through every single year trying to pass a budget, we'll forget that. Every fiscal fight becomes a shopper. For you and me, mortgages and car loans and student debt, all of that would get more expensive too. So American consumers have a tougher time. American businesses have a tougher time. Congress has a tougher time. Who wins out of this?

Who gains globally out of the dollar, out of the de-dollarization? I'd say there is no true absolute winner in a de-dollarized world. Although the U.S. government absolutely loses its power to sanction foreign entities. That's the third big difference that we're going to talk about. The way the global financial system works now, it's just hard to move money without touching the U.S. or a big U.S. bank. And that means that when the United States chooses to, it has the ability to impose sanctions that cut people off from global finance.

Jay Shambaw again right there at George Washington University. Those sanctions are the biggest economic weapon Washington has. So terrorist groups, countries that are trying to acquire a nuclear weapon when they've said they wouldn't, or, you know, Russia invades Ukraine. If we lose the role of the dollar, we lose that sanction. The dollar is what it is, and we get what we get, lower rates, significant sanctions power, because of the perceived stability of the U.S. economy and its government, a history of paying our debts on time and strong financial regulation, an independent central bank.

But what's that thing people say about great power and it coming with great responsibility? If people see us as irresponsible with our power, it makes it just much more likely. that they will find ways to move money that don't touch the dollar. The dollar, again, makes the global economy more efficient for everybody. But that doesn't mean there aren't ways around it. It's expensive to do those things. But if the U.S. gives countries a reason to do it, you could see us walking towards that less dollarized world.

And that kind of tipping point could occur rather quickly. I guess the core message is that the only enemy to the U.S. dollar is not a rivaling currency. It's not the MNM&B. It's not the euro. It's not the Japanese yen. It's our own physical responsibility itself. Or fiscal irresponsibility, right? Right. Irresponsibility from that point of view. This hypothetical that we've been talking about is still a hypothetical. The U.S. dollar is so essential to the global economy that it's not going to be replaced

soon. But the institutions of this economy of which the dollar is one depend on the institution. of this democracy. This final note on the way out today, a word on nomenclature, or maybe it's honorifics. I don't know. You might have noticed that earlier in the program, I referred to the new guy at the Fed as Chairman Warsh. The convention for the past two incumbents, Yellen and Powell, has been chair. But Warsh's biography on the Fed's website says, chairman.

So, chairman here it shall be. Our media production team includes Brian Allison, John Fokie, Montana Johns, Drew Jostat, Gary O'Keefe, and Charltonthorpe. Alex Simpson is the manager of media production. And I'm Kyle Rizdal. We will see you tomorrow, everybody. This is APM. I'm Riemechres, and this week on This Is Uncomfortable, we're talking about romance scams and the people behind them.

I chat with Carlos Bargan, a reporter who spent years getting to know scammers in Nigeria, also known as Yahoo Boys. We talk about how they justify what they do, and why some of them are even celebrated in popular culture. You have fascinating songs of singers that come from the street, hailing Yahoo Boys, as kind of like heroes, as kind of like roving hooves that are like giving away their money to people who cannot eat.

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