WSJ What’s News - Dollar Stores Show Lower-Income Americans Are Tightening Their Belts

Episode Date: December 13, 2024

P.M. Edition for Dec. 13. Dollar stores are a bellwether for the spending of lower-income Americans and recent data shows they are feeling financial strain. WSJ Heard on the Street columnist Jinjoo Lee talks about the forces at play. And the new presidential planes that Donald Trump negotiated for during his first term will likely not be ready for him to fly in during his second term, either. We will hear what is going on at Boeing from Wall Street Journal aviation reporter Andrew Tangel. Plus, the U.S. prepares new rules that would restrict the sale of advanced AI chips, aimed at limiting China’s access. Alex Ossola hosts.  Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

With Uber Reserve, you can book your Uber ride in advance. 90 days in advance. Perfect for all you forward thinkers and planning gurus. Reserve your Uber ride up to 90 days in advance. Uber Reserve. See Uber app for details. The U.S. is preparing new rules to limit China's access to advanced AI chips. And dollar stores offer a window

into how low-income households are faring. And right now, those consumers are showing signs of financial strain. Dollar stores have been saying that consumers are holding off on purchases until the last minute, and they're spending less toward the end of the month when they've used up their budget. Plus, why Donald Trump may never get to fly

in the new Air Force One that he negotiated for. It's Friday, December 13th. I'm Alex Osolo for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. The US is preparing rules that would restrict the sale of advanced artificial intelligence

chips in certain parts of the world. People familiar with the matter say the restrictions are an attempt to limit China's ability to access those chips and to close its backdoor access when China purchases chips in other nations that it can't obtain directly from the U.S. But the new rules could cause conflict with those other nations who don't want Washington micromanaging their purchases. It's the latest in a series of moves from the Biden administration as it attempts to block Chinese access to the most advanced chips, as well as chip making equipment and other technology. The latest round of curbs

could come this month, weeks before President-elect Donald Trump takes office. China has denounced the US curbs on chip purchasing and retaliated by limiting the export of some minerals used in chip production. In business news, Amazon union members at two New York City warehouses have voted unanimously to authorize strikes. Teamsters, one of the largest unions in the U.S.,

has given Amazon a December 15th deadline to negotiate a contract addressing wages and working conditions, the union said. Amazon wasn't immediately available for comment. And consulting giant McKinsey has apologized for its role in helping Purdue Pharma turbocharge its sales of OxyContin opioid painkiller. McKinsey also agreed to pay a $650 million settlement and enter into a deferred prosecution agreement with the U.S. Justice Department. That agreement will resolve criminal and civil claims stemming from its opioid-related work. McKinsey has already paid nearly $1 billion to settle hundreds of civil lawsuits related

to the opioid crisis. During Donald Trump's first presidential term, he awarded a nearly $4 billion contract to Boeing to deliver two new presidential planes. Their first flights are currently slated for 2026. Now, we're exclusively reporting that an array of issues have caused further delays, which means the president-elect likely won't get to fly on a new Air Force One during his second term either. Here to tell us more is Wall Street Journal aviation reporter Andrew Tangle. Andrew, tell me more about this delay from Boeing. What's been going on? It's been a string of production problems and management slip-ups with these two very important aircraft. They've had a host of supplier problems,

they've had quality issues, they've had labor problems trying to get enough workers who have these special security credentials called the Yankee White Clearance on top of their security clearance because this program is so highly classified because it's supposed to be a flying White House for the president. And it's just a huge complicated project that has just not happened as quickly as Boeing and the Air Force originally envisioned. And it just dragged on and on and on. Problems have mounted. Boeing has eaten billions of dollars in losses

for shareholders and the planes just aren't finished. Okay, so given all these issues, what's the new timeline for when Boeing might deliver these new planes? When Boeing did this deal after Trump personally negotiated it during his first term, the plan was to deliver the planes by the end of 2024, so this year. And they're nowhere near meeting that milestone.

And the Air Force next year is supposed to work with Boeing on a new master schedule that will take into account the delays from all of these mounting problems and presumably have a realistic estimate for when these planes are going to be complete. But the long and short of it is that these new planes that Trump has been so fixated on will not be ready for him to fly on as president in his second term. Boeing and Air Force representatives declined to discuss the project's timeline when you reached out, and a spokeswoman for Trump's transition team didn't respond to a request for comment.

What do these planes mean for Boeing's business and its reputation? For Boeing, it's a relatively small project in their portfolio, but its importance to the country is outsized, and its effect on Boeing's finances over the last few years has also been outsized. It's just been a big money pet and Boeing doesn't have any money at the moment to keep pouring in there.

So it just adds to the strain, the worse the problems get. It also complicates the ability of the commander in chief of the United States to be able to get around. That was Wall Street Journal aviation reporter, Andrew Tangle. Coming up, what can consumer behavior at dollar stores tell us about the state of low income households in the U.S.? That's after the break. With Uber Reserve, good things come to those who plan ahead. Family vacay? Reserve your ride as soon as you book your flights.

To all the planners, now you can reserve your Uber ride up to 90 days in advance. See Uber app for details. By many metrics, the U.S. economy seems to be doing okay. Inflation has eased, wage growth has been decent, and many Americans have more in savings than they did pre-pandemic. But lower-income consumers aren't feeling any of that. Dollar stores, a bellwether for that group's spending, started seeing signs of consumers belt-tightening in recent months. Jinju Lee is a columnist for Hurt on the Street. So, Jinju, what are the signs of consumers' financial strain at dollar stores and other retailers?

So dollar stores have been saying that consumers are holding off on purchases until the last minute. For instance, they're not shopping in advance for occasions like Halloween. They're buying it closer to when they need it. And they're spending less toward the end of the month when they've used up their budget. And it's not just dollar stores.

McDonald's, they said, poor consumers are eating at home more. And their $5 meal has been very popular. Monroe, which is an auto repair service chain, said people are trading down to cheaper tires. This is interesting, especially because lower income households have actually fared pretty well in the years following the pandemic. Lower wage workers saw bigger pay increases and stimulus checks and food stamps helped

them accumulate savings. So what's changed here? So wage growth for the lowest income Americans has actually slowed down a lot since 2022. And now it lags behind that of the richest households. And some of the post-pandemic boost to government assistance, like the food stamp program, are no longer there. And the cumulative impact of inflation over the last few years are catching up to them. Inflation though is affecting everyone, right? So what makes it hit harder for lower income families?

Lower income families spend a higher proportion of their paychecks on bare necessities, like rent, utilities, groceries. And inflation in those categories have been more severe and more persistent than discretionary purchases like clothes and furniture. So the Bureau of Labor Statistics, for example, assumes that about 71 percent of spending goes towards food, housing and medical care for the poorest Americans. For the richest households, that number is closer to 65%.

It sounds like these years of inflation have had this compounding effect for these lower income folks. What might help them start feeling better? Hard to tell. We need to see inflation slow down more and or see wages catch up. And inflation actually picked up slightly in November.

So that's not a great sign. In addition to that, food stamp benefits barely increased for fiscal year 2025. So that's another headwind. That was WSJ Hurt on the Street columnist, Jinju Lee. Thanks so much, Jinju. Thank you. In US markets, concerns about softer spending by lower-income customers dragged down consumer goods stocks like Nike and Coca-Cola, and they, in turn, dragged the Dow about 0.2% lower.

The S&P 500 was flat, and NASDAQ inched ahead 0.1%. Former House Speaker Nancy Pelosi was hospitalized after falling on an overseas trip. Her spokesman said that Pelosi, who's 83, was traveling with a bipartisan congressional delegation in Luxembourg to mark the 80th anniversary of a World War II battle. He added that Pelosi won't be able to attend the remainder of the events. A person familiar with the incident said she tripped and fell after a group photo with other lawmakers and officials, and a separate person said Pelosi could walk with help and was alert. If you're looking for a wellness appointment as a way to relax, there's a massage or

maybe a facial. Now though, customers are seeking out professional back scratchers as a way to de-stress. A small but growing field of scratchers are making a living off their nails, hoping there's a healthy market of people who will pay for what a spouse or a wooden spoon will do for free. Joseph Pizzani is a reporter for the Wall Street Journal and is scratching the surface of this story. Joseph, what exactly are these back scratchers doing?

Are they literally scratching an itch? They say they're not scratching itches. They're using their nails and they're gently rubbing it against the skin, going up and down the back, down the arms, up into the scalp. And in one case, she's putting the tip of her nails inside people's ears. They say it's a way for caesars to get relaxed, and it's different than scratching an itch. Okay, I'm curious about the economics here.

How much does it cost to get your back scratched? And are the scratchers earning enough to actually make a living? Most of them are charging $100 or more an hour, and they say they are making a living, and part of the growth is from social media. And one person I talked to in Pasadena, California, she quit her job as a pattern maker.

She was making six figures. And now she said she's earning more than she made before. And part of it was because of social media. That was our reporter Joseph Pizzani. And that's What's News for this week. Tomorrow you can look out for our weekly markets wrap up, What's News in Markets. Then on Sunday, we'll be looking at how the youth vote shifted in Donald Trump's favor in the presidential election and what Gen Z voters are thinking about the president

elect, politics, and the role of government in their lives. That's in What's News Sunday. And we'll be back with our regular show on Monday morning. Today's show was produced by Anthony Bansi and Pierre Bienamay with supervising producer Michael Cosmitis. Michael Laval wrote our theme music. Aisha Al-Muslim is our development producer.

Scott Salloway and Chris Sinsley are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osala. Thanks for listening.