WSJ What’s News - Why Americans Are Turning to Discount Stores

Episode Date: June 4, 2025

P.M. Edition for June 4. Dollar General and Dollar Tree have reported bumper first-quarter earnings. WSJ reporter Suzanne Kapner joins to discuss what that shows about consumers, and about the state of the U.S. economy. Plus, the Congressional Budget Office estimates that President Trump’s tax-and-spending megabill would add $2.4 trillion to the U.S. deficit, as Republican senators are demanding changes that could alter its price tag. We hear from WSJ tax policy reporter Richard Rubin about how the bill might shift. And the Trump administration threatens Columbia University’s accreditation. Alex Ossola hosts. What’s News in Earnings: Retailers Scramble to Respond to Tariffs Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Samsung Vision AI televisions transform screens into intelligent solutions. From reviving old memories with AI upscaling, to seamless hands-free control with universal gestures, the next vision in television is here. Learn more about Samsung Vision AI televisions at Samsung.com. Republican senators want changes to President Trump's mega bill, which is estimated to increase the U.S. deficit by more than $2 trillion. Plus, more high-income shoppers are turning to discount retailers. What does this say about American consumers?

Consumers are under pressure and even consumers that have a little more disposable income are trading down to these dollar stores to get bargains and value. And Russian President Vladimir Putin told President Trump that Russia will respond to Ukraine's recent drone attack. It's Wednesday, June 4th. I'm Alex Osala 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 Trump administration has taken aim at Columbia University's accreditation, a significant escalation in the government's battle with the Ivy League school. The Department of Education told the organization through which Columbia is accredited that the school is in violation of federal anti-discrimination laws and no longer appears to meet the standards for accreditation. The move doesn't revoke Columbia's accreditation, without which Columbia would be virtually unable to operate. But the administration urged the accreditor to work with the school to make sure it comes into compliance with federal law and, quote, take appropriate action if Columbia fails to do so.

Neither Columbia University nor the Middle States Commission on Higher Education, which accredits Columbia, immediately responded to a request for comment. ————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————— services firms sank unexpectedly last month. The Institute for Supply Management said today that its Purchasing Managers Index for Services providers fell to 49.9 in May from 51.6 in April. Economists polled by the Wall Street Journal had expected a small rise. The contraction points to mounting uncertainty and price pressures for businesses prompted by President Trump's tariff policies. The reading below 50 indicates a first contraction in activity since June 2024. Meanwhile, American employers further dialed down their hiring in May, a sign that the labor market may be weakening amid growing economic uncertainty.

According to the ADP National Employment Report released today, just 37,000 jobs were created last month, down from 62,000 in April. The downturn means job growth was its weakest in more than two years. After the ADP numbers were released, President Trump posted on Truth Social that Federal Reserve Chair Jerome Powell should lower rates. The Fed reiterated last week that officials make interest rate decisions based solely on careful, objective, and non-political analysis.

U.S. stocks were mixed today after President Trump renewed his call for a Federal Reserve rate cut. The Dow fell about 0.2%, the Nasdaq rose about 0.3%, and the S&P 500 stayed flat. and the S&P 500 stayed flat. President Trump's tax and spending mega bill comes with a significant price tag. The legislation would increase budget deficits by $2.4 trillion over the next decade, compared with doing nothing. That's according to a Congressional Budget Office estimate released this morning. The number underlines Republicans' challenge in selling the measure as fiscally sound, even as Republican senators want changes

to the GOP tax and spending mega bill. WSJ tax policy reporter Richard Rubin is here to tell us more. Richard, what are some of the things that senators are looking to change in the big beautiful bill? The House bill has these Medicaid cuts and you've got senators like Josh Hawley

and Susan Collins on the Republican side who want to soften those a little bit. The House bill faces out the clean energy tax credits very quickly and there are senators like Tom Tillis of North Carolina who want to slow that down a little bit. And then you've got a bunch of senators who want to make some of the tax cuts that are temporary in the House bill, particularly for businesses, to make them permanent. And so even as you're hearing a lot of the loud voices talking about how there's not enough spending cuts and too much deficit in this bill, there are some real forces pushing

the bill in the other direction, which is softer spending cuts and maybe more tax cuts. But there is a chance that that CBO estimate could rise after the bill passes through the Senate. That's one of the real questions. Does the Senate feel constrained by the House agreement to keep that deficit number at 2.4ish trillion? The Senate could make that deficit number bigger and just say, okay, fine, like, we'll just have fewer spending cuts or more tax cuts and it's fine. That runs the risk of losing support in the House and even losing support in the Senate, because you've got no more conservative members who are concerned about the deficits.

They also could find ways to cover the cost. Both real ones, like finding other spending cuts elsewhere, tax increases elsewhere, or by saying, oh, well, it's going to increase economic growth, and so we'll assume some revenue comes from that. So they've got a range of choices for how they both change the bill and then talk about how they change the bill. Now the Senate really has to get down to business and figure out what is the magic combination of policies that can get them at least 50 votes.

And they don't have that yet, but that's the work they're undertaking right now. And they're all relatively optimistic that they can get there. So that's the path ahead for the next couple of weeks. That was WSJ reporter Richard Rubin. Thank you, Richard. Great, thank you.

Another thing that the big, beautiful tax and spending bill contains expanded access to health savings accounts or HSAs. At least 60 million Americans currently have access to these accounts, which offer remarkable tax breaks to users who can afford to maximize them. If the Senate passes the bill, millions more Americans could potentially have access soon. WSJ reporter Laura Saunders told our Your Money Briefing podcast about what comes next. Laura Saunders, WSJ News One thing to know is that the current legislation

before the Senate, which the House has passed, would take away none of the current benefits of HSAs, but it would add more benefits. The Senate is getting to work right away and hopes to have something done soon. We don't know quite how that's going to work, but I will say there are 10 provisions affecting HSAs in a positive way and they have not been controversial. Not the way that SALT provisions for state and local tax deductions are controversial or green energy provisions are controversial. We don't know what's going to happen, but they probably have as good a chance as many.

For more from Laurel, listen to tomorrow's episode of Your Money Briefing. Coming up, discount stores are thriving. What does that say about how the U.S. economy is doing? That's after the break. economy is doing. That's after the break. What's better than a well-marbled ribeye sizzling on the barbecue? A well-marbled ribeye sizzling on the barbecue that was carefully selected by an Instacart shopper and delivered to your door. A well-marbled ribeye you ordered without even leaving the kiddie pool.

Whatever groceries your summer calls for, Instacart has you covered. Download the Instacart app and enjoy $0 delivery fees on your first three orders. Service fees, exclusions, and terms apply. Instacart, groceries that over-deliver. The latest data on consumer sentiment showed that American households are not feeling great. The reading reported last week was one of the lowest ever recorded in data going back to 1952. And though consumers are feeling low, discount retailers are riding high.

Both Dollar Tree and Dollar General reported higher than expected earnings for the first quarter of the year. They got there in part because they're reaching a broader consumer base. Yesterday, Todd Vasos, the CEO of Dollar General, said in an earnings call that the company is reaching higher income consumers. During our recent customer survey work, 25% of DG customers reported having less income than they did a year ago and nearly 60% of our core customers noted that they felt the need to sacrifice on necessities in the coming year.

While our core customer remains financially constrained, we have seen increased trade-in activity from both middle and higher income customers. Dollar Tree said something similar. In its earnings call this morning, CEO Michael Creeden pointed to a broader consumer base as the reason behind its strong first quarter. Creeden trends remain strong as we attract customers from other retail channels. In recent quarters, higher income customers have been a meaningful growth driver for us. In Q1, we had measurable sales improvement across all income levels, with the most growth

coming from our higher income customers. In particular, we saw a meaningful traffic increase from customers with household incomes of more than $100,000, demonstrating Dollar Tree's broad appeal. To talk about what these results tell us about American consumers, I'm joined by Suzanne Kappner, who covers retail for the Wall Street Journal. So Suzanne, both higher end lower income consumers are buying from these stores. What does this tell us?

Well, consumers are under pressure and even consumers that have a little more disposable income are trading down to these dollar stores to get bargains and value. So there is this dichotomy a little bit. There are existing core customers who tend to be on the lower end are really feeling strapped, but at the same time, their results are buoyed as they pick up more customers

from these higher income cohorts. One of the things that is looming over some of this is tariffs. What are Dollar General and Dollar Tree planning to do about that? Well, like other retailers, they're rejiggering their supply chains. They're moving production out of China as much as they possibly can.

Dollar General, for instance, said that they've reduced their exposure to China and they are mitigating the impact by using many of the same tactics across the retail industry, working with their vendors to reduce costs, looking for concessions from their suppliers, even re-engineering some products or finding substitute products with lower costs. So they're trying a variety of different things. What does this tell us about the broader state of the economy? This lower income customer has been under pressure for a long time. Ever since inflation started spiking up during the pandemic,

these are the people that have been hit hardest, that have had to live paycheck to paycheck and have had to really watch their budgets. And this is a continuation of that trend for them. But we are starting to see it hit higher income buckets. Now, we are seeing this shift in customers trading down, which shows that even people with a little more disposable income are feeling pressured. That was WSJ reporter Suzanne Kapner. Thank you, Suzanne.

Thanks for having me. And you can hear more from Suzanne discussing with WSJ Markets reporter Hannah Erin Lang about how U.S. retailers like Macy's, Target, and Best Buy are negotiating President Trump's tariffs and what their earnings reports tell us about the resilience of the American consumer in our special episode of What's News in Earnings, out last Monday. We'll leave a link for you in the show notes. In other news, Reddit is suing AI startup Anthropic for using the online discussion site's data without a licensing agreement.

According to the complaint filed today in California, Reddit said the AI company unlawfully used Reddit's data for commercial purposes without paying for it and without abiding by the company's user data policy. Anthropic didn't immediately comment. President Trump said today that Russian President Vladimir Putin told him he would have to respond to Ukraine's recent attack, dampening the prospects for immediate peace between Moscow and Kiev.

In a social media post, President Trump said the two leaders spoke for an hour and 15 minutes, though the post didn't say whether he urged Putin not to launch a retaliatory attack on Ukraine. Trump said that he and Putin also discussed blocking Iran from getting a nuclear weapon and that the Russian leader said he would be willing to get involved in the ongoing conversations.

And a large cargo ship transporting thousands of vehicles is adrift in the Pacific Ocean after several electric vehicles it was carrying caught fire. All 22 crew members were evacuated safely. The lithium batteries used in many electric vehicles are highly flammable. There have been cases of spontaneous combustion, but no ship fires so far have been directly blamed on EVs. And that's what's news for this Wednesday afternoon.

Additional audio in today's episode, courtesy of S&P Global Market Intelligence. Today's show is produced by Pierre Bienamé and Anthony Bansi with supervising producer Michael Kosmides. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.