Are we spending more because we can, or because we have to?

0:28This is the story of the one. On the program today, you, the humble American consumer. We are going to revisit the European economy circa 2010. And look, just put down your phone, will you? From American public media, this is Marketplace.

0:57I'm Kai Rizdahl. It is Wednesday today. This one is the 12th of November. Good as it always is to have you along, everybody. There are a lot of confounding things about this economy right now. And right near the tippy top of that list is the American consumer, specifically the way we keep on spending, even though survey after survey after survey shows we are getting crankier and crankier. Today's data point comes to us from the Bank of America Institute, which tracks credit card and debit card data, which in turn shows consumer spending was up a bit in October. That's month to month and year over year.

1:35But we're spending more in part because we can. And we're spending more in part as Marketplace's Subri Beneshore reports, because we have to. Last month, at the dawn of holiday shopping season, consumers turned up the spending by almost two and a half percent. The year over year growth rate is the fastest since early 2024. David Tinsley is senior economist at the Bank of America Institute. It's been increasing for the last five months. But spending more did not mean we got more. Tinsley says the amount of stuff we buy hasn't actually changed that much since January. We are just paying more for it.

2:15In part due to tariffs, in part due to just overall inflation. Matt Schultz is chief consumer finance analyst at LendingTree. Anybody who's thinking that the budget from last year is going to get them the same amount of gifts this year is probably going to end up being a little disappointed. On average, consumers are actually planning on spending less this holiday season, according to Conference Board Senior Economist Stephanie Guishar. On average,$990 on both gifts and non-gifts. This is down 6.9 % from last year. That is what we have been telling ourselves and people who do surveys. What we say and what we do are different, though, and in reality, according to forecasters, we will probably spend more.

3:01We're expecting holiday spending to grow between 3.7 % and 4.2 % this year. That is a pretty positive number. Mark Matthews is chief economist at the National Retail Federation. One reason shoppers may end up spending more is because some of them can. They're supported by strong fundamentals like, you know, continued wage growth, near record levels of household wealth, good disposable income growth, and relatively low unemployment. That said, there's a big divide between lower income and higher income spending right now. One tip from LendingTree's Matt Schultz on staying within your holiday shopping budget.

3:36Make a list before you go out. Impulse buys have wrecked a whole lot of holiday budgets over the years. Good luck, everyone. In New York, I'm Sabree Beneshore for Marketplace. Seeing as how we do talk about consumers a lot on this program, maybe I should explain why we talk a lot about consumers on this program. It's not going to take long, I promise. According to the Federal Reserve Bank of St. Louis, in the second quarter of this year, spending by or on behalf of consumers was 68.2 percent of the entire economy. That's why. All right. With President Trump's plans for a 50 year mortgage getting, well, an underwhelming reception, it is worth remarking that we have just about come to that time of year when the housing market starts to hibernate.

4:25School's well underway. There are, of course, the holidays and the cold weather. NFL games, perhaps, taking priority over those Sunday open house visits. What have you. But come snow or rain or Thanksgiving dinner, there are signs would-be homebuyers are more active now than in years past. The Mortgage Bankers Association reports mortgage applications were up 31 % last week from the same time last year. Marketplace's Matt Levin has more now on the art and the science of holiday homebuying. November and December are usually slow months for Craig O 'Boyle, a real estate agent in Colorado Springs.

5:00But so far, slow season has been, well, less slow. On Friday, I got three offers on two listings that had kind of just sat for a while. And then I got an offer on another listing that had expanded all price ranges, like the lower end to the extreme higher end out here. The offers came in below listing price, which wasn't surprising. Tis the season for bargain house hunting. It's the same kind of mentality, people going out on Black Friday. Hey, I've had my eye on this house for a while. Maybe now I can get 10 % off. Except instead of waiting in line outside Target, ready to engage in hand-to-hand combat over the same TV, you're much less likely to run into competition at an end-of-year open house.

5:43People are just busy for the holidays. And if you do find a property still on the market, the sellers are usually eager to negotiate. You are kind of dealing with the leftovers from the year, to use a Thanksgiving metaphor. Daryl Fairweather is an economist at Redfin. Those homes have been sitting on the market for longer. The sellers, they start to get a little motivated. Most people who own a home, they want it to be done with by the time Thanksgiving and the holidays roll around. Investors and second homeowners are usually the big buyers this time of year. But this season, they may be joined by more regular home buyers looking to lock in a 6 % mortgage rate on a 30-year fixed.

6:21Economist Danielle Hale at Realtor.com says even though rates started dropping a few months ago, We know that it takes some time for buyers to find out about and then react to lower mortgage rates. And last year, when mortgage rates dropped in September, we saw the pickup in home sales in November, December timeframe. frame. Buyers may also be trying to lock in rates while they are relatively low. Again, economist Daryl Fairweather with Redfin. I think that there is a good chance that this might be a low point for rates and they might be higher come January. It's definitely not guaranteed that the Fed will cut.

7:00Mortgage rates are loosely tied to Fed rates, and it's unclear what J-PAL and company will do next month, let alone what they'll do in 2026. I'm Matt Levin for Marketplace. Let alone, indeed, Wall Street today kind of mixed, kind of meh. We will have the details when we do the numbers.

7:35Here's one from the, man, what a difference 15 years makes file. Think back with me now to 2010 or so. The worst of the financial crisis was in the rearview mirror. But over in Europe, there was a lingering debt hangover, most particularly in a handful of countries in Southern Europe, Portugal and Italy, Greece and Spain as well. Now, though, those four have seemingly gotten their mojo back, and it's a different group of countries that has become Europe's economic problem children. Chelsea Delaney of The Wall Street Journal wrote about it the other day. Chelsea, welcome to the program. Thanks so much for having me.

8:10For those unfamiliar, would you just remind us what it was like in Europe in the 2010s-ish? I mean, yeah, I think the 2010s were a really fraught time in the Eurozone. You know, after the financial crisis, it spilled over into this massive debt crisis in Europe. And we saw, particularly in these southern European economies like Greece and Spain, huge, huge distress. And there were times when they thought the Eurozone was going to break apart. that they would have to leave the euro. So it was a very, very politically, economically, financially fraught time for Europe. Yeah, my memory of that time is everybody was talking about ring fencing, all that Greek debt.

8:53Now, though, as you point out in this piece, you and your colleagues, it's almost flipped a little bit. And Northern Europe are the ones, those are the countries that are somewhat challenged. Yeah, I think we called it the role reversal in our piece. And to some degree, I think that is really what's happened. You know, the problem economies in Europe today are countries like France, which is having a lot of problems balancing its budget. The UK, the same problem. Germany, whose economic model has been really broken over the past couple of years. And then you have the southern economies, which are doing really well.

9:30So Spain has been the fastest growing economy in Europe, but also one of the fastest growing economies in the entire developed world. You have Greece growing a lot as well. Even Italy, which is still stagnating a bit, has gotten a lot of praise from investors for really getting its budget in order. Its stock market has had one of the best performances this year across Europe. So, yeah, we've definitely seen a bit of a flip-flop across Europe. Okay, why? Yeah, that's an excellent question. It's rooted in the Eurozone debt crisis. So, back then, a lot of countries in Southern Europe received bailouts.

10:08And as part of those bailouts, they were basically forced to do austerity. So they had to cut pensions. They had to raise retirement ages. They had to privatize some of their industries. And that was, at the time, extremely painful for those economies. We saw unemployment soar. A lot of people got poorer. But what it did was sort of set the stage for these economies to emerge a lot stronger. They're more dynamic. And so that was one factor as well. A lot of Southern European economies depend a lot on tourism. And post-pandemic, there's just been this massive surge in tourism towards Europe. So that's really benefited places like Greece.

10:47And then if you look at the Northern European side, it's kind of the opposite. The other thing that's happening, though, with the Northern European countries is there is nobody, you know, much as the Northern European countries forced the Southern European countries 15 years ago to adopt austerity measures and reform things, nobody squeezed in the Germans and the French and the Brits. Yeah, exactly. Like you don't make the choice to cut spending unless you're absolutely forced to. And nobody's making the UK or France do that at this point. So they're just kind of continuing on with these patchworks of, you know, trying to get spending done a little bit, but also not really addressing it in a major way.

11:28So there is really no consensus on how to address this right now. And nobody's really forcing them to. Just to bring it to U.S. shores for a second here, nobody's squeezing us either. And we have many advantages globally. We've got the dollar. We've got all of that. But we also have a looming and ever-increasing debt situation here that nobody is forcing us to solve. Yeah, I think if you look at the problems that France and the UK are having, the US has those problems on a much bigger scale. Like the deficits in the US, it's about 8 % of GDP. You know, the UK is 3 % or 4%. So the spending problems are much, much bigger in the US.

12:07But as you say, like, people want to buy US treasuries, they want to buy the dollar, and that allows the US to run bigger deficits. But confidence can be very fleeting. We've seen this many, many times. And I think people are very nervous about the U.S.'s finances. But like France, investors are not yet forcing the U.S. to make these tough choices. Right, right. Slowly and then all at once. Chelsea Delaney at The Journal. We got her in London. Chelsea, thank you so much. Really appreciate your time. Thanks so much for having me.

12:54Corporate earnings season for quarter number three is coming to a close. NVIDIA is the last biggie we're going to get after the closing bell Wednesday next. In the meanwhile, the Dow's hit a fresh record high and the S &P 500 is trading 16 % higher than it was at the beginning of the year. The average P.E. ratio of the S &P 500 right now is 25. That's Michelle Lowry. She's a professor of finance at Drexel University. That P.E. ratio she mentioned is what we're going to spend the next couple of minutes on. P.E. stands for price to earnings. It's a ratio, a company's stock price divided by its earnings per share.

13:33I think maybe the easiest way to explain this is to start with a really simple example. We do love some simple examples. Let's take a company. Let's suppose it has earnings per share of$1. $1. Got it. And we're going to make this company go out of business in the very near future. Sad, but OK. Go on. When it goes out of business, it's going to pay out all of its earnings. So how much would you pay for one share of stock of this company? You'd pay a dollar. Right. Pay a dollar, get a dollar. That company's P.E. ratio is one. But. Suppose that this company is going to live for the foreseeable future.

14:13We're not going to kill it off tomorrow. It might make another dollar next year or more than a dollar the following year. Investors, as they do, are going to price this stock based on their expectations of future growth. And the P.E. ratio thus goes up. Now, a huge chunk of the S &P gains of late have come because of the hundreds of billions of dollars that are being invested in artificial intelligence. So bearing in mind that the average P.E. ratio on the S &P right now is 25. Remember, price to earnings, the ratio is 25. What does that tell us? People have very optimistic expectations of how fast these A.I.

14:53companies are going to grow into the future. That's P.E. present day. The historical context, as it always is, I'm obliged to point out, is helpful. There are kind of two episodes in the past where price earnings ratios have shot up to really high levels. John Steinson is a professor of economics at UC Berkeley. One was right before the Great Depression. OK, the other one? In the late 1990s during the Internet bubble. Oh, great. Just great. Of course, this time could be different. You know, this is, you know, AI could turn out to be just as good as people are hoping. But certainly in the past, when price earnings ratios have been this high, people have ex-post been, you know, disappointed.

15:42Here's Michelle Lowry one more time. The reality is nobody knows. We're all just sitting here trying to figure it out right now. And this is on average across the market how investors are thinking about it. Nobody knows, gang. Nobody knows.

16:24Coming up. And I have to do either push-ups or squats or something like that. I mean, how badly do you want to be on your phone, you know? First, though, let's do the numbers. Dow Industrials added 326 today. That is seven-tenths of 1%, 48 ,254 on the blue chips. As I said, another record high. The Nasdaq down 61 points, about a quarter percent, 23 ,406. The S &P 500 ticked up four points, a tenth percent, 68 and 50. Matt Levin was telling us about the stronger-than-expected activity in housing. Remax down 0.6%. Zillow down 2.75%. Anywhere Real Estate, parent company of Coldwell Banker and Century 21, among others, moved up 0.4%.

17:08Ticker symbol on that one. It's a good one. H-O-U-S. On Holding rang up 18 % today. That's after the shoe company posted quarterly results that exceeded expectations. They expect sales to jump some 34 % this year. That's a lot for shoes. Bonds up. Yield on the 10. Your T-note down 4.06%. You're listening to Marketplace. This is the story of the one. As head of maintenance at a concert hall, he knows the show must always go on. That's why he works behind the scenes, ensuring every light is working, the HVAC is humming, and his facility shines. With Grainger's supplies and solutions for every challenge he faces, plus 24-7 customer support, his venue never misses a beat.

17:53Call quickgrainger.com or just stop by. Grainger, for the ones who get it done.

18:03This is Marketplace. I'm Kyle Rizdahl. Here's a phrase you might not have heard in a while. Subprime borrowers. If you're having flashbacks to the financial crisis right now, I get it. So many mortgages given to the riskiest of borrowers back then. The 2025 version of that is car loans. Last month, Fitch Ratings tells us, 6.6 percent of subprime borrowers were at least 60 days late on their car payments, the highest delinquency rate on record, which for this data set goes back to the early 1990s. The why of this thing you can probably imagine. The what's it going to mean? Here's Marketplace's Daniel Ackerman.

18:43A car can be an economic lifeline, says Jessica Caldwell of the car buying site Edmonds. Going to school, going to work, taking their kids where they need to go, it's really kind of the cornerstone of your life for most Americans, especially in places that don't have good public transportation systems. And unlike many mortgages or student loans, which have more borrower protections, Caldwell says the consequences of missing car payments can happen fast. Their car could be repossessed. And the reason subprime delinquencies are rising now should be clear to anyone who's gone car shopping lately.

19:16Car prices are at record highs. Ted Rossman is senior analyst at Bankrate. We're talking about roughly$50 ,000 on average for a new car. Combine that with higher interest rates in recent years, and it means the cost of financing a car is rising even faster than the cost of everything else, says Ricard Bandebo of VantageScore. When we look across all different loan products, the average loan size amongst auto loans has increased more than any other loan product. For Christopher Palmer, a finance professor at MIT, the delinquencies suggest that the vulnerable part of the economy is having an even tougher time making ends meet.

19:55But if issues with subprime lending call to mind the subprime mortgage crisis, Palmer says not so fast. There is a substantive difference between subprime car loans and subprime mortgages in that the mortgages tended to be systemic. Mortgage balances economy are nearly eight times greater than auto loans, according to the New York Fed. So you had a lot of financial institutions that could not withstand the foreclosure crisis in houses. We don't see a lot of institutions right now that seem so tied up and so exposed to car loans. Plus, Mike Brisson of Moody's Analytics says even though more people are behind on car payments, we're not seeing them going into bankruptcy and defaults, which means banks aren't writing off these loans just yet.

20:40I'm Daniel Ackerman for Marketplace.

20:47Hey, so how's your screen time these days? Three hours a day? Seven? More? No judgment here, I promise, but any guesses what it is on average? According to the healthcare data company Harmony Healthcare IT, it's five hours and 16 minutes. And you know what that is, right? It's a business opportunity for the cottage industry that's developing to help you get off your phone. Marketplace's Maria Hollenhorst reports. About a year and a half ago, a friend of mine told me about an app she'd downloaded to help curb her screen time. It turns on the camera and it watches me. Like camera physically tracking your movements.

21:31And I have to do either push-ups or squats or something like that for every minute of free use of the apps that I've chosen to lock. I know. Terrifying. Her name's Hannah Palma, and the app is called Clear Space. You can tell it how much you want to use certain apps, like Instagram or TikTok, and it will prompt you to do an exercise or take a deep breath each time you open them. Oh, and it costs$50 a year, which Hannah pays gladly. I realize it's kind of silly that I'm paying monthly for my phone, and then I'm paying yearly to not use it. But I think that's the best way that I've stayed healthy in managing my screen time.

22:14ClearSpace is just one of dozens of companies that have popped up in recent years that are in the business of screen time reduction. And Hannah, who's actually a mobile app engineer, convinced me to sign up too. And for a while, it kind of worked. I found that just taking a pause before opening TikTok at least helped me become more conscious of my scrolling. And like a lot of these new apps, it had a dashboard where I could track my progress. It's fascinating, isn't it? Don't use your phone, but like come to this dashboard, which will show you how much you've not used your phone. Zotanya Sujan is a reader in communication and social technologies at the London College of Communication.

22:49And she said that those gamified features like stats tracking, streaks, and the ability to add friends are the same ones that social media companies use to make their platforms so sticky in the first place. It's that little dopamine hit we all get when we see notifications from our virtual lives. I think digital well-being and digital detox and these apps are trying to give people, well, weirdly, using the same systems and tools to try to give people a sense of control over very pervasive interfaces and technologies. Some startups, including Brick, Bloom, and Block, yes, that's three different companies, sell physical devices that restrict apps when you tap them.

23:27They're priced between$30 and$60, sometimes with an additional monthly subscription fee. But almost all of these systems have ways to cheat a little, break the rules that you've set for yourself. I've used all of them. The lockbox phone case, Brick, Freedom Software, like lots of different things. I think the challenge is the magnetism of the phone is strong and the functional use of the phone is strong. Ben Goldhirsch developed his own homemade screen limiting solution, which he calls... The Staff of Destiny. It's a big walking stick. He picked it up while camping in Alaska that he screwed his phone case into.

24:04Which is super embarrassing to kind of walk through the airport with your phone on a stick. But it did have kind of a wizard vibe. It's designed to make scrolling inconvenient. And with that same idea, a company that Goldhirsch co-founded called Matter Neuroscience is now developing a six pound phone case priced at$209. And if you're hearing this and screaming$200 phone case,$50 app, what in the capitalism is going on here? Yes, it is crazy. I think it's crazy to pay to not use your phone. I think you'd think that it would just be up to people to be able to do that. So Tonya Sujon again at the London College of Communication.

24:42But the thing I think the most is that being chronically online and being deeply engaged with your phone is not like a personal fault. It's something that, you know, we are using these technologies the way that they're designed to. When I checked in with Hannah a few weeks ago, it was clear she'd been a lot more dedicated to her screen limits than I have. I have a 74-day streak that I'm really proud of. My streak is only three days. So she invited me to join a challenge where we can compare our scrolling minutes and do exercises to earn more. Okay, time to do some squats. And I know that this gamified strategy is straight from the big tech playbook.

25:24It's not going to let me cheat. But it does make me feel a little bit closer to my friend in real life. I'm Maria Hollenhorst for Marketplace.