Hey, big spender!

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0:36Wealth Enhancement can help you build the right blueprint for investing, retirement, tax, and more. With offices nationwide, there's an advisor who's ready to listen and craft a blueprint for your future. Find out more at wealthenhancement.com slash build. It was the rate cut everyone expected, but now what? From American Public Media, this is Marketplace.

1:11In Washington, D.C., I'm Kimberly Adams in for Kai Rizdahl. It's Wednesday, September 17th. Good to have you along. The Federal Reserve Open Market Committee's announcement today of a quarter point rate cut wasn't a surprise. And all of the FOMC members, except the newest member of the Fed, Trump appointee Stephen Myron, were on board with the modest cut. Myron won it half a point. Fed Chair Jerome Powell was clear that this rate cut is an acknowledgement of a shift in attention from the inflation side of the Fed's dual mandate to the labor market side. Because despite the tariffs. I would just say that the risks there have been less than one might think.

1:55And in terms of the labor market, what we're seeing is unemployment is still low, still a relatively low rate, but we're seeing downside risks. And what are some of those downside risks? You see people who are sort of more at the margins. So kids coming out of college and younger people, minorities, are having a hard time finding jobs. The overall job finding rate is very, very low. However, the layoff rate is also very low. So you've got a low-firing, low-hiring environment. environment. And the concern is that if you start to see layoffs, the people who are laid off won't, there won't be a lot of hiring going on.

2:36So that could very quickly flow into higher unemployment. Not to mention what's going on with immigration. There's very little growth, if any, in the supply of workers. And at the same time, demand for workers has also come down quite sharply. And to the point where we see what I've called a curious balance. So while Powell says yes, there is still inflation risk from tariffs and other economic policy. We have a situation where we have two-sided risk, and that means there's no risk-free path. Wall Street today, traders knew it was coming, but still liked it. We'll have the details when we do the numbers.

3:42like Powell said the Federal Reserve is in a tricky place as it tries to balance a weakening job market and strong consumer spending. We just learned how strong in the August retail sales report that came out yesterday, which showed a third month of increased spending. The thing is, those retail sales are growing more dependent on the shopping habits of a smaller group of consumers. The top 10 percent of earners in the U.S. accounted for nearly 50 percent of spending in the second quarter, according to Moody's Analytics. That's the highest level since it started tracking this data. Someone asked Fed Chair Powell about this at the press conference today, and Powell acknowledged it but pointed out even spending by those at the top is still spending driving the economy.

4:28So what does it mean to have that much of the economy hinging on this kind of spending imbalance? Marketplace's Christian Schwab reports. Soaring home values and financial markets have helped the rich transform into the wealthy, And the economy does benefit from this in some ways. In fact, it's probably benefiting right now. That has helped keep sales and the economy stronger than it would have been. Jim Wilcox, an economist at UC Berkeley, says without the high earners, there'd be more people feeling inflation and less spending. And the unemployment rate would be higher. It's currently at 4.3 percent.

5:10But the thing about wealth that's based less on income and more on housing, stocks and bonds is that those markets and the money tied up in them are more volatile. And just as it has gone up by an enormous amount in recent years, it can retrace some of that. If that happens, high earners are going to feel less secure. Mark Zandy is the chief economist at Moody's Analytics. It's not like they're going to run for the bunker, but they become more cautious. More cautious about home renovations, new cars, expensive trips. Even doing that, you know, becoming less aggressive in their spending would be enough to cause the economy some big problems.

5:51Because the spending happening by the majority of Americans is not enough to bankroll the economy. Zandi says the bottom 80 percent of earners, their spending has increased, but not faster than the rate of inflation, which means in some ways they're actually pulling back. And of course, if top earners are feeling any pain, middle and lower income people are hurting more. This imbalance of high earners propping up the economy, it's become more cemented, says Michael Linden, a senior policy fellow at the Washington Center for Equitable Growth. And it has created a self-reinforcing loop where more and more the economy is working for people at the top and not middle and bottom.

6:38That can show up in everything from the selection of stores that are at the mall to what kind of policy is prioritized in government. I'm Kristen Schwab for Marketplace.

7:08Many of the questions at today's Fed press conference were about how tariffs are showing up in the economy. A good example of this is the experience of many of the businesses in the online marketplace Etsy. Almost 90 % of sellers on that platform are a business of one, and many are facing their own make it or break it moment as tariffs threaten their entire business model. Chabeli Karazana is an economy and child care reporter at The 19th, and she wrote about the landscape for Etsy sellers. Chabeli, thanks for being here. Thanks so much for having me. For those who aren't so acquainted with Etsy and how it works, who is the typical Etsy seller and what kind of products are they selling?

7:50So about 80 % of Etsy sellers are women. I like to joke that it's mom and pop, but mostly mom shops, and it's largely handmade items, jewelry, apparel, a lot of handmade work. You talked to a few Etsy sellers while reporting this piece, but I want you to tell us about Kelly Abernethy, who sells jewelry on Etsy, and what tariffs have meant specifically for her business. So Kelly's story really struck me. She is a person who five years ago had experienced a lot of grief. She lost two babies to miscarriage and sort of started her business from that. She wanted to make some commemorative jewelry and thought, hey, why don't I put this?

8:35She never made jewelry before, but she's like, why don't I put this on Etsy, see if somebody else wants it? And it turned into her full-time business. The thing that was interesting about Kelly's story is she tries to source the majority of her products in the United States. But there is one item, the rose gold in that signature necklace that she makes that she cannot find in the US. So she gets it from China. Now she's really in a place of wondering, will I be able to continue making this item with the 30 % tariff that is on imports from China in the long term? These small businesses like Kelly's don't have a lot of wiggle room or funds to be able to weather something like that.

9:14And so she's really wondering if she's going to be able to make the thing that launched her business. Well, say more about that. Why do you think Etsy sellers are more exposed to tariffs right now than other small businesses? So we know this is not just Etsy sellers, but nationally, women-owned businesses tend to be very, very small. Some 90 % of them have no employees at all. So we're talking these micro micro businesses that have historically struggled with capital. The challenge for a lot of these sellers coming into the start of these tariff increases was, can I buy some stuff in bulk before these tariffs come in?

9:53And for a lot of Etsy sellers, the answer was no, they didn't have the cash up front to be able to do that. And now as the tariffs have started to roll in, they are struggling with figuring out, you know, am I going to be able to absorb this increased cost? Can I pass it on to my consumer? Or are people just going to say, you know, forget it, I don't need a handmade item. I'm just going to go get something on Amazon. What happens when the sellers try to source from, you know, U.S. providers or U.S. suppliers? That is a challenge too, because what we heard from a lot of them was they cannot find comparable items in the US for a comparable price.

10:33If they can find them, which Kelly has not been able to, but if they can, sometimes they're often much more expensive in the US. And they might also be really different, which is something I didn't think about, but was interested in as we reported this story was, you might find something similar in the US, but it's not exactly the same. So now you're taking new marketing pictures, you're letting your customers know. So it is a challenge, I think on multiple fronts for folks to source stuff in the U.S. So where does this leave sellers specifically here in the U.S. and those women and moms that you were talking to?

11:09I don't think we know quite yet. I think we're starting to see this ripple effect take place. I think a lot of the sellers that we spoke to said that they're sort of in a holding pattern. They're not quite sure how this is going to affect their business just yet. They might have some product lined up and don't need to make those purchases from overseas just yet. When they do is when sort of the rubber is going to meet the road a bit. So I think this next holiday season, which is busy season for all of them, is really when we're going to start to see where that impact is going to be focused. What's Kelly going to do?

11:45Kelly doesn't know. Kelly told me that she, there's something that she told me that really stuck with me. She said, you know, I didn't come into this to make a lot of money. I just wanted to be doing something that I enjoyed and was passionate about. And that was my American dream. And now I'm sort of feeling it slip away. Chabeli Karazana is an economy and child care reporter for The 19th, writing about tariffs and Etsy sellers. Thanks, Chabeli. Thank you.

12:34Stepping away from monetary policy for a minute, let's turn to energy policy. For most forms of renewable energy, especially wind and solar, the GOP's tax and spending law that passed this summer was bad news. Just a few years after Democrats and President Joe Biden expanded tax credits aimed at boosting renewable energy development, the new law ends them years ahead of schedule. One form of renewable energy was spared, though. Hydropower. It's not entirely clear why, but certain investments in hydro projects remain eligible for federal tax credits into the 2030s. But while it should be a good time for the sector, the industry is also confronting a once-in-a-generation problem.

13:20Marketplace's Henry Epp explains. Here's the thing about hydropower in the U.S. these days. We're not building much more of it. Hydro accounts for about 6 % of our electricity, and it's been at that level for the last few decades. The reality is we've sort of tapped the biggest potential sources of hydropower in the United States at our nation's grid. Jennifer Garson is with the energy consulting firm Waypoint Strategy Group. She previously worked at the U.S. Department of Energy. There are only so many rivers that you can actually dam and be able to still provide safe passage for fish and build it in an environmentally compatible way.

13:58And we already blocked a lot of those rivers to generate power many decades ago. Think the Hoover Dam, for example. The problem with those tax credits that hydro projects can tap into for the next eight years is they're for new electricity generation. But there are ways that hydro companies can access them, even if they're not building the next Hoover Dam. Updating the electric generating equipment, the generator, the turbine, all the parts that are used to make power. Malcolm Wolfe, president of the National Hydropower Association, says upgrade enough of that stuff and the owner can get a tax credit.

14:33The other way is to add hydropower turbines to existing dams that don't have them. And there are a lot of those. There are 90 ,000 dams in America, and only 3 % are used for power generation. The rest are used for flood control, irrigation, water storage. But all of those other uses for dams also make for a big hurdle for hydro projects, permitting and licensing. Depending on where you are in the country, you could have as many as 10 or more different entities that have a right to have a permit in the process. Caitlin Grady is an associate engineering professor at George Washington University.

15:14There's fish and wildlife, both at the federal and the state level. There are permits or reviews associated with things like the Endangered Species Act, with the Clean Water Act. For good reason, Grady says. Dams on rivers impact wildlife habitats and surrounding communities. But for hydropower operators, the challenge is the time it takes to license a facility. Eight years on average, according to the National Hydropower Association. It's longer on average than licensing a nuclear plant, which is kind of crazy. Those hydro licenses usually last for 50 years. The last big wave of hydro development in the U.S.

15:53was about 50 years ago, so hundreds of facilities are up for re-licensing. That's what the company First Light Power is navigating with two of its hydro facilities in Massachusetts. Justin Trudell is the company's CEO. We are now in year 13 of the five-year licensing process for these projects. And it's not finished. This summer, several groups appealed the company's state water quality certification, arguing it hasn't done enough to mitigate erosion and impacts on certain fish species. So Trudell says First Light is waiting to make upgrades while it operates under an extension of its old license.

16:29So we're kind of stuck saying, look, we know where we need to go. But while this process is playing out, we can't get there. Trudell says his company has the means to keep its Massachusetts facilities running. But some smaller hydro operators haven't survived relicensing. Over 60 facilities have surrendered their licenses in recent years, according to the National Hydropower Association. The challenge, says consultant Jennifer Garson, is finding investors who are willing to wait. Sometimes capital providers may not have the patience for the length of time that it will take to recoup. There is one source of capital that could come to hydro's aid, big tech looking to power data centers.

17:08In July, Google signed a$3 billion agreement to buy hydropower. The hydro industry hopes other tech companies follow suit. I'm Henriette for Marketplace.

17:37coming up starting school again at 50 brings out all the internal fears that i have about feeling old. School is back in session. But first, let's do the numbers. The Dow Jones Industrial Average gained 260 points, six-tenths of a percent, to close at 46 ,018. The Nasdaq slid 72 points, three-tenths percent, to finish at 22 ,261. And the S &P 500 ticked down six points, a tenth of a percent, to end at 6 ,600. In non-Fed-related news, Jerry of Ben & Jerry's says he's quitting the ice cream biz. Jerry Greenfield says the brand's advocacy on progressive issues created an untenable conflict with parent company Unilever.

18:24Unilever added nine-tenths percent. Bond prices fell. The yield on the 10-year T-Note rose to 4.08 percent. And you're listening to Marketplace.

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20:07This Marketplace podcast is supported by Justin Wine. Get the celebration ready with Justin Wine. Since 1981, Justin has been producing world-class Bordeaux-style wines from Paso Robles on California's Central Coast. Justin offers curated gift sets, library wines, magnums, and even custom-etched bottles. Visit justinwine.com and enter MARKET20 for 20 % off your order. Justin offers the perfect holiday gifts for clients, colleagues, friends, or family. Be sure to check them out at justinwine.com to receive 20 % off your order for a limited time. This is Marketplace. I'm Kimberly Adams. Investors and lenders have been anticipating that quarter point rate cut for a while.

20:55As Powell reminded folks today, the Fed doesn't set mortgage rates, for example, But those who do basically have already priced the cut into those mortgage rates, which have come down in recent weeks. They're now the lowest they've been in about a year. The average 30-year fixed is hovering somewhere between 6.1 and 6.4 percent, depending on which tracker you're looking at. The drop in rates has sparked a jump in homeowners refinancing, according to the Mortgage Bankers Association. But it hasn't motivated nearly as many people to jump back into the market to buy. Marketplace's Samantha Fields has more.

21:33At the beginning of this year, mortgage rates were hovering around 7 percent. Two years ago, they hit almost 8 percent. Mike Frattantoni at the Mortgage Bankers Association says now that they're below 6.5, it might make sense for people who bought at those higher rates to refinance. And in the past week's data, a lot of them made the jump. We saw almost a 60 % increase in the volume of refinance applications. He says hundreds of thousands of borrowers now have the option to bring down their mortgage rate and their monthly payment by refinancing. Just as a rule of thumb, oftentimes a lender will say if you can save half a percentage point, that's often enough to at least explore the opportunity.

22:16And right now, many recent homebuyers can save more than that. So far, though, prospective buyers don't seem moved by the drop in rates. There was only a 3 % jump in mortgage applications from people looking to buy last week, compared to that nearly 60 % jump in people looking to refinance. Danielle Hale at Realtor.com says some of it is just timing. People who are ready to refinance have probably been thinking about it for a while and have just been waiting for their opportunity. It's also not as big or as complicated of a decision to refinance as it is to buy, she says. There aren't as many moving parts.

22:52Buying a home has a longer lead time than the decision to refinance, and so I think we will eventually see some more interest in home buying. It's also likely that people who aren't actively searching for a house aren't even aware that rates have come down, says Ali Wolf at Zonda. You're a journalist. I'm an economist. We study housing. We look at mortgage interest rates all day, every day. the average consumer doesn't. So it can take a little while for people to realize. And once they do, she says there's still the issue of home prices, which are near record highs, and the question of whether people feel like it's a good time to buy.

23:28A lot of consumers are looking at the economy, and the economy looks shaky, and there's job instability, and there's a lot of people that are saying, okay, great, mortgage rates are down, but should I make the largest investment of my life today? Maybe not. Maybe I need to wait until things look a little more stable. I'm Samantha Fields for Marketplace.

24:05Most homeowners will spend a big chunk of their lives paying off their mortgages, if they ever do. But for those who can pull it off, freeing up that income can open up all kinds of new opportunities. We checked in with someone who took advantage of the chance. My name is Linda Frembis. I'm from Douglas, Massachusetts. I am 50 years old, and I recently have returned to college to eventually join a radiologic technology or rad tech program. starting school again at 50 brings out all the internal fears that I have about feeling old I stopped coloring my hair during the pandemic and so that was one of the things that even working in tech I was very nervous about because in tech you know tech companies prize youth it made me nervous and then you know I realized okay you know with that that saying with age comes wisdom is so true.

25:03And so honestly, walking into an in-person classroom is not that different from the last time I did it a few decades ago. And the best thing about it was I walked in and I saw people of all ages, all backgrounds, all there for very specific reasons. And I felt right at home. What has allowed me to make this career change is that we paid off our mortgage. I had gotten a big bonus from an acquisition at work. So when we decided, it was in February, we just decided, hey, when the bank opens on Monday, we should probably just get rid of this. Let's get this payment off of our back. I'm not quite sure what I expected happens to someone when they pay off their mortgage.

25:49It is two ATM slips and a promise that you'll get the promissory note in the mail. And that's it. And I was expecting, I don't know, balloons falling from the ceiling, maybe some cake. I don't know. And so when I decided to go back to school and a pretty hard pivot away from a corporate office-based environment to a healthcare setting, the process actually happened really quickly, I think, because it has been kind of sitting at the back of my brain for a long time.

26:27I'm a two-time cancer survivor, and some of the best people I've ever met, I've met on my worst days. And I just really want to be that for someone. I've had a lot of recent conversations about why, like, why would anyone in their right mind in this economy leave a very well-paying corporate job to go back to school? and who knows what the job market will look like by the time I'm ready to rejoin. And my answer to that is, I really think people as humans have great capacity for change. And I'm hoping that applies to me.