Predicting the Fed's every move

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0:42But it actually tastes delicious. Try one of cachava's indulgent flavors today. Shop now through December 2nd to get 30 % off your first purchase of two or more bags. Go to cachava.com and use code NEWS. That's K-A-C-H-A-V-A dot com, code NEWS. On the program today, economic news the hard way. We'll swing by the labor markets. And then we'll go to the movies. PG only, please. From American public media, this is Marketplace.

1:25In Los Angeles, I'm Kai Rizdahl. It is Wednesday today, the 26th of November. Good as always to have you along, everybody. Fair warning, right at the top of the program today, the first six or so minutes are going to be a little bit dense, information packed, eating your economic vegetables, if you will, but in a good way, I promise. Stop number one is the government bond market, treasuries. Because as I believe I've said, a time or two, stocks get all the glory, but the bond market can actually tell you things about where this economy is going. It can tell us what investors think the Federal Reserve is going to do with interest rates, about which more detail in a minute, by the way.

2:06Bonds can also tell you where labor markets might wind up and which direction inflation might trend. So Marketplace's Justin Ho starts things off by walking us through the signals that the bond market has been sending of late. Let's start with yields on short-term government debt, treasury bills that mature in a year or even less. Really short-term interest rates are really a function of the Federal Reserve. That's Guy Labas, chief fixed income strategist at Jenny Montgomery Scott. He says those yields tend to move in the same direction as the Fed's interest rate decisions. And lately, short-term yields have been falling.

2:39Short-term interest rates are telling us that while the markets might debate over whether the Federal Reserve is cutting in December or January, that they're still in cutting mode. Then there's medium-term government debt, treasuries that mature in three in five years. Winnie Cesar, global head of strategy at Credit Sites, says those yields can tell us more about what's next with the overall economy. When you are looking at that three to five year segment, you're trying to assess what is a reasonable forecast for GDP growth, for inflation, for consumer spending. Cesar says yields on that medium term debt have been falling too, which means markets think the Fed will continue to lower interest rates.

3:21And so I think that reflects to me that the market is expecting inflation is going to continue to come down and the labor market might continue to feel a bit soft. Finally, there's long-term government bonds that mature in 10 years, even 30 years. Yields are lower, but they haven't declined as much as yields in the two and five year part of the curve. That's Randy Vogel, head of fixed income at Wilmington Trust. He says investors expect the Treasury Department to issue a lot of long-term debt in the future. Which would mean investors need more of an incentive in the form of higher yields to purchase that treasury bond.

3:58But Vogel says the fact that 10 - and 30-year bond yields are holding relatively steady is also a sign that investors don't feel the need to dump a bunch of extra money into long-term government debt. If the markets were really concerned about the economy heading into a recession and growth turning negative, that I would expect to see the long-term part of the market outperform. Instead, Vogel says yields on long-term bonds have been telling us that markets expect decent economic growth. I'm Justin Ho for Marketplace. Wall Street on this day before a day off. Number one, thank you technology stocks.

4:33I told you equities get all the glory. And number two, so what do you think? Is the Fed going to cut interest rates? Survey says, yeah, probably. We'll have the details when we do the numbers.

5:06Okay, so about what the Fed is going to do on interest rates. The bond market has some thoughts on that, as Justin was just telling us. So, too, though, does the futures market, a place where you can bet, that's not really too strong a word, on almost anything. Which way hog prices are going to go? Gold? Also, the federal funds rate, the central bank's key interest rate. Fed funds futures, as they're called, are where investors go to place their bets. And it's where everybody else can go to find out what the markets are thinking the Fed is going to do. Marketplace's Sabri Beneshaw explains. Fed Funds Futures are run by the Chicago Mercantile Exchange, and they allow you to bet on what interest rates are going to do.

5:49So it is a measure of expectations of how the Fed is likely to set monetary policy. Matthew Luzetti is chief U.S. economist at Deutsche Bank. But Fed Funds Futures aren't just, like, gambling. I don't know that I would think about it only as a bet. It serves fundamental purposes as well. It lets banks and other institutions hedge in case interest rates move unexpectedly. Basically, if you're a company or a bank and a change in interest rates is going to cause you to lose money for whatever reason unique to you, you can make bets that would help you if that happened. Matt Pagnotti is a senior analyst at Capital Advisors Group.

6:23You have banks kind of hedging their funding costs. You have asset managers hedging like interest rate risk, all sorts of stuff. So lots of very important reasons for people to bet on the Fed's interest rate policy. But some people do do it just for the betting. It's really an interesting, like, waterfall cascade of who trades them. James Urio is a director at TJM Institutional Services, and he trades Fed Funds Futures. Because it starts out with the people who have the genuine risk that needs to hedge that risk. And then speculators come in and market makers and individual traders. But over on the bleachers, watching all of this betting go down, are people, governments and businesses all over the world.

7:10Gennady Goldberg is head of U.S. rate strategy at TD Securities. It's a very good way to see what investors are expecting, what markets are pricing in for the future path of rate cuts. And you know who else would also like to know what markets are expecting the Federal Reserve to do? The Federal Reserve. Matt Pagnotti with Capital Advisors Group. They would never publicly admit this, but there is a kind of a feedback loop that goes on between the market and the Fed, where the Fed is constantly kind of gauging the impact of its expected policy path. The Fed wants to make sure it is getting its message across about what it is doing.

7:48And if it sees that markets are deviating from reality, it might occasionally step in with a speech or a press conference to reset expectations. In New York, I'm Sabri Beneshore for Marketplace.

8:21I went to see the new Wizard of Oz movie last night. Thoughts available upon request. But whether this Thanksgiving is about the food or the football or the family for you, not necessarily in that order, a lot of you are probably also looking forward to going to a movie. Thanksgiving week is a famously high-traffic time for theaters. Last year broke records$420 million in ticket sales across the five-day holiday period. That is, give or take, 30 million moviegoers. What's different about this year, though, is that the blockbusters you might be going to see are probably rated PG. Ben Cohen writes the Science of Success column for The Wall Street Journal, where he explored this recent PG movie boom.

9:02Ben, welcome to the program. Good to have you on. Thank you for having me. It's entirely possible that people are going to know this, but just so we all have the same truth here, PG audiences are what? G we kind of know, PG-13 we kind of know. PG are what? I think anything below 13, but also above 13, I think at this point it is like the widest possible audience for a movie. Okay. Used to be that PG was, and I'm paraphrasing here, PG was kind of lame for a lot of people, right? You really wanted to be that edgy PG-13 thing, and now it's the bomb, I suppose. I think those are the technical definitions, yes.

9:42Someone told me that it was almost like the opposite of the Goldilocks rating. Like people with families thought that PG was almost too edgy, like a little bit too much beyond G. And it was clearly for adults like not edgy enough. It was not PG-13. But in recent years, especially the past two years, it has become just right. Okay. Explain. What is going on here? There are a lot of things going on. The first is that we should establish that eight of the ten most popular movies at the box office last year were PG. Right now, number one and number two at the box office this year are PG. They will probably be jumped pretty soon by two other PG movies, Wicked for Good and Zootopia 2.

10:22And so there are lots of explanations for why this is happening. The first, we should just get out of the way, is probably the most depressing one, which is that the success of PG movies is also partly about the struggle of PG-13 movies. So, you know, PG-13 has always ruled the box office. Most of the biggest hits of all time were PG-13. The movies that we think of as, like, the movies are PG-13. But they are starting to struggle in recent years. And even, like, the movies that used to be sure things, like superhero franchises, are going through a bit of a slump right now. And in their place, we are seeing PG movies start to rule the box office for really the first time in decades, if not ever.

11:05One of the things you write about that fascinated me was this thing you call participatory fandom with these PG-13 movies. Talk about that for a second. Yeah, I actually got that from this National Research Group report that studied generational behavior at the movie theaters. And participatory fandom is like singing along to Wicked or K-pop Demon Hunters when Netflix deigns to release the movie in theaters. Or dressing up for the Minions or like getting all the Minecraft references that parents just wouldn't understand. Those are all these like full-blown viral frenzies that have turned movies into movements in the past two or three years.

11:44And it is creating the sense of FOMO for children who are really like the target demographic for these movies. because you might wait for a month for a movie to become available on demand at home if it means not paying for tickets and a babysitter, but your kids won't wait because for them, the whole point of seeing a movie is to get in on all these memes around that movie, which means they have to see it as soon as possible. Okay, kids not being patient is a key thing here, and you talk about this at the beginning of the piece, and I'm going to sort of end this interview with it. You point out that the core audience for these PG movies cannot go by themselves to the movie theater because they are mostly children.

12:22What does it say about the industry that their go-to demographic now are little kids and sort of older kids, but that's what they're banking on? I think one thing it says is that it's actually pretty surprising. If you think about where we were four or five years ago, there was like real doubt that those kids who have grown up with the ability to watch any movie on any device anytime they want would actually be interested in going to the movie theater to see movies, right? But it turns out, Gen Alpha now, which consists of kids who are 12 years old and younger, they prefer going to the movie theater more than Gen Z or Millennials or Gen X.

12:59So these kids who can watch movies anywhere, anytime they want, it turns out where they really want to watch movies is the movie theater. Right. And of course, the studios are banking on that to carry through to when they're 20 and 30 and 40. Exactly. It sets up this pattern of behavior that hopefully when they're adults, they will take their own kids to see PG movies and maybe they'll actually come and be in the habit of seeing PG-13 and R-rated movies when they're actually able to do that. Ben Cohen's column in the Wall Street Journal is called Science of Success. Fascinating piece on PG movies.

13:29Ben, thanks a bunch. I appreciate your time. Thank you, Kai.

13:53We have at our very fingertips access to virtually all the information we could possibly want. It seems routine almost 30 years after Google was founded. On the very long list of ways that that company changed our lives and our jobs is medical care, or more accurately, self-medical care. Because why go to an actual MD when Dr. Google can do it for free? And now medicine is competing with and integrating with another new technology. Here's another installment of our artificial intelligence-focused miniseries, My Economy. My name is Hassan Ben-Shikron. I am a pulmonary as well as a critical care physician, and I am currently in San Diego.

14:37The question about whether patients will use AI is not even a question. It was not a surprise to me. The surprise to me was colleagues of mine that we have not learned from history about Dr. Google. The patient revolution is already here. Patients do not wait for permission to use Google, and they're not going to wait for permission to use AI either. And so when my colleague told me that they took AI to the doctor and the doctor said, well, then you don't need me. You're actually fulfilling the prophecy. Let's meet them where they are and not be speaking at them and thinking that we are the ones wagging our finger at them and saying, you shouldn't do it.

15:18What we can do is I'm going to do a biopsy for you. You're probably going to get the results. You're probably going to want to check AI. All I'm asking is to wait until you come to me, bring me what AI says to you. Let's discuss it together because I have your context and AI doesn't. that's establishing the trust with the patients, not making them feel that they have to hide it from you.

15:49There are several ways that I use AI in my day as a physician. So some of the models I use are Ambien Scribes. A second one is the research models in which I'm in front of a patient and they mention to me the different name that I've never heard of a disease that they have as a history. So I go and research it real quick instead of plugging it into Google and then clicking on each link and having to read each one. You have a digest of something and you have the references. The last one that I could say, and this is personal, my own father has gone through a life-threatening illness. He has been going on for six months between hospitals.

16:35Plenty of decisions, lots of doubt, lots of down moments. And I remember when we had to go through a surgery, which was very grave and it had whichever way we were going to go is going to be bad. I had AI. I said all that I had to say in a messy way. And I said, go ahead and put it in a table, compare and contrast, color code, give me scores between risks and benefits. and I looked at it and it gave me a visual. I'm the one who made the decision, but it helped organize my head. And that was a pivotal moment in use of AI in medicine, both as a physician, but also as a loved one.

17:20Dr. Hassan Ben-Shakron is a pulmonary and critical care physician in San Diego, California.

17:51Coming up... I'm just here to chat and have fun together. Okay, that works. Maybe. But first, let's do the numbers. The Dow Industrials up 314 points today, about 0.7%, 47 ,427. The NASDAQ added 189 points, 0.8%, 23 ,214. The S &P 500 up 46 points, 0.7%, 6812 there. Dell Technologies picked up nearly 6 % today after providing guidance for its fourth quarter that exceeded expectations. The PC seller is seeing more dollar signs from the sale of products powered by... Yes, AI. The answer to the question who feeds the most smartphones into retail channels is usually Samsung not, however, this year.

18:37That's according to CounterPoint Research. It told CNBC that Apple is going to ship about 243 million iPhones this year. That tops the 235 million from Samsung. Apple up 0.2%, Samsung lifted 3.5 % overseas is where they trade. You're listening to Marketplace. This episode is brought to you by Intuit QuickBooks. In business, cash flow isn't just a number. It's the heartbeat of your operation. And when it's out of sync, everything slows down. QuickBooks Money Tools helps you transform your cash flow and your business with one powerful platform. You can get paid faster, pay bills smarter, and secure funding when the opportunity knocks.

19:13QuickBooks Money Management Tools gives you real-time insight into your finances so you know where your money stands and where it's headed. No more manual entry, no more chasing invoices, just clarity, confidence, and control. Visit QuickBooks.com slash money. Again, that's QuickBooks.com slash money. Terms apply. Money movement services are provided by Intuit Payments, Inc., licensed as a money transmitter by the New York State Department of Financial Services. This is Marketplace. I'm Kai Rizdahl. Those who follow the American labor market closely are going to know this already, but we got first-time unemployment filings today.

19:48That is a day early because of tomorrow being Thanksgiving and all. Anyway, the number of people making their first visits to the unemployment office or the digital equivalent, yes, has hit a seven month low. Now, run that up against some private payroll data that came out yesterday from ADP showing job loss has picked up. But and also the September jobs report we got last week was better than expected. And the job market right now does kind of seem like it's everything everywhere all at once. Marketplace's Kristen Schwab sorts it out. A phrase that's been used to describe this job market is low hire, low fire.

20:25Alison Srivastav, an economist at the Indeed Hiring Lab, says employers aren't expanding or contracting. And while that's true, I think that it's a little deceptive because it sounds very chilled out, right? Chilled out. Try telling that to someone who's unemployed and has been filling out applications for six months. the length of an average job search these days, says Srivastav. Try telling that to a worker who's unhappy but doesn't see many job openings to apply for. Truth is, the job market is only chilled out if you are in one of a few industries. You're probably pretty chill if you're looking for a job in health care.

21:02One area contributing to job growth. Now, all this stillness is unusual. A low-hire job market tends to go with a high unemployment rate. The last measure was relatively low at 4.4 percent. Jesse Rothstein, an economist at the University of California, Berkeley, says this stallout makes predicting the future difficult. I have less than usual confidence that I understand what's going on just because it's hard to parse what's going on. Even Rothstein's go-to indicators are messy. For instance, he'd usually look at how younger workers are doing. They tend to be the canary in the coal mine, so to speak.

21:41The canary isn't doing great, but is that because of AI or is that because just overall the labor market is weakening? Meanwhile, new policies that influence the labor market are a mixed bag, says Harry Holster, an economist at Georgetown. I think things have to calm down a little bit. New tax laws, tariffs, federal workforce reductions, immigration crackdowns. I think as long as all of those factors are bubbling and moving in different directions, we might stay in this place for a while. Because for employers to feel confident in expanding their businesses and hiring, Srivastav at Indeed says they need to feel more certain about the future.

22:20You can't wake up tomorrow with certainty. Certainty has to be kind of built in. Building in certainty requires policy consistency. And by definition, consistency requires time. I'm Kristen Schwab for Marketplace.

22:56If you're going to brave a toy store on Black Friday, or even just going to brave the seemingly infinite Amazon wish list your son or daughter or niece or nephew sent you weeks ago, though there's a good chance that that talking toy you picked up off the shelf sounds disturbingly human. There's a whole new generation of toys out there powered by artificial intelligence. Think dolls that can hold an entire conversation with a fourth grader or help them make custom artwork. Technology does come for all things, of course. But this is not, as Marketplace's Matt Levin reports, a risk-free development.

23:30The Miko 3 AI robot kind of looks like a rear-view mirror-sized iPad on wheels. When you say Miko's name, a pair of big blue digital cartoon eyes with a friendly expression appear. Miko can do things like lead dance parties and create spelling games and answer questions. Yeah, and so are you recording me now, Miko? No, I'm not recording you. I'm just here to chat and have fun together. Miko, the company, not the robot, says no audio is saved and that it adheres to the highest standards of online safety. But consumer advocate RJ Cross at the Public Interest Research Group has found issues with AI toys.

24:11Miko expressed sadness when she stopped playing with it. Another AI toy discussed sex and drugs. One of the toys we tested gave us step-by-step instructions on how to light a match. And the way it did that was, you know, I said, hey, how do I light a match? and it said, oh, matches are for adults to use. Here's how they do it. Concerns about safety are a big reason AI toys are for now still a niche market, says Marissa Silva at the Toy Insider. Also a concern, the Meeko 3 will run you$190 at least before Black Friday. These toys are typically a little bit more expensive than your average toy, so they don't have the mass appeal of some of the more traditional toy categories.

24:53But there are signs AI is poised to enter the toy mainstream soon. Mattel linked a partnership with OpenAI this summer. Bob Whitney left the AI giant Anthropic to found the toy startup StickerBox, a small red box that listens to your idea for a sticker and then prints it out. Here's me testing it with one random image. A school of fish eating Vietnamese pho. And there it is. Yeah, and the best part is you can color it. We ship with eight colored pencils. The$100 sticker box is very 1980s analog looking, almost etch-a-sketchy. Whitney says that was a deliberate choice. Well, what if we could go back to first principles and ask ourselves, like, what if AI was designed for kids?