The "stuck economy," tariffs and Wall Street

0:00This podcast is supported by Odoo. Some say Odoo business management software is like fertilizer for businesses because the simple efficient software promotes growth. Others say Odoo is like a magic beanstalk because it scales with you and is magically affordable. And some describe Odoo's programs for manufacturing, accounting, and more as building blocks for creating a custom software suite. So Odoo is fertilizer, magic beanstalk building blocks for business. Odoo, exactly what businesses need. Sign up at odoo.com. That's O-D-O-O dot com. Introducing your new Dell PC with the Intel Core Ultra Processor.

0:34It helps you handle a lot, even when your holiday to-do list gets to be a lot. Like organizing your holiday shopping and searching for great holiday deals and customer questions, and customers requesting custom things, plus planning the perfect holiday dinner for vegans, vegetarians, pescatarians, and Uncle Mike's carnivore diet. Luckily, you can get a PC with all-day battery life to help you get it all done. That's the power of a Dell PC with Intel inside, backed by Dell's price match guarantee. Get yours at the best price of the year by visiting dell.com slash holiday. Terms and conditions apply.

1:08See dell.com for details.

1:14The job market could make or break the economy right now. So how are we supposed to figure out what's going on if there is no jobs data? From American Public Media, this is Marketplace.

1:34In New York, I'm Kristen Schwab, in for Kaira's doll. It's Tuesday, September 30th. Good to have you along. This is supposed to be a big week for jobs data. I say supposed to because, as of this broadcast, the government is heading toward a shutdown. If Congress and the president don't make a deal by midnight, all non-essential operations will pause. That means thousands of federal workers will be furloughed, including the people at the Bureau of Labor Statistics, who work on the monthly jobs report that's scheduled to come out this Friday. No workers means no job report. To talk about what all this means, we called up Martha Gimbel.

2:15She's the executive director of the Budget Lab at Yale. Martha, thanks for being here. Thanks so much for having me. So before we get to everything I just talked about with Friday Jobs Report, let's talk about some labor market data we do have that we got today, the Job Openings and Labor Turnover Survey for August. What did you make of it? So the thing that we saw from that survey, which we like to call jolts, is a real slowdown in hiring. There's not a huge amount of firing that's going on in this labor market right now. So if you've got a job and you're holding on to it, you're in okay shape.

2:54But hiring is now at, on average, levels that's more consistent with what we saw in 2010, 2011. Those were not years that people think of as being a great time to find a job. So what does that tell you about what the economic outlook looks like? You know, I think the thing that is a little bit scary at this exact moment is the labor market's been holding on because we haven't had a huge amount of firing. You know, so job growth comes from both people not being fired, but also from people being hired. In a low hire environment, if things turn and employers give up and start firing people, we could see a rapid deterioration in the labor market.

3:44You've seen that somewhat in recent months when we've realized the labor market hasn't been as strong as it used to be. And it's yet another reason why we really need access to data from the Bureau of Labor Statistics to figure out what's going on right now. Yeah, well, if we don't get that report on Friday, I'm wondering what kind of data hole this leaves us with. How crucial is that report to understanding where things are headed? It's a pretty substantial hole. There isn't really anything that can make up for it. You know, in past shutdowns, they have released things like the weekly claims report.

4:21We don't know if they will do that that time. But I just want to go back to the point about how job growth is really a combination of both hiring and firing. If we get the weekly claims report, that will tell us about people getting fired, but it won't tell us about what's going on with hiring, which is a huge part of the question right now. And so frankly, we'll be flying blind at a relatively important time for the economy. Yeah. How might this shutdown affect future data releases if it continues to, say, if it drags on? We'll have to see how long it goes for. But, you know, in mid-October, the Bureau of Labor Statistics is going to start gathering data for the October jobs release.

5:08It also collects data for the inflation release throughout the month of October. It's been able to make that up in the past. But, you know, the Bureau of Labor Statistics does its job throughout the month, and it can't just come up with data that's high quality magically in a few days if you bring it back. And so the longer this goes on for, the harder it's going to be to get access to trustworthy data when we need it. Well, if we don't have data from the BLS, are there other places we can turn to to fill the gaps? You know, we do have private sector data, particularly on the labor market. I should say, you know, that data can be noisy.

5:52It's often benchmarked against the Bureau of Labor Statistics data. And right now, the economy is sort of in an uncertain point. And at moments like that, different private sector data series can point in multiple different directions. And so that can make it harder to really figure out what's going on. I also want to say, you know, we have private sector data for the labor market. We have much less private sector data for prices. And so if the inflation reports for October get screwed up, we don't have clear places in the private sector that we can turn to in the same way. Yeah. You know, I'm wondering for people who are listening to this on their way home from work, from the grocery store.

6:36If they're thinking, Martha, this is just data, it doesn't change my economy, or how I feel about it. What do you what do you say to that? It absolutely may not change your economy or how you feel about it. But it may change the Federal Reserve's economy and how the Federal Reserve feels about it. You know, the Federal Reserve is in a really tricky position right now. And they are trying to figure out where the economy is heading and how they can best set up interest rate policy for this very, very complicated environment where you have a weakening labor market, but also strengthening inflation.

7:07And what the Federal Reserve decides to do affects all of us. It is incredibly important that the Federal Reserve has access to the best quality data so they can make the best quality decision for the economy. And so that's the real concern here. Martha Gimbel is the executive director of the Budget Lab at Yale. Thanks, Martha. Thanks for having me. Wall Street Today appeared to be worried about a government shutdown and then decided not to be. We'll have the details when we do the numbers.

8:03As I just said, the stock market has mostly shaken off the news of the day. The looming government shutdown, a stagnant labor market, and you know, everything else. Bond markets have been digesting the news a little differently. The yield on the 10-year T-note has been falling over the last couple of days. So what are bond markets trying to tell us? Marketplace's Justin Ho explains. The big signal that bond markets are sending us this week is that they're a little nervous about what's going on in Washington. You know, if we do get the shutdown, how long is that shutdown going to be? That's Chuck Tomes with Manulife Investment Management.

8:39He says markets are concerned in large part because this potential shutdown could have a real impact on the broader economy. There's different numbers that people have thrown out there, anywhere from, you know, 0.1 to 0.2 drag on quarterly GDP growth every week that the shutdown lasts. Then there's that likelihood that a shutdown will cause the government to withhold upcoming economic data releases, including Friday's jobs report. And anytime you have some uncertainty, people get a little bit nervous and move towards more like to quality type investments. And you're seeing that happen in the treasury market overall.

9:15And more demand for those safe treasuries pushes down their yields. Thing is, government bond yields have been trending lower for months now, which has more to do with the labor market, says Randy Vogel, head of fixed income with Wilmington Trust. The market's grown a bit concerned, as has the Fed, about the weakening in the labor market, and that's kept the Fed engaged with rate cuts. Vogel says many investors are deciding to buy bonds now before rates fall further. It could be pension funds looking to lock in yields at those rates because they think in the future rates are coming down. It could be a retail investor who's looking at a treasury or a corporate and thinking the same thing.

9:51But demand for government bonds hasn't been uniform. John Canavan, lead market analyst at Oxford Economics, says investors are still nervous about inflation, partly because of tariffs and also because consumer and business spending has held up. We've seen better than expected durable goods orders recently and better than expected consumer spending figures recently. As a result, Canavan says investors are more leery about piling money into longer-term bonds, since inflation looks like it'll be sticking around. Which means that long-term yields, because of the inflation concerns, will not fall as quickly as short-term yields will, as investors demand greater yield for the inflation risks over a longer period of time.

10:31In other words, the bond market is sending us signals that it's concerned, but it's also telling us that the economy is still humming along. I'm Justin Howe for Marketplace. Another week, another tariff announcement from the White House. I know, at this point, it can feel a bit potato-potato, but each tariff move affects a new industry. This time, it's housing. A new 10 % import tax on softwood, lumber, and timber will go into effect mid-October, at the same time as the previously announced 25 % tariffs on kitchen cabinets, bathroom vanities, and upholstered furniture. The Trump administration says those tariffs could increase even more come January.

11:12Marketplace's Samantha Fields looks at how these taxes could affect home builders and buyers. If you go into a Home Depot or a Lowe's, you'll see a whole lot of lumber. Two by fours, two by sixes, studs. Greg Kuda at Westline Capital Strategies says much of it was once Canadian pine trees. That's ultimately used to frame the walls, the floors, the roofs, the trusses of single-family, multi-family, commercial, residential buildings. Canadian softwood lumber is popular with home builders. And right now, Chris Beard at John Burns Research and Consulting says there is a lot of it sitting around. There's been talk throughout this summer of what we call a wall of wood, literally piles and piles and piles of Canadian lumber stacked up at U.S.

12:00distributors and dealers. That's because producers and importers rushed extra inventory into the country earlier this summer to try to get ahead of tariffs Trump implemented back in August, specifically on Canadian lumber. So even though tariffs are higher now than they were a couple of months ago, lumber prices are lower, both because of that oversupply and because demand in the housing market has been weak. But Beard says those lower prices are unlikely to last. This wall of wood, if you will, is going to get drawn down, and so that will eventually probably be reflected in the prices. About 80 percent of the softwood lumber the U.S.

12:36imports comes from Canada. In a couple of weeks, it will be subject to this new 10 percent tariff on top of the 35 percent import tax that's already in place. And Beard says certainly that cost can't be eaten by just the importers. Who will ultimately have to eat the increased cost is still an open question, says Rachel Brewster, a professor at Duke Law School. It's either going to be borne by the consumer directly and raise housing prices, or, you know, a lot of American builders are simply going to internalize those costs and it's going to decrease their own profits. But the tariffs are a tax.

13:10And one way or another, someone will have to pay it. I'm Samantha Fields for Marketplace.

13:31How we shop, how we discover new products is changing. There's, of course, the now tried and true Google search. There's the newish trend of combing through TikTok. And increasingly, there are chatbots. OpenAI is rolling out a new instant checkout feature for some items on Etsy and Shopify merchants like Skims and Glossier. Paid and free users of ChatGPT can hit the buy button without navigating out of the chat. OpenAI says it's the first step towards agentic commerce, where AI could eventually shop for us. Though humans are still in the driver's seat in this iteration. Marketplace's Megan McCarty Carino has more.

14:13Greg Zakowitz is in the market for a cappuccino maker, but not just any cappuccino maker. So yesterday I go on ChatGPT and I'm like, all right, give me a cappuccino maker under$300 that has, you know, minimal plastic internal components. And I just do this quick thing and I get my results. Zachowicz is a senior e-commerce expert at marketing platform OmniSend, which found that just like him, almost 60 percent of consumers are now using chatbots to shop online. They're still doing the search like they always would, but they're replacing Google with ChatGPT or Claude or whoever they're using. He says consumers increasingly trust chatbot product recommendations more than Google search.

14:53AI can summarize reviews and narrow down results to a few key options with minimal instructions. So why not let the bot handle the purchase too? This happens over and over and over again. Sucharita Kadali is an e-commerce analyst at Forrester. Every large tech company goes through this cycle where they think, we're going to own commerce now. Wow. Meta, Twitter, Pinterest, Snapchat, TikTok, and Google have all tried to bring shopping transactions directly onto their platforms with mixed results. One perennial challenge is getting retailers to give up their direct link to consumers, says analyst Andrew Lipsman with Media Ads and Commerce.

15:36Retailers will want to keep their own data closer to the vest. They'll want to drive traffic through the front door of their site. And so they have less reason to participate. Because that data on purchases is valuable for advertising, says analyst Eric Sufford at MobileDevMemo. You need to know what people have bought recently and what people have searched for recently. And without that data, you can't do proper targeting. Which, he says, may give a hint as to why so many tech companies have tried this approach. My sense is OpenAI can make a lot of money with ads. They just need to do it in a way that doesn't sit at odds or doesn't feel hostile to the core product experience.

16:15OpenAI says it will receive a small fee from participating merchants, but products available for instant checkout won't be favored in the list of results. I'm Megan McCarty Carino for Marketplace.

16:38Coming up. When it comes to sensory-friendly haircuts, the biggest thing is patience and compassion. How a barber is making the industry more inclusive, one haircut at a time. But first, let's do the numbers. The Dow Jones Industrial Average rose 81 points, just under two-tenths percent, to finish at 46 ,397. The Nasdaq added 68 points, three-tenths percent, to close at 22 ,660. And the S &P 500 gained 27 points, four-tenths percent, to end at 66 ,88. Boeing is developing a new aircraft to replace its troubled 737 MAX, according to the Wall Street Journal. The planemaker descended 0.6%. Bonds fell, yield on the 10-year T-note rose to 4.14%.

17:27You're listening to Marketplace. This podcast is supported by Odoo. Some say Odoo business management software is like fertilizer for businesses because the simple, efficient software promotes growth. Others say Odoo is like a magic beanstalk because it scales with you and is magically affordable. And some describe Odoo's programs for manufacturing, accounting, and more as building blocks for creating a custom software suite. So Odoo is fertilizer, magic beanstalk building blocks for business. Odoo, exactly what businesses need. Sign up at odoo.com. That's O-D-O-O dot com. This Marketplace podcast is supported by Wealth Enhancement, who ask, do you have a blueprint for your money?

18:05Wealth 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. This 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.

18:50Justin 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.

19:25earn Dell rewards and enjoy many other benefits like free shipping, expert support, price match guarantee, and flexible financing options. They also have the biggest deals on accessories that pair perfectly with your Dell PC, improving the way you work, play, and connect. Whether you just started holiday shopping or you're finishing up, these PCs and accessories make perfect gifts for everyone on your list. Shop now at dell.com slash deals and don't miss out on the best prices of the year. That's dell.com slash deals. This is Marketplace. I'm Kristen Schwab. We talked about this a bit on yesterday's show, that there's a sense that parts of the economy, whether it's jobs or housing, are just kind of stuck.

20:06We're in this loop where economic uncertainty is making people press pause, and people pressing pause is fueling economic uncertainty. Abba Bhattarai recently wrote about this. She's an economics correspondent at The Washington Post. Abba, it's great to talk to you again. Yeah, likewise. Thank you for the opportunity. So your story talks about two major pieces of the economy that are at a standstill. Let's start with housing. What's happening there? Well, home sales have bottomed out after the pandemic. We're seeing high interest rates. We're seeing really high home prices. And that's deterred a lot of people from buying homes right now.

20:46For people who already have homes, it's not really a problem unless they want to move. But a lot of folks have locked in very low mortgage rates. They've refinanced at maybe 2 % or 3%. And it doesn't make sense to get up and leave right now. And then the second pillar of your story is jobs. Fill me on in that piece. That's right. So the job market isn't terrible on the surface. The unemployment rate is relatively low, but it's really difficult to find a job if you don't already have one right now. Hiring has stalled. Businesses are holding off on adding new positions. And a lot of people who are out there are saying, you know, it's never been this hard to find a job.

21:24They're feeling really crummy about their prospects. Tell me more about two of the people you interviewed in your story and their job prospects and how those stories show up in the economy. So I talked to Jacinda Snyder, who is 23 years old. She lives in South Carolina in a rural town, and she just graduated from college with a degree in environmental science. But she says she feels completely stuck in just about every way. She doesn't have a car, so that gives her very limited mobility to, you know, access jobs. She's been applying to hundreds of jobs, but has gotten nothing so far. And so she's stuck living at home.

22:02She can't really afford to move. And it's really hard for her to, you know, sort of change her situation at the moment. You also interviewed a man who lost his government contracting job and took a job at the grocery store. My question is, you know, he's still working, but I'm wondering how that downshift kind of shows up in the greater economy. That's a great question. And we're seeing that across the board. For younger people, for older people, a lot of the folks who have lost their jobs in the last year have said that they just haven't been able to find anything. So they are maybe relying on gig work or they're working part-time.

22:38In this case, the man that I talked to, Charles, it's 64 and lives in Maryland. He's working at a grocery store part-time. And he says, you know, his quote was, it feels like I'm treading water right now. I know where I want to be going, but I just kind of can't get there. I'm stuck. The Fed just cut interest rates a quarter point. And the idea here, right, is that cheaper borrowing is supposed to juice the economy. But one of your sources says no. Tell us a little bit more about why that might not fix all of this standstill. The Federal Reserve controls just one interest rate, and that's a very short term interest rate that banks use to lend to each other overnight.

23:16and it doesn't necessarily translate into lower mortgage rates. It might, sometimes it does, but there's a lot more economic uncertainty on the horizon as well that is keeping interest rates, including for mortgages, elevated at the moment. So then what's the answer? How do we unstick the economy? Gosh. If we all only knew. Yeah, we're in this holding pattern because of uncertainty for the most part. I mean, business owners will tell you that things just feel really scary right now. It doesn't make sense to invest. It doesn't make sense to hire. And I think a lot of households are feeling the same way.

23:54And so until that changes, until we start to see more spending, both from businesses and from households, I think we're going to be stuck here. What do you say to someone who says, Abba, this is just a standstill blip in time, this too shall pass. That is exactly what the Trump administration is hoping is the case. They're saying that this is just a momentary blip. We're going to get things moving shortly. There's going to be plentiful jobs in the economy. Homes are going to be affordable again. And this is, you know, just a temporary period that we're having to weather through in the meantime.

24:28Abba Badurai covers economics for The Washington Post. Thanks again for joining us. Thank you so much.