What's next for the Fed?

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0:55Okay, quick, what's a four-letter word that can tell us where this economy is going? From American Public Media, this is Marketplace.

1:14In Los Angeles, I'm Kyle Rizdahl. It is Thursday, today, December the 4th. Good as it always is to have you along, everybody. The theme of the program today, the first eight or so minutes, is time. T-I-M-E. What is it, really? We begin with the lagging, lagging indicators. Think about it. That have been coming to us as federal data plays catch up from the shutdown. The delayed September jobs report, a tardy retail sales release. And then tomorrow, the September, again, September, Personal Consumption Expenditures Index of Intense Interest to Fed Chair Jay Powell and the gang ahead of their last interest rate setting meeting of the year next Tuesday and Wednesday.

1:59You know, we're going into year end and we're going into the holiday season. So data from September, I don't know about you, but September feels quite a long time ago. Yeah, sure does. Andrea Eisfeltz, a professor of finance at UCLA Anderson. That said, some economic trends do tend to be more slow moving. So I think we have seen from several data sources that in particular for smaller businesses, there have been fewer jobs created and we probably see a bit of a softening in the labor market there. Remember, we talked about small businesses yesterday and their job losses. Labor market softness, of course, is something the Fed is watching as we've been talking about.

2:41But the big shadow over all of this is what we don't know. And by that, I mean the releases we are never going to see, and particularly the unemployment report for October. Nina Ihackers at the University of Rhode Island. If anyone wants to make a case for a cut, having access to that jobs data is extra important in all of this. Go on. The Fed can maybe make more reasonable estimates about the effects of tariffs and whatever on the costs of production, which they're certainly doing. I mean, I think that that's a big part of the uncertainty with the Fed right now. But those job numbers are really, really important for that other mandate that the Fed has.

3:26Two things the Fed is required to do, right? The dual mandate, stable prices and maximum employment. Jay Powell's press conference Wednesday next. You'll be hearing a lot about both of those things. Do not miss it. You know, sometimes to go forward in time to understand what is going to happen, which we're going to do with Mitchell Hartman in a minute, you got to go back in time. Our point of entry is a report in the Financial Times this week that bond investors, which remember, the bond market can tell us where the economy is going. Those investors have been letting the White House know, shall we say, that they are concerned about who President Trump might pick to replace Jay Powell and how independent or not that person's going to be.

4:09Marketplace Sabri Beneshaw takes things from there. The easiest way to understand why it is so important for the Fed to be independent is to look at a time when it was not, more than 40 years ago. History provides a warning here. David Krauss is emeritus professor of finance at Marquette University. Arthur Burns and William Miller succumbed to pressures of Nixon, Ford, and Carter to keep interest rates low, which continued to allow inflation to run unchecked. Inflation reached more than 13 percent in 1979. Eventually, a new Fed chair, Paul Volcker, had to clean up the mess by severely raising interest rates, and it was grisly.

4:49I lived through this. We went through a double-dip recession in the early 1980s because we just had to wring inflation expectations out of the economy. It's the inflation part of all this that scares the bond market. Inflation is really the enemy of bonds. Colin Martin is head of fixed income research at the Schwab Center for Financial Research. When you own a bond, you are kind of stuck with whatever interest rate it pays out. And if all of a sudden everything in your life is more expensive because of inflation. It makes that bond investment just less attractive in a high inflationary environment.

5:22Investors do not like losing money. So if they do start getting a whiff that inflation might ramp up again later, they'll just refuse to buy long term bonds that do not give them a little something extra to make up for it. So then long term bonds have to start offering that little something extra. And then all kinds of investments are doing the same, which makes borrowing in general more expensive. There is really no place you can hide in that environment. Fahad Malek is a portfolio manager at Alliance Bernstein. Treasury yields are rising. Equities are most likely selling off. And credit is most likely selling off as well.

5:55That's not necessarily good for capital markets. All that said, the name of the person who becomes the next Fed chair isn't as important as what they do. Marvin Lowe is global macro strategist at State Street. All of the candidates that are being floated do have credentials that would make them efficient leaders for the Federal Reserve. It really depends how they approach it. And whether history starts to rhyme. In New York, I'm Sabree Beneshore for Marketplace. Speaking of history rhyming, you remember I said the other day traders are just marking time. There's that word again. Waiting on the Fed meeting.

6:31Yeah, I'm sticking with that. We'll have the details when we do the numbers.

6:58So, again, time. What is it, really? We know with a reasonable degree of certainty what the central bank's meeting next week is going to bring. A quarter percentage point cut in the Federal Reserve's main interest rate, the federal funds rate, it's called. A perhaps better and maybe more important question is what the Fed's December meeting next year is going to be like. If, as again, we can say with a reasonable degree of certainty, a very low interest rate friendly person becomes the next chair. Marketplace's Mitchell Hartman is the ghost of the federal funds rate yet to come. Good day to you, Kai.

7:37Well, as you know, the summer of 2026 was blazing hot. Then we had that freak Thanksgiving Day blizzard. And just like this time last year, the Fed's Open Market Committee will gather next week to set interest rates in its final 2026 meeting. By which point, economists I have just polled agree the federal funds rate will be lower than it was one year ago. Approximately 2.75 percent. 3 percent. 3.25. OK, now I'm back in December 2025. And yeah, the economists I interviewed predict a range of federal funds rates one year from now. Jay Hatfield at Infrastructure Capital Advisors came in with the lowest estimate, below 3%, which would certainly stimulate the economy.

8:27Our models show that inflation is contained and likely to decline, particularly as shelter inflation gradually drops down to market rates. And 275 is the historical 30-year average of Fed funds. Economist Joe Bruce Willis at RSM predicts a 3 % Fed funds rate, a bit below where the Fed itself predicts the rate will be. He thinks rates could end up higher, though. There's risk to the upside around growth and inflation, which may require the Fed to make a quick U-turn, and hike rates, which would clearly exacerbate tensions with the White House, regardless of who's in charge of the Federal Reserve.

9:06We know the White House would like to see rates much lower, maybe as low as 2%. Kevin Hassett, as the new chair, could try to steer the Fed in that direction. But Daniela Hathorne at Capital.com says it wouldn't be a slam dunk. Kevin Hassett is expected to be more pro-growth, but of course he can't completely ignore inflation. And there are other unknowns that make prediction really hard, says former Fed economist Claudia Somm. Big changes that could happen at the Fed in terms of a Supreme Court allowing the president to remove a governor. I think at the end of the day, the economy is going to drive where rates go, but it could be a pretty uncomfortable ride.

9:47And she says one thing that financial markets do not like is economic uncertainty or, you know, being haunted by ghosts. I'm Mitchell Hartman for Marketplace.

10:14How you're experiencing inflation depends a whole lot on what you're spending money on. And for a lot of families, the high and rising cost of child care has been especially tough to handle. Between 2020 and 2024, and this is from the organization Child Care Aware of America, the average cost of child care in this economy rose nearly 30 percent. That data point brings us to the next story in our series, Lived Economies. Marketplace's Kristen Schwab has been following people from across the country as they negotiate the changes in this economy, which for us today means two families that have been trying to figure out whether it makes sense for one of the parents to keep working or to stay home with the kids.

10:55Here's Kristen. Life at Julie Yang and Daniel Tao's house in St. Paul Park, Minnesota, is a little chaotic these days. But then again, life is always busy when you have six kids. I'm sorry. I have Austin and Tatum right here with me. Julie says the family has been going through some kid drama. Asher, who's in the third grade, has become a bit of a class clown. We just had conferences and I heard really bad reviews. So I was pretty upset with that. So now he's grounded. Meanwhile, Isla, who's five, had a falling out with a friend. Something had happened at school and she was like, yeah, well, she yelled at me and told me she wasn't my friend anymore.

11:35And then she told all the other girls not to like me. Typical kid stuff, really. What's not so typical is what's happening with their newborn. Saatchi was born preterm with a congenital heart defect and had to have a major surgery. Julie says he requires a lot of care. We just left a three-hour genetic appointment yesterday. I feel like I've been at the doctor's every week. Julie recently made the difficult decision to cut way back on her hours at her job as a nurse. It means the family lost their state child care assistance and Julie's part-time nursing pay, about$30 ,000. So the two have been dipping into their savings.

12:17They've told the kids to expect one gift each this Christmas. One special gift. Though Julie's family is dealing with some particularly big challenges, raising kids in the U.S. has always required families to improvise, especially when it comes to juggling schedules and finances. Taryn Morrissey is a professor of public administration and policy at American University. To have young children in general is somewhat of a leap of faith and an economically scary prospect, right? But Morrissey says the rising cost of health care, daycare and groceries is coming to a head. It's an intense, economically uncertain moment.

12:57And families are facing a lot of pressures. Those pressures may be pushing some parents to restructure their lives. The number of households paying for child care, it's down more than one and a half percent from a year ago, according to recent data from Bank of America. Meanwhile, the number of households receiving multiple paychecks is also down. The trend is most common among lower-income families. People are making these complicated calculations. It's just that many families don't seem to have real options. Still, even families that do seem to have options are making tough decisions. Hannah Tamari and Kareem Adassi in Sacramento had their second daughter Summer earlier this year.

13:39Honestly, she's our dream child. She's a great sleeper. She's such a happy baby. She's always smiling. She's your by-the-book baby. Hanan considered leaving her job in real estate to become a full-time mom. But the budget wasn't budgeting. $50 boxes of diapers, the$8 ,000 hospital bill from Summer's birth. Paying for all that without Hanan's$85 ,000 salary, while also trying to save up to buy their first home, felt impossible. It was a hard decision, you know. There are days where I do want to stay at home, you know, and I wish that the financial reality of living in California was a lot easier for a family just living on one income to have that full security.

14:27Plus, Hanan likes working. She wants to set that example for her daughters. And she's heard people in her mom groups talk about how hard it is to get back to work after time off. I go back and forth. I do have mom guilt about, you know, wanting to be at home, be present, not miss anything. It's a decision that so many parents are familiar with. Stay home with the kids, go back to work. One way or another, you feel like you're missing out. I'm Kristen Schwab for Marketplace.

15:19Coming up. Well, why haven't you guys, you know, done anything yet? Tough, but fair. Let's do the numbers. Dow Industrial's down 31 points today, about a tenth percent, 47 ,850. The Nasdaq rose 51 points, about two-tenths percent, 23 ,505. The S &P 500 notched seven points to the good, a tenth percent, 68 and 57. Grocery chain Kroger reported third-quarter earnings today and said it now expects slower sales growth for the full year. The interim CEO said today that high-income families are still spending. Middle-income families are beginning to feel more pressure, he said. Kroger slid four-and-six-tenths of one percent.

16:00Walmart up 0.4%. Costco down 2.9 % on the day. Consumer Reports just published its annual list of top car manufacturers based on reliability, safety, and owner satisfaction. Top of the list this year, Subaru. BMW is a close second. Here's the interesting part. Tesla moved from 18 last year to 10 this year. Go figure that out. You're listening to Marketplace. With the state of today's economy, it's more important than ever to invest in products that last for years to come. As the seasons shift and get cooler, make sure your closet is stocked with durable layers that stand the test of time from American Giant.

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17:55This is Marketplace. I'm Kai Risdahl. We are now less than a month out from subsidies for the Affordable Care Act going away. As you know, one of the defining disagreements between Democrats and Republicans before, during and after the government shutdown. It's anybody's guess what Washington is going to do. But there is, in the meanwhile, a slice of the U.S. health care economy that is expanding with bipartisan support, no less. Patrick Cooley wrote in The Washington Post the other day about low-cost health plans for farmers that are now being offered through farm bureaus in 12 states. It should be said that these plans are not ACA compliant, which means, among other things, they don't have to cover people with pre-existing conditions.

18:35Patrick, welcome to the program. It's good to have you on. Thank you. Would you first of all tell us, just so we all know, what these state farm bureaus are, what they do? I guess the simplest answer would be advocacy organizations. They also provide certain services, like, for example, they set farmers up with crop insurance. They do things like lobby state lawmakers. And from my end, they occasionally work with journalists providing commentary and things like that. And working on stories like this one. So let's take it to the next step in the subject of this piece. They also offer health care insurance.

19:13And I need you to help me understand the challenge that farmers have with health care coverage. Yeah. So it's a couple of different issues. One, their income is not the same from year to year. You know, the price of corn, the price of milk, the price of beef, it's not always the same. So, you know, they can't go into the year saying this is how much I'm going to make. So in that respect, it's difficult for them to get insurance on these marketplaces because they don't know what their incomes can be from the year. Most of them also don't qualify for subsidies. A lot of them end up buying insurance on the AC exchanges anyway, but it's incredibly expensive.

19:53One of the farmers I talked to said that her father gets health care through the Affordable Care Act exchanges, but he pays something like$2 ,400 a month. Those subsidies have for sure been in the news. And as we have talked to many a farmer on this program, they are price takers, not price makers. What generally do farmers, and we should be clear here, this is a relatively small number of people, but the farm economy is huge, just net net. So what do they think of this coverage that they're able to get from coverage from their state farm bureaus? Well, it runs the gamut. The farmers who are able to get coverage that I talk to, they like it, but a lot of them don't qualify.

20:30and their employees don't qualify because they might have pre-existing conditions. So they're a little reticent. The farmers that don't qualify, for them, it's like, why even bother offering this if I can't qualify? But the ones who are able to get it, they seem to really like it. You know, they don't have to pay too much for it. It covers most of what health insurance would cover, you know, medical procedures, doctors, appointments, things like that. Yeah. You point out in this piece, we should say that these plans from these state farm bureaus are not unlike what the Trump administration has proposed, right?

21:05Cheap short term plans as an Affordable Care Act sort of alternative. Make sense of that for me. Yeah. So the way they're pitched is as an affordable option for farmers. The caveat, though, is that it is not regulated the same way as the insurance you might get through your employer or the insurance you get on the marketplace is regulated. It in a lot of ways goes back to insurance the way insurance was before the Affordable Care Act, in that if you have preexisting conditions, they can deny you. They are also not required to continue insuring you if you develop some sort of chronic condition.

21:44Now, I want to be clear, the farmers I talked to at least said that they will not do that. But since this doesn't follow the same rules as most other insurance, there's nothing stopping them. And I should clarify, in most of these states, they're not allowed to call it insurance for that very reason, because it doesn't follow those regulations. Those seem to be pretty significant caveats, just saying. Yes. I actually talked to a farmer who said that they probably wouldn't consider this because they have several employees who have ongoing medical conditions and they wouldn't want to offer a plan that couldn't get those employees.

22:22So, yeah, it's a it's a pretty big caveat. For sure. Patrick Cooley writes for an outfit and works for an outfit called Industry Dive. He wrote this piece for The Washington Post. Patrick, thanks for your time. I really appreciate it. Yeah, no problem. Thank you for having me on.

22:51Here's today's entry in the yeah, we got data for everything file. The global market for the restoration of historic buildings sits at more than$120 billion. So says Archive Market Research. And we do, of course, have plenty of historic buildings out there just waiting for the right person to come along and give them a second life. So here with today's installment of our series, My Economy. My name is Dana Winook. I am the executive director for the Livingston Arts Council. And today we are at the Howell Opera House.

23:23It's seen a lot in its time. Opera houses were more of like a community gathering place. So every graduation from the high school was here. Court was here. Performances. Ironically, only like one or two operas, according to our historians. It was built in 1881 and closed in 1924 for fear of it burning down. You know, this is all lath and plaster and clearly just wood. So, you know, it was common for opera houses to just burn down. So for us, they said, nope, Fire Marshal shut it down and it sat here since. I've been working in nonprofits for over 15 years. And when I saw this position open up, I came into the interview and they walked me in and showed me the space.

24:05And I was like, this is so cool. Like you can almost hear the space, you know, wanting to be active. And I'm like, well, why haven't you guys, you know, done anything yet? And they had said, well, we're volunteers. We've been working on this for 20 years, but at a volunteer space, we just really need someone to come in and do this every day. And I'm like, I can totally do this.

24:32we've got about two million dollars from the state in a grant and then another half million promised from a couple different private donors so that 2.5 million will go do a few things that you can see here we'll level up the floor we'll redo most of the plaster we are actually planning to launch our first opera in may we're gonna do pirates of penzance that's the kind of production that would have been done here. The production will be a little bit toned down because there's no technology on this stage. Even all the light bulbs that you see are knob and tube that have been cut because it's a fire hazard.