Who's got the pricing power?

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1:14Once again, it's all about the jobs. Oh, and inflation and real estate and politics, too. From American Public Media, this. is Marketplace.

1:36In Los Angeles, I'm Kyle Rizdahl. It is Monday today, the 22nd of September. Good as always to have you along, everybody. We began today with Section 101A15H1B of the Immigration and Nationality Act of 1952 as amended. It covers, broadly speaking, and as you have perhaps heard by now, skilled workers for whom the Trump administration has decided the price tag for companies wanting to hire said skilled foreign workers should be$100 ,000 per. There has been confusion, it's fair to say, over exactly what the administration meant with its announcement about H-1B fees last Friday. But the White House does say it is doing this because it wants to boost the employment and the wages of American workers.

2:30Marketplace's Sabri Beneshore spent his day trying to figure out whether it will, in fact, do that. A$100 ,000 fee is, by all accounts, going to discourage a lot of companies from hiring foreign workers through the H-1B program. What happens next is debatable. Now, it might improve the job prospects of certain types of U.S. workers. Gaurav Khanna is an associate professor of economics at UC San Diego. He's thinking computer scientists, for example. In the short run, IT firms might try to hire a few U.S.-born computer scientists. That is in the short run. Longer term? It stops the IT firm from growing, and as a result, it doesn't hire other workers.

3:12Historically, top science and engineering talent from around the world has been drawn to work in the U.S. There may be a tradeoff. Research by Patrick Turner at Notre Dame suggests H-1B immigration in the 90s and 2000s may have limited how much more STEM workers are paid over non-STEM workers. But Turner says the innovations they've created have benefited the whole workforce. Not having those workers in this country means that we miss out on kind of the technological advantages that those workers bring. H-1B visas are capped at 85 ,000 workers per year in most cases. Companies have to enter a lottery to get them.

3:48Researchers took a look at companies that don't win those visas. Ethan Lewis is a professor of economics at Dartmouth. Productivity slows down. Firms get smaller. Sometimes they go out of business. Startups that aren't able to hire foreign workers suffer in particular. Britta Glennon is an associate professor at the Wharton School. They become less likely to IPO, less likely to have a successful acquisition, less likely to patent. Glennon's research looked at what multinational corporations do when they can't hire foreign workers. Their response actually is not to hire more American workers, but actually to hire foreign workers at their foreign affiliates instead.

4:31She says the H-1B system is used by some companies that game the lottery by flooding it, with applications to bring in relatively lower paid IT workers at the expense of, say, highly skilled AI PhDs who are also applying. I don't think that those are necessarily the types of positions that, you know, Congress was thinking of when they created the H-1B visa program. But she says that problem could be solved with something other than a$100 ,000 fee on foreign H-1B workers of all kinds. In New York, I'm Sabri Beneshwar for Marketplace. Up and to the right went the major stock indices. Today we will have the details when we do the numbers.

5:27Later this week, Friday to be more precise, so much later this week, We're going to get the inflation reading that the Federal Reserve prefers over their consumer price index. Say it with me now. You've heard it before. It is the Personal Consumption Expenditures Price Index, PCE, to those in the know. It comes as most of the inflation indexes that we've seen over the past couple of three months have shown that inflation is sticking around, maybe even picking up a bit, which means consumers and businesses are still dealing with higher costs. If you don't know why, see me after class. But another way to think about it is that a lot of businesses can keep raising prices because their customers keep paying up.

6:10Marketplace's Justin Home made some calls to ask about that pricing power. Running a coffee shop has been expensive this year. Definitely in the last few months, I've seen the cost of coffee go up, matcha, the cost of chocolate went up significantly. That's Joellen Dipakakibo. She owns Pinhole Coffee in San Francisco. She says between the rising cost of wages, benefits, rent, and now tariffs, she had to raise her prices a few months ago around 75 cents per drink. Deepak Akibo says she arrived at that number by pulling up a spreadsheet. When things change for us, it just calculates and inputs a new retail price that we should be doing.

6:51But costs aren't the only things that go into setting prices. Deepak Akibo also factors in what our customers can handle. The neighborhood I'm in, which is Bernal Heights, it's a pretty wealthy neighborhood, but it's not only just wealthy people that live there, too. It's a mix of people. So it's kind of trying to figure out a balance. And so far, Deepakikibo says that 75-cent hike has gone over okay. We see the same people every day, so we know that they're fine with it because they still continue to come through. That ability to raise prices without driving away customers is a business's pricing power.

7:27Put another way, it's a reflection of consumer demand. If demand is stronger than typical, then you'll have more pricing power. And if it's weaker than typical, you'll have less pricing power. That's George Perks, macro strategist with Bespoke Investment Group. He says consumer spending has been holding up reasonably well over the last few months. What we're seeing is that the economy is performing much better than you would assume it was if you just talk to surveys of businesses or consumers who are very dour and down about how they're experiencing the economy. But in terms of the actual spending, things look much healthier.

8:02But Perk says it depends on the types of consumers we're talking about. For wealthier consumers who own their home and have large stock market exposure, times are really, really good. And so that is going to feed through to spending from that asset-owning group of American households. That means pricing power is the strongest among businesses that cater to consumers with more disposable income and more assets. We're getting more calls on luxury properties, and so we're competing a little bit more in that arena. That's Jess Harrington. She owns Finesse Home Staging, a company in the Boston area that fancies up homes that are up for sale with furniture, paint, and lighting.

8:40Harrington says she's raised her prices 20 % over the last year. That's allowed her to buy nicer furniture, hire more staff, and offer what she calls a higher quality service. She says that lets her target customers who are willing to pay more. There are people out there that really, really value what we do, and they would pay more than what we're quoting. But pricing power isn't nearly as strong among businesses that serve people lower down the income spectrum. People are telling you straight up, this is great, but I can't afford it. It's too expensive. That's Marcia St. Hilaire Finn. She runs Bright Start Early Care and Preschool in Washington, D.C.

9:17She says enrollment this fall has been the slowest on record. Parents are blaming the high cost of living, and many of them are dealing with government cutbacks. What we're finding in D.C., a lot of our families were federal government and workers, and a few of them, one of the two lost their jobs. As a result, St. Hilaire Finn is holding her prices steady. She's even offering discounts for parents who sign up within the next month. She says she's focused on trying to sell families on the benefits of her service. Your child is being engaged, developing their social skills, making relationships.

9:52St. Hilaire Finn says if enrollment picks up again, she might consider a price increase come spring. I'm Justin Ho for Marketplace.

10:13All right, I've got some good housing news and some maybe not so great housing news. Mortgage rates, as we've been telling you the past couple of weeks, are coming down. A 30-year fixed is within spitting distance of 6.2%. Still high, yes, but well below the post-pandemic highs. However, comma, home sellers seem to be pulling back. New data from Redfin shows active listings in August were off 1.4 percent month to month. New listings down 1.1 percent. Marketplace's Elizabeth Troval has more now on those seller jitters. Earlier this year, home buyers in many parts of the country were finally starting to feel the market tip in their favor, says Chen Zhao with Redfin.

10:58I think that that was around the time when sellers realized, hey, you know, we're turning from a seller's market to a buyer's market right now. Sellers who no longer had the upper hand in price negotiations got wise and said, I'm not getting the prices that I want. So a lot of sellers started pulling back. So since then, what we've seen is that new listings have started to decline. Sellers may be pulling back, but buyers aren't. So supply is starting to dwindle. Real estate agent Amanda Snicker in Denver says working with sellers there has involved a lot of managing expectations. Their motivation to prioritize a quick sale is less.

11:41Because some sellers may have paid off the house, so they aren't worried about it sitting on the market for a while if they can't get full price. And so they're really hanging on to this is what I think my house is worth and I'll sell it if someone wants to pay for it. And if they don't, then it's really no loss to us. Others may have bought their homes more recently when interest rates were lower and want to get the most bang out of that buck in order to buy their next house. If they're looking to move into a home with a six and a half percent interest rate, you know, 20 or 30 percent increased in value or mortgage amount makes a really big difference in monthly costs.

12:18This is also playing out in Chicago, where housing supply is quite tight, says Erica Villegas with the Chicago Association of Realtors. And then we have some sellers that don't mind buying a new home and paying a higher interest rate, but they don't know what they're going to buy because we don't have the amount of inventory that we need. She says even though mortgage rates have gone down, she's not confident another modest decline could spur a selling spree. I'm Elizabeth Troball for Marketplace.

13:07Setting aside for just a second what the law actually says, both the Biden and Trump administrations let TikTok keep running in this country passed the January 19th deadline for its Chinese parent company, ByteDance, to divest. There does now, though, seem to be a possible deal that will let a group of American investors allied with the president take it over. One, perhaps the sticking point in negotiations, has been TikTok's algorithm, the secret sauce that keeps users glued to their phones. Reports are that a licensed copy of it is going to be run by the U.S.-controlled joint venture. The algorithm itself is actually considered restricted technology under Chinese law, which means it can't be exported without special permissions.

13:49Export controls, of course, aren't new. But as Marketplace's Megan McCarty Carino reports, controls on an algorithm are different. Export controls have come up a lot in recent years. The U.S., for instance, has restricted the sale of advanced semiconductors to China, which in turn has limited exports of critical minerals to the U.S. These are goods that can be used to build strategic technologies. An algorithm, though, is a bit more abstract than elements dug out of the earth, says Professor Stephen Weber at UC Berkeley's School of Information. People say, oh, the algorithm, as if the algorithm is like a thing or a widget or like something you could put in a box or drop on your foot.

14:34An algorithm is none of those things. Essentially, he says, an algorithm is just math, a set of rules or instructions. But when we talk about AI, those rules are expressed in code and can self-adjust. It's a machine learning system that's made up of rules that are constantly evolving based on how people interact with it. And Weber says it's a lot harder to control than a shipping container full of graphite. Trying to control the export of math is really hard. It's like trying to nail jello to the wall. But that hasn't stopped governments from taking a swing at it. Susan Landau, a professor of cybersecurity and policy at Tufts University, points to the U.S.

15:18attempts to control encryption systems. Encryption systems are what we call dual-use technologies. They can be used both by the military as well as by civilians. Think of the 2014 World War II movie, The Imitation Game. We're going to break an unbreakable Nazi code and win the war. I'm designing a machine that will allow us to break every message, every day, instantly. During the Cold War, the U.S. classified strong encryption systems literally as munitions. They couldn't be exported without special permission. Landau says that became a problem in the 90s with the rise of personal computing and the internet.

15:58Virtually every time you connect to a website, you're doing a secure connection. And the kinds of things that people wanted to be able to do, in particular to do commerce, became much more complicated. With export controls in place, companies like Microsoft and Netscape, remember them, couldn't sell browsers with strong encryption outside the U.S. U.S. companies are really loath to develop one system with weak encryption that can be exported, and one system with strong encryption domestically. It's very hard to say to customers, oh, it's fine that you have the weak encryption. By the late 90s, the government began easing restrictions on encryption systems.

16:37But Sam Sachs, a senior fellow at Yale Law School, says we'll likely see more battles over export controls in the AI age. We're seeing more use of it as software applications increasingly become subject to geopolitical fights. The Biden administration proposed a framework to restrict details on the inner workings of the most advanced AI models from going overseas. The Trump administration rescinded that rule and has promoted the idea of AI as an important export. But it's also stepped up restrictions on AI hardware for adversaries. At one point, it was much more clear-cut. How do you draw the line in terms of access to technology by so-called adversaries?

17:21Now, it's a bit like nailing jello to the wall. I'm Megan McCarty Carino for Marketplace.

17:42coming up oh this is awesome i would much rather do this than sit in a classroom for another four years i hear that fresh faces in domestic manufacturing straight ahead but first Sure. Let's do the numbers. Dow Industrial is up 66 points today, about a tenth percent, 46 ,381 for the blue chips. The Nasdaq lifted 157 points, about seven-tenths percent, 22 ,788. The S &P 500 up 29 points, four-tenths percent, 66 and 93. That right there, folks, a new record. Tech stocks in India sagged after the news about that H-1B visa stuff Sabri was telling us about. Companies like Infosys, Wipro, and Emphasis saw sizable declines in their share prices.

18:26Back home, Apple up 4.3 % after reports the company is seeing strong demand for its latest iPhone, the iPhone 17. I was in an Apple store this weekend. It was backed. You're listening to Marketplace.

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19:19Whether 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 Marketplace podcast is supported by Wealth Enhancement, who asks, do you have a blueprint for your money? Wealth 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.

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21:00Insurance. Let us make your bad day better. Find an agent at CINFIN.com. This is Marketplace. I'm Kyle Rizdahl. There are now eight days left until government funding runs out, which means there are about 7.99999 days until Congress is back is really against the wall. And while one can never be sure what is going to concentrate lawmakers' minds, there is another September 30th deadline looming out there. The Farm Bill, the huge piece of legislation that funds everything from agricultural subsidies to nutrition assistance and conservation programs, is two years overdue for a full refresh. But as Marketplace's Savannah Peters reports this time around, punctuality is the least of the Farm Bill's problems.

21:48It's that time of year again where another extended Farm Bill is due to expire. Daniel Sumner, an economist at UC Davis, is here to clear some things up about that legislation. The first thing I have to say is people call it the farm bill, but almost none of it has anything to do with a farm. It's true that about 80 % of the 2018 farm bill funded nutrition programs, like food stamps or SNAP or school lunches. Sumner says most of the rest covers farm subsidies. And I always laugh out loud when reporters say, oh, we get a farm bill every five years. And I say, yeah, except when we don't, which is every time.

22:25The Farm Bill binds together the interests of commodity farmers in rural districts and low-income families, mostly in urban ones. So it's not remarkable that Congress has kicked the can a few times. But this Farm Bill is special. In that most of the big-ticket items that it would normally address were part of the GOP policy bill that passed this summer. That has really changed the dynamics of Farm Bill debate going forward. Claire Calloway is with the Open Markets Institute. She says it was congressional Republicans who pushed to fund crop insurance and commodity price floors and to cut funding for SNAP through budget reconciliation.

23:07In other words, without Democrats weighing in. For a long time, the farm bill kind of forced a more bipartisan process, but it looks like it's becoming more like every other policy issue. And with those core provisions settled, there's not much incentive or even the goodwill in Congress to renew the rest of the bill, says Jonathan Koppes with the University of Illinois Ag Policy Program. It's not going to be the sort of thing that I think is easily repaired and everybody goes back and says, oh, that was a crazy time, but everything's normal now. He says the coalitions that got past farm bills out the door took a long time to build and could take even longer to restore.

23:50I'm Savannah Peters for Marketplace.

24:07We started the program today with jobs. We are going to end the program today with jobs and kind of along the same lines as Sabree started us off with. President Trump and his administration say they want more Americans to have jobs. Yes. But matching their policy decisions to that aspiration is challenging. Let's take manufacturing. One of the president's stated reasons for his tariffs, there are three stated reasons in all. One of them is that he wants more domestic manufacturing. In July this year, though, more than 450 ,000 factory jobs in this economy went unfilled. And for years, companies in virtually every part of the country have struggled to find people who want that work and have the right skill set to do it.

24:54KUNC's Lee Patterson looks at one possible fix for that, getting teenagers interested. Back in high school, Genesis Gomez got to rebuild an engine. We spray-pinted it purple and it was shiny, so it looked pretty and it ran. Gomez loved this one manufacturing class. I really enjoyed being in that environment because I felt like I was actually doing something, making something of myself. The 18-year-old has since graduated and now works at a company called CoorsTech outside of Denver. You start by putting in a blank. Gomez fastens a cylinder inside a boxy machine that grinds a hole into it according to pre-programmed measurements.

25:39She dusts the powder off. And then they get sent to kilns to get fired. Because this material is ceramic? Yeah. The finished product is a mold for aluminum cans. Soda, energy drinks, beer, all that stuff. This is what they use to make the cans. Gomez makes can molds with a machine that requires both computer and machining skills. It can take years to master. She's learning as an apprentice through a program aimed at training young people. According to a recent survey by the National Association of Manufacturers, nearly 50 percent of respondents struggled to find and keep good workers. It's very stressful.