Buy in bulk and on credit

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Speaker 3 In which, once again, the hero of the economic story is you.

Speaker 3 From American public media, this is Marketplace.

Speaker 3 In Los Angeles, I'm Kyle Rizdahl. It is Wednesday today, the 22nd of January.
Good as always to have you along, everybody. We'll begin midweek with a checkup of sorts on the American consumer.

Speaker 3 We do that, by the way, concentrate so much on consumers because, in case you're new here, spending by or on behalf of American consumers drives 70%

Speaker 3 of everything that happens in this economy.

Speaker 3 And the most proximate beneficiary of that spending today is the consumer products conglomerate Procter ⁇ Gamble, maker of everything from laundry detergent to tampons to toothpaste.

Speaker 3 PNG reported profits this morning, sales up 3% year over year. Sales growth mostly thanks to higher sales volume rather than higher prices.

Speaker 3 Marketplace's Henry Epp gets us going with what that tells us about how consumers are spending right now and how retailers are trying to get their piece of it.

Speaker 4 Companies that sell packaged goods to us consumers, razors and toilet paper and cleaning products, they've had a pretty decent couple years, says Arun Sundaram at CFRA Research.

Speaker 5 But growth has been driven by higher prices, which is obviously not sustainable over the longer term.

Speaker 4 A company can only raise its prices so much before customers start to look for cheaper options. So now companies are trying to keep their prices in check and focus more on sales volume, he says.

Speaker 4 Procter Gamble is having some success in that area, in part because, as their chief financial officer told Bloomberg, some consumers are consistently buying larger packs of things.

Speaker 4 Again, Arun Sundarum at CFRA.

Speaker 5 That indirectly means that more consumers are shopping at places like Costco or Sam's Club where you can get those larger pack sizes. And oftentimes that comes at a better value to the consumer.

Speaker 4 Value is really what shoppers are looking for right now after years of high inflation, says Brian McCarthy at Deloitte. And value doesn't just mean spending less.

Speaker 4 It can be a combination of things and not just about the product itself.

Speaker 7 For some, it's going to be quality. For others, it's price.
for others experience, you know, some for its convenience.

Speaker 4 So if retailers can make it easy and maybe satisfying to buy, say, a 36-roll pack of toilet paper, that approach can win over some customers.

Speaker 4 And overall economic conditions might make those customers open to spending a bit more in the months ahead, McCarthy says.

Speaker 7 We're starting to see interest rates come down while the labor market remains strong, and inflation is starting to wane as well.

Speaker 4 Those factors could give retailers a lift in many categories, including some that have struggled the last couple of years, says Craig Rowley at Corn Ferry.

Speaker 8 We're seeing apparel doing better. We're seeing athletic wear doing better.
We're seeing home goods doing better.

Speaker 4 All that stuff we bought a ton of early in the pandemic, he says, it's starting to wear out and needs to get replaced. And we've got a bit more spending power to do that right now.

Speaker 4 I'm Henry Epp for Marketplace.

Speaker 3 PNG shares up about 1.9% today. That's a bit better than the three major indices.
We will have the details when we do the numbers.

Speaker 3 Even though Procter ⁇ Gamble has been selling a lot of pretty much everything,

Speaker 3 there is still a handful of warning signs when it comes to American consumers right now.

Speaker 3 Interest rates are still high, and there's a good chance they're going to stay that way for the foreseeable future.

Speaker 3 And according to data from the New York Fed, delinquencies on credit cards and auto loans have been rising for more than a year now.

Speaker 3 That does sound like a bad sign for an economy powered by consumer spending. But as marketplace's Justin Ho reports, is it really?

Speaker 9 This is how Capital One CEO Richard Fairbank described the health of his customer base on an earnings call this week.

Speaker 6 The credit metrics are looking great. The consumer's in a great place.

Speaker 9 Fairbank said customers' account balances are higher than before the pandemic.

Speaker 9 Gerard Cassidy, a bank analyst at RBC Capital Markets, says all of the government relief aid that went out early in the pandemic is still helping people pay off their bills.

Speaker 6 And I think it's going to take at least another year or two before it's completely washed out of the system.

Speaker 9 The labor market is still strong, too. Workers are hard to find.
Income growth is outpacing inflation. Ben Ayers is senior economist at Nationwide.

Speaker 10 For most people that have jobs, and particularly those that have investments, they have homes, and those values are going up, the credit situation for most households is pretty solid.

Speaker 9 But the emphasis there is on most. Ayers says plenty of households are struggling under the weight of high prices and high interest rates.

Speaker 9 In fact, he says it's those households that are behind the recent increase in loan delinquencies.

Speaker 10 They're falling behind on payments. They're putting more of their day-to-day expenses on credit cards.
And it's that segment that we're definitely concerned about.

Speaker 9 But those pockets of stress don't really pose much of a threat to the broader economy because wealthier consumers are still in good shape, says Shannon Grine, an economist with Wells Fargo.

Speaker 11 So the top 20% of consumers account for about 40% of spending in the U.S. So I think you can have these vulnerabilities surface without it causing a meaningful deterioration in consumer spending.

Speaker 9 Grind says the risk here is that the strong economy will mask those vulnerabilities. She says that's something the Federal Reserve will have to keep in mind.

Speaker 11 They need to see a little bit more sustained progress on inflation, but I do think they're also aware of the fact that higher rates are having an impact on certain areas of the economy, particularly these more vulnerable consumer groups.

Speaker 9 And Grind says cutting interest rates could help those groups stay afloat. I'm Justin Ho for Marketplace.

Speaker 3 About eight years ago, I went apple picking for a series we were doing on the show back then, but it wasn't fun. What a lovely fall day apple picking.
It was actual agricultural.

Speaker 3 This is a job apple picking, and it was hard.

Speaker 12 You should feel how heavy that bag is.

Speaker 3 Give me the strap, too.

Speaker 1 Oh, yeah, the whole thing.

Speaker 1 going to work?

Speaker 3 All filled up, which it is. The thing weighs 42 pounds.
Jesus.

Speaker 12 That's how easy that bag is. You're putting it on.

Speaker 12 He's going up a ladder. Up a ladder, down a ladder.

Speaker 3 And with some chiding.

Speaker 12 No, I don't want to try to climb. All right, fine.
I'll try to climb the ladder. So am I.

Speaker 3 I get hurt. We're going to sue you.

Speaker 12 You know that, right?

Speaker 3 Slowly but surely, I inch my way up just a couple of steps, mind you.

Speaker 12 Wow. Wow.
Yeah, now.

Speaker 12 All right, I'm done.

Speaker 3 That was Patrick Smith with me there that day on his family farm, Loftus Ranches, in the Yakima Valley up in Washington state. Apples and hops, too, is what they grow.

Speaker 3 As you've heard me say more than once on this program, immigration is a labor story, which I mentioned, of course, because of the Trump administration.

Speaker 3 So to get a sense of what that might mean in the very labor-intensive agriculture sector, we've gotten Patrick Smith back on the phone. Patrick, it's really good to talk to you again.

Speaker 8 Yeah, good to talk to you, Kai.

Speaker 3 First things first, I suppose, how's business at Loftus Ranches?

Speaker 8 Yeah,

Speaker 8 business is good. You know, agriculture, of course, is very cyclical, and both hops and apples, our two primary crops, are in a little bit of a down cycle right now.

Speaker 8 But, you know, we've got a great team here, and we're focused on the things that we can control.

Speaker 8 And, yeah,

Speaker 13 we're making our way through it.

Speaker 3 Fair enough. Let's talk about some stuff you maybe can't control.
And the reason we wanted to talk to you was, you know, I played up in the introduction to this piece. I played a piece of tape from,

Speaker 3 you know, when I was up there with you guys in 2016, and I came to realize how hard apple farming is

Speaker 3 and what kind of labor you need.

Speaker 3 Here's my question: First of all, what's your labor situation right now? Are you getting all the H2 visa people that you need? And secondarily, how much is it costing you?

Speaker 3 It's got to be really expensive.

Speaker 8 Yeah, yeah. So we are fortunate that the H2A visa program does give us the availability of labor that we need to get the job done.
As you allude to, the difficulty is that the cost

Speaker 8 continues to escalate even faster than inflation. That represents a significant real cost increase.

Speaker 3 What I hear you saying is that your margins are getting really thin.

Speaker 8 Yeah, correct. So the Northwest Horticultural Council trade group here commissioned a study recently about Washington apple growers' labor costs over the past decade.

Speaker 8 And in 2023, Washington apple growers spent 99%

Speaker 8 of their revenue on labor. So that 1% doesn't leave much for

Speaker 8 fertilizer and taxes and water and

Speaker 8 fuel for your tractors, things like that. And so, yeah, margins are getting squeezed.
In comparison, in 2013, labor was about 37%

Speaker 8 of the like per bin revenue that apple growers received.

Speaker 3 You don't need me to tell you this, but having 1% left over is not a way to run a business model.

Speaker 8 No, no. And like we've talked about before,

Speaker 8 farmers are price takers. We don't set the price of apples.

Speaker 8 And in an economic environment and political environment where inflation is really the driving

Speaker 8 force in elections and

Speaker 8 household budgets.

Speaker 8 It's really hard for us to

Speaker 8 manage and

Speaker 8 not pass on significant cost increases that consumers would see in a grocery store.

Speaker 3 It's tricky to know what the new Trump administration is going to do on immigration before they actually do it.

Speaker 3 They've started some crackdowns and obviously crackdowns will not happen to H2A workers because they're legally and sponsored by you. But

Speaker 3 it's possible that this administration is going to decide that even legal immigration is not something that it's interested in.

Speaker 8 Aaron Powell, yeah, absolutely. You know, farm labor and a secure source of farm labor is more than just important to

Speaker 8 employers like us, to farmers.

Speaker 8 Food security is an important part of national security. It's also an important trade bargaining chip in that American agriculture is a net exporter.
And if legal immigration is constrained

Speaker 8 through policies of the Trump administration, that has other implications beyond just how it affects farmers.

Speaker 12 Yeah.

Speaker 3 You are what? I know I ask you this pretty much every time, and I can never remember. You're the fourth generation, right, of your family to be on this farm.

Speaker 4 Yeah, correct. All right.

Speaker 3 And you and your siblings and the rest of your family have expanded.

Speaker 3 You have a brewery now. You've got, I was looking at your website earlier, you've got Loftus Labs, which is sort of an analytics and data thing.
So you're clearly expanding.

Speaker 3 Here's my question, though. Do you imagine, how old are your kids now, Patrick?

Speaker 8 I have three kids. They are 14, 8, and 4.

Speaker 3 14. So not too far from deciding what that kid is going to do.

Speaker 3 Do you imagine they're going to be generation number five?

Speaker 8 I certainly hope so. If we do our job well, the farm hopefully will be there for them to at least have the decision whether they want to come back to it or not.
You know, I certainly hope that

Speaker 8 we pursue smart immigration and trade policies that benefit farmers as well as

Speaker 8 the nation as a whole.

Speaker 3 Patrick Smith, Loftus Ranches up in the Yakima Valley in Washington State. Apples, hops, brewery, data analytics, all that good stuff.
Patrick, thanks a bunch. Good to talk to you again.

Speaker 8 Likewise, Kai, good to talk to you.

Speaker 3 There's been, as I'm sure there is wherever natural disaster strikes, a massive outpouring of support for victims of the Palisades and Eaton fires.

Speaker 3 GoFundMe's, shelter, and donations of all kinds, but what gets given isn't always what's most needed. From LAST, Jarep Local has more.

Speaker 14 Just southeast of where the Eaton fire burned, the YMCA in Sierra Madre is a hive of activity on this morning.

Speaker 14 A large group of volunteers forms a chain to unload boxes of donations from an Amazon truck.

Speaker 12 I can see the front wall.

Speaker 14 There are also a lot of just regular folks who wanted to help, like 11-year-old Winnie Newberg.

Speaker 15 We didn't lose our home, but a lot of our friends did, so we wanted to give something back.

Speaker 14 And what's your job here?

Speaker 15 Right now, me and my friend are basically just giving out pet supplies like toys, leashes, food for cats and dogs.

Speaker 14 The back patio of the YMCA is dotted with piles of canned food, toys, and bedding. AJ Placentia wanders around looking to replace things that he, his wife, and two-year-old son lost in the fire.

Speaker 14 Are there specific things that you're looking for for him?

Speaker 17 Basically cars, toy cars, dinosaur toys, and things that he likes like that.

Speaker 14 He's also looking for essentials he'll need when he can get out of the emergency shelter where he and his family have been staying.

Speaker 18 Trying to find a mattress,

Speaker 17 but I can't, they don't seem to find one here.

Speaker 14 Placencia and the other fire victims I speak with say they're grateful for all the help they're getting, including for little things like snacks and toothbrushes and eye cream.

Speaker 14 Many of them lost everything.

Speaker 14 State Senator Sasha Renee Perez is also here. She represents this area.
She says what people need most right now is money.

Speaker 19 Cash assistance really gives my constituents the flexibility to address whatever pressing needs that they may have at that moment. A lot of times that need might be housing, right?

Speaker 19 Maybe it might be food for the children.

Speaker 14 What fire victims and donation centers don't seem to need more of is used clothing.

Speaker 14 After I leave the YMCA, I drive down Sierra Madre Boulevard several miles west, past scarred oak trees and hillsides scorched by the Eaton fire.

Speaker 14 I see five pop-up donation sites within about a mile on the porches of businesses, outside of the supermarket. In front of a local funeral home, used clothing is piled high on folding tables.

Speaker 14 Some of it, including a poofy white wedding dress, is strewn across the sidewalk.

Speaker 6 I've seen pallets of clothing just left outside in a parking lot for months after some disasters because there's no place to put it. People don't have resources to sort it.

Speaker 14 This is Drew Hanna. He's led relief efforts after disasters in California, Hawaii, and elsewhere for the nonprofit Team Rubicon.
He says clothing donations can be especially difficult to handle.

Speaker 6 That is countless hours of work by volunteer agencies, by survivors themselves to navigate the piles and piles of donated clothing.

Speaker 14 Hannah says a lot of donations after disasters unfortunately end up in the landfill.

Speaker 14 A better approach, he and others told me, is to contact donation centers or check their social media to find out exactly what's needed, or give money to a trusted relief organization that knows how to put it to good use.

Speaker 14 In Los Angeles, I'm Jill Replogel for Marketplace.

Speaker 3 Coming up.

Speaker 20 I could use all the help painting, trim, just spot cleaning, staging, that kind of thing.

Speaker 3 Reopening after a hurricane. But first, let's do the numbers.

Speaker 3 Downdustro is up 130 points today, about 3 tenths percent, finished at 44,156.

Speaker 3 The NASDAQ went up 252 points. That's 1.3%, 20,009.
The S ⁇ P 500, up 37 points, about 6 tenths percent, 6,086. We heard earlier from Henry Epp about the state of consumer demand.

Speaker 3 Kelanova, the parent company of Cheez-Its, Morningstar Farm Meat Substitutes, and Rice Krispie Treats, dipped less than a 10th percentile today.

Speaker 3 Clorox Company might be and probably is best known for its cleaning products. Also, however, owns the Kingsford Charcoal brand and also Hidden Valley Ranch.

Speaker 12 Who knew?

Speaker 3 Down eight-tenths of one percent. Bonds down, yield on the tenure.
Teenote up 4.61% on the tenure today. You are listening to Marketplace.

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Speaker 3 This is Marketplace. I'm Kai Rizdahl.
Executive orders and actions have been coming out of the White House fast and furious, as you have surely seen and heard.

Speaker 3 And while speed can get an agenda moving quickly, it can also muddy the waters. Take, for instance, section 7 of the executive order from the other day titled Unleashing American Energy.

Speaker 3 It orders, among other things, an immediate pause to the disbursement of federal funds tied to certain components of the Inflation Reduction Act and the infrastructure law.

Speaker 3 Which components exactly is a lot less clear, as Marketplace's Kimberly Adams explains.

Speaker 18 Early yesterday afternoon, Jeff Davis at the Eno Center for Transportation started getting frantic phone calls.

Speaker 13 Saying that the executive order signed by President Trump the day before purporting to stop green New Deal spending was having the effect of suspending all Federal Highway Administration payments and new project approvals.

Speaker 18 Davis says the FHA started shutting down down disbursements out of an abundance of caution, even for things like road and bridge work.

Speaker 18 The idea that promised funding could be on hold changes the calculus for state policymakers, says Adi Tomer at the Brookings Institution.

Speaker 7 They may be hesitant to continue projects where they might be liable for enormous sums of money. We're talking tens to potentially hundreds of millions of dollars.

Speaker 18 After that panic, the White House issued guidance clarifying it was just talking about the Green New Deal stuff, like EV charging infrastructure.

Speaker 18 Other funding can keep flowing if agencies check in first. The whole thing is causing a ton of confusion.

Speaker 21 I will tell you that there is a lot of people reaching out that are wondering what is going on.

Speaker 18 Marcia Geldert Murphy is the president of the American Society of Civil Engineers and also works as an engineering consultant in five states.

Speaker 21 Everybody in those states are all equally concerned about what is going to happen to this money that hasn't been received yet, but was promised.

Speaker 18 Because tens of billions of dollars have been promised for projects tied to the Inflation Reduction Act and the infrastructure law.

Speaker 18 Jodi Freeman directs the project on environmental and energy law at Harvard Law School and says if the president tries to block that funding permanently, that's considered impoundment.

Speaker 22 That would be the president actually impounding money that Congress has appropriated. And that would lead to a legal battle.

Speaker 18 Plus, says Freeman, states that already spent that money with the expectation of reimbursement would likely sue to get it back. In Washington, I'm Kimberly Adams from Marketplace.

Speaker 3 Plans to build back are just starting to take shape after the fires here in Los Angeles.

Speaker 3 Over on the other side of the country, a lot of homeowners and businesses are in the early stages of their own rebuilds after Hurricane Helene hit last fall.

Speaker 3 Hannah Berniske is the owner of Cold Mountain Art Collective in Kenton, North Carolina.

Speaker 20 So we still have a long way to go, but I was able to get a brand new window for the front gallery space. We've had some electrical work done.

Speaker 20 and I think really in the next two weeks things should start picking up and moving pretty quickly is my hope.

Speaker 20 I really would like to be open no later than like late February

Speaker 20 but each week that goes by, each day that goes by, it just,

Speaker 20 it's starting to feel like it's going to push into March. I hope not, but we'll see.

Speaker 20 Sometimes it feels really overwhelming to think about all of the small things like countertops and doors and mirrors and toilet seats.

Speaker 20 And it's like all the little things add up and they feel very overwhelming. But it looks like around $50,000 for the rebuild.

Speaker 20 Now, whether insurance matches that or not, I don't know yet.

Speaker 20 Kind of a wait and see game with that, but either way, it's got to get done.

Speaker 20 I think that for me, the biggest question is: why stay in this location, knowing that it's flooded and that it'll likely flood again.

Speaker 20 But I bought this building with my small business loan for a really good deal.

Speaker 20 And even if I were to sell it and try to purchase another property, I would never be able to get something as affordable as this.

Speaker 20 I love my building, I'm very attached to it, and I just don't think I could lose it or leave it.

Speaker 20 I'm looking forward to like the final details.

Speaker 20 We're going to set up some volunteer days to have the community come in and do, like put together our IKEA furniture and we'll have pizza and it just, it gives the community more of an investment in the space.

Speaker 20 They've really been wanting to offer physical labor and so I'm going to. I'm going to accept that.
I could use all the help painting, trim, just spot cleaning, staging, that kind of thing.

Speaker 20 I think it's those moments leading up to the grand opening that I'm looking forward to the most. It's kind of like an opportunity to start fresh with new business ideas and just new paths.

Speaker 3 Hannah Berniske, owner of the hopefully soon to be up and running again Cold Mountain Art Collective in Canton, North Carolina.

Speaker 3 This final note on the way out today, in which I ask you once again to tell me how college football isn't actually professional.

Speaker 3 The name image likeness deals we have talked about, whereby players can benefit from the use of their personal brands, which good.

Speaker 3 Saw this in the Wall Street Journal today, though, that the Ohio State Buckeyes football team, newly minted national champions, would be valued at $1.96 billion.

Speaker 3 Could that team be bought and sold on the open market? That's research out of Indiana University, Columbus. Texas comes in at $1.9 billion, Michigan at $1.6.

Speaker 3 Georgia, Notre Dame, LSU, Penn State, Tennessee, and Texas A ⁇ M all breaking nine figures. I personally wanted Notre Dame to win.
Not that that's here nor there.

Speaker 3 Our media production team includes Brian Allison, Jake Cherry, Jessin Dueller, Drew Jostet, Gary O'Keefe, Charlton Thorpe, Juan Carlo Storado, and Becca Weinman. They are priceless.

Speaker 3 Jeff Peters is the manager of Media Production. I'm Kai Risdahl.
We will see you tomorrow, everybody.

Speaker 3 This is 8 p.m.

Speaker 20 You've finally broken loose from work. Three friends, one tea time,

Speaker 18 and then the text.

Speaker 20 Honey, there's water in the basement. Not exactly how you pictured your Saturday.
That's when you call us, Cincinnati Insurance.

Speaker 20 We always answer the call because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better.

Speaker 20 Find an agent at cinfin.com.