Sticky inflation, Fed drama and the rise of 'cute' debt

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Sticky inflation, Fed drama, and the rise of cute debt.

It's all on the show today from American Public Media.

This is Marketplace.

In Denver, I'm Amy Scott in for Kai Rizdahl.

It's Friday, August 29th.

Good to have you with us.

Inflation is still with us.

The Personal Consumption Expenditures or PCE price index, that's the inflation measure the Fed pays more attention to.

It rose by two-tenths of a percent in July from the month before, though the annual rate stayed flat at 2.6%.

But core inflation minus food and energy was higher than it's been in months, 2.9%.

Joining me to talk about that and the rest of the week's economic news are Courtney Brown at Axios and Jordan Holman at the New York Times.

Hello, you two.

Hey, Amy.

So let's start, Jordan, with the news also out today about consumer spending, which rose in July in spite of that still stubborn inflation.

And also at a time when surveys show declining consumer confidence.

What do you make of that?

Yeah, so this July, goods rose a bit faster than services.

And what I make of that is that people want to spend on the things that they think they need.

So, you know, this report was really bolstered by sales in motor vehicles, some of those other durable goods, and less so on the discretionary.

And I think all of that kind of the big picture is that people know that tariffs will affect prices, tariffs will affect what they can get.

And it seems like consumers have just decided, let me get the stuff that will last me in the long run, the thing that's the big ticket item that I might need and get it before the expected prices will increase.

Okay.

And so that tariff, those tariff worries are kind of showing up in those consumers' sentiment numbers.

We learned from the University of Michigan today, sentiment was down 6%

from July.

Yeah, it's huge.

I mean, and it does make sense, though, for the majority of this year, people have been hearing about tariffs and the consequence of tariffs.

is higher prices.

And even in the recent earnings calls for retailers, they're starting to be more vocal about the fact that they'll have to raise prices.

So I think it's just only reasonable that people will finally get to the point that it might not be happening now, but it will happen.

And that's affecting the sentiment report.

Okay, Courtney, this news is more for the Fed to chew on when it meets next week.

And

recent signals have been that officials will be cutting interest rates in September.

Do you think this latest inflation data changes that equation?

I'm not sure it does.

We

heard from Fed Governor Christopher Waller last night.

You might remember he was one of the two governors who favored an interest rate cut the last time the Fed met.

Of course, they kept interest rates steady.

You know, what he said was he's betting that any tariff-related costs

that businesses are going to deal with, that consumers might deal with, it's going to be a one-off.

It's going to be a one-time price hike um underlying economic activity is actually slowing hiring is stalling out and the fed needs to relieve the pressure on the economy for that reason now of course he could be wrong right he could be wrong that um tariff related inflation is a one-time um price hike.

Some Fed presidents have come out and said they are way more worried about inflation being sticky as seems to be suggested by the data today.

Right.

And of course, the other big Fed news this week was the president's efforts to fire Fed Governor Lisa Cook over unproven allegations of mortgage fraud.

Staying with you, Courtney, because you cover the Fed.

Cook has sued to block that effort.

There was a court hearing today.

What is the latest?

What a week for Fed Governor Cook.

Like, let's just take a second.

Monday night, the president president fired Fed Governor Lisa Cook, and today was the first official hearing after Cook moved to sue the president.

This hearing was really just about the lawyers making their case about whether Governor Cook should remain Governor Cook as this case plays.

through the court.

Her lawyers are arguing that she should be able to serve out her duty as a Fed governor,

potentially vote in the Fed policy meeting

in September.

And the government is saying, no, she should step down as the courts decide whether or not the president has the legal right to fire Fed Governor Cook.

And no ruling yet on whether she gets to stay in her position while that plays out, right?

No ruling yet.

As of Friday evening East Coast time,

you know, Cook's fate is still up in the air.

And we are expecting some ruling perhaps next week after the long holiday weekend.

And again, this would just be, can she stay in her job as the court rules on whether or not President Trump is

in his legal right to fire Cook?

Okay.

And Jordan, I'm sure you've been watching this too.

Can you talk about the implications for the broader economy if the president is successful in stacking the Federal Reserve Board with loyalists?

I mean, you know, sure, we'd all love to have lower interest rates, but we've also seen how people feel about inflation.

Totally.

Yeah.

I mean, the big idea here behind the Federal Reserve's independence and not just having a board full of Trump loyalists is that their decisions around things like interest rates should just be guided purely by economic data and like what's happening in the economy and not just how the president feels or, you know, any political party.

Because once you start answering to the president in that way, it can really obscure what's happening.

And it really

can obscure the tools needed to make sure that prices are where they are, that you're responding to things in the job market.

in the long run that could lead to booms and busts that just isn't a sustainable thing so that's the real implication.

It might not be, you know, right now, but it could send us down a slippery slope.

And that's why that independence of the Federal Reserve is really important.

And real quick, Jordan, before we let you go, you, as part of your job, talked to lots of CEOs.

What are you hearing about trying to run a business in this moment?

Okay, every CEO I've talked to has just really been like, we're trying to keep our heads down.

You know, in addition to everybody, there's a lot of fear.

There's a lot of, you don't know what the third rail is by what you say or what you do.

And so, yes, they're clearly watching what's happening to other CEOs like Intel, but also the Federal Reserve.

But just everyone's telling me they're trying to keep their head down, focus on what they can control, which understandably is harder than ever right now.

Right.

There's a lot that they can't control.

Well, Jordan Holman with the New York Times and Courtney Brown, always good to talk to you.

Courtney's at Axios.

Thank you so much and have a good weekend.

Thanks, Amy.

Happy weekend.

On Wall Street, a dip to end the week.

We'll have the details when we do the numbers.

We also learned that personal income grew last month by four-tenths of a percent, faster than inflation.

And the biggest driver of that was an increase in compensation.

Historically, people who switch jobs see a bigger increase in pay than those who stay put.

But as Marketplace's Samantha Fields reports, that's changed recently.

Every big pay bump I've ever gotten has come from switching jobs.

And Andrew Stettner at the Century Foundation says that's true for most people.

The data is there that in general, you know, the best way for you to get a raise is to go to a new company.

Or at least it was for the last 15 years.

But in the last few months, people who switch jobs haven't been getting any more of a pay bump than people who stick with the same company.

It's a pretty big reversal.

It is for us what we are calling the economics of uncertainty.

Companies don't know what's happening in this economy.

Are tariffs on or are they off?

Are they 15% or 145%?

With uncertainty, you know, people can't really make business decisions and plans for the future.

So people are kind of just hunkering down.

Allison Srivastov at the Indeed Hiring Lab says many workers are also just hunkering down.

And for those who do want to take a risk and switch jobs, hiring is really stagnated.

There aren't as many jobs to switch to.

And if you are job switching, it might be less of an upgrade.

For the first time since 2010, data from the Atlanta Fed shows wage growth is the same for people who switched jobs and people who stayed in the same role.

Taylor Boley at Bank of America Institute says that's more evidence that the labor market is cooling.

I think a lot of this has to do with who has the power.

And right now, that power really rests in the hands of employers.

That's not great news for workers.

And Andrew Stettner at the Century Foundation says it's not great for the economy either.

You want people to leave jobs in a dynamic economy.

You don't want people just sticking sticking to their own job.

He says that can hinder economic growth and innovation.

I'm Samantha Fields for Marketplace.

This is not news to most of us, but the federal government's labor force is smaller now than it was at the start of the year.

CNN's data tracking finds that more than 50,000 workers have been laid off or targeted for layoffs from federal agencies so far this year.

For the latest installment of our series, My Economy, we checked in with one of those workers.

My name is Droa Patel.

I live in Northern Virginia.

Up until February of 2025, I was the Director of Communications and External Affairs for an office within the Office of the Assistant Secretary for Health.

And today I run my own consulting firm.

I was laid off on February 15th.

We got these notices on Saturday around 7:30, 8 p.m.

at night.

I got a letter saying I was

an unfit employee based on my

PMAP, so the performance evaluations that we receive.

I've gotten nothing but great performance evaluations in the past.

So I think I felt really wrong.

I chose to be a civil servant and I worked really hard to become a federal employee.

It's not an easy process.

And so I kind of felt like, oh my god, why did I make this choice thinking that it would be any kind of stable or beneficial career if people can like gut it and remove it out from under you?

I've applied to several jobs, heard back from some, not heard back from some, you know, a lot of sweet like, you're very qualified, but we're not moving forward with you as a candidate.

A lot of, oh, we posted that job, but we're not really looking for somebody at this time.

And in the area that I live in, with the number of layoffs, I mean, we're mostly government employees or contractors.

So that means that there's just a lot of very talented people roaming around right now.

I do hope to go back one day to truly be a civil servant.

I love being a civil servant, but for me, I've taken it as this is a great redirection.

I decided to start my own consulting firm and it's called Joy Forward Consulting.

So I've been able to use my network to help me continue to work.

Of course, I think about: okay,

I don't have a steady paycheck right now in that I'm not at a nine to five and that's going to come perfectly bi-weekly.

But, you know, I belong to a group where we try to help each other and we have like collective funds where we help each other with things like rent and gas.

So I've continued to remain flexible and adaptable in every way to make sure that I could provide for my family.

Joya Patel in Northern Virginia.

You know, we can't do this series without you.

So whether you're staying the course or maybe making a pivot, tell us about it.

Marketplace.org/slash myeconomy.

Coming up.

A star may be a star not just because they are fantastic in their work, but because of the team around them.

Assembling an AI super team.

But first, let's do the numbers.

The Dow Jones Industrial Average fell 92 points, 2 tenths percent, to finish at 45,544.

The NASDAQ subtracted 249 points, 1 and 2 tenths percent, to close at 21,455, and the SP 500 lost 41 points, 2 thirds percent, to end at 6,460.

For the week, though, the Dow slipped 2 tenths percent, the NASDAQ gave up 2 tenths percent, the SP descended a tenth of a percent.

Bonds fell, the yield on the 10-year T-note rose to 4.22%.

You're listening to Marketplace.

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This is Marketplace.

I'm Amy Scott.

Buy now, pay later services just keep growing.

And a lot of the ads for these services that let you spread out payments over time, usually interest-free, are aimed squarely at women, making debt look fun or even cute.

Annie Joy Williams wrote about this for The Atlantic.

Welcome to the program.

Thanks for having me, Amy.

So tell me about this ad that you saw in the subway that kind of sent you down this path.

Yes, I was on my commute home from work a few weeks back and I was on the subway and I looked up and I saw this ad for Cash App, which is now in partnership with Afterpay for its installment payment services.

And it said, little payments are so much cuter.

And my first thought was, this ad wasn't made for a man.

This ad was made for me, a young woman who, you know, is drowning in credit card debt and is desperate to keep up with the Joneses, whether online or in real life.

Yeah, and this isn't the only example you found of debt being marketed as cute or feminine.

Tell us about some of the other examples.

Oh, my gosh.

Yeah, it's every year.

Once I opened this, it was like opening Pandora's box.

I found a number of pop-up situations where Klarina had partnered with, you know, Paris Hilton to do this like house of Y2K that was reminiscent of millennial nostalgia.

And then they did a pop-up store with Shein, the fast-fashion, predominantly women's clothing brand.

And they had this big bubblegum pink party bus that you'd got manicures and makeovers in.

And on the side, it said, in pink, we trust.

And even just murals, you know, After Pay did one that said After Pay is like eating the whole carton and spreading the calories out over six weeks.

And it was all of these ice cream paintings.

And, you know, men aren't counting calories calories maybe like women are to that degree with dessert.

So yeah, it felt very much targeted.

I saw a lot on TikTok from predominantly female influencers, whether they were comedians or just, you know, get ready with me videos saying, I bought all this with Afterpay or pitching Afterpay or Klarna as, you know, responsible spending was the big phrase I kept hearing.

Hmm.

Responsible spending.

Of course, this is still debt.

And you write that women are, in fact, more likely to use buy now, pay later services.

Why do you think that is?

Yeah, this is really fascinating to me because overall, we don't see women be in as much debt as men.

There are two categories, though, that a lot of studies show women are in more debt in, and those are credit card spending and student loans.

And so, you know, I think a lot of times women in their homes, and this has been generationally reinforced, are seen as the day-to-day consumers.

So, while men may be making the bigger investments, whether it's a car or a house, that may be falling on them, women are often handling the groceries, the clothing, the day-to-day stuff that really adds up.

And most of these places that provide the buy now pay later service are selling those smaller consumer things, right?

And their clientele are predominantly women because of that.

One of the things that I found fascinating in your story is that even though these ads seem directed at women consumers or shoppers, the business model is about selling these services to the retailers.

Can you say more about that?

Yeah, so I think a lot of people assume that by now pay leader services make their money off of consumers missing their payments.

And that is true.

They do make money off of that.

But ultimately, they make the most money off of selling themselves to retailers.

They are solving this problem of cart conversion for companies, right?

Because, like me, whenever I went to check out with my five sorority formal dresses, I would have never pushed by if I had to buy them all up front, but I did push by

when I saw that there was an option to pay in installments.

So that really solves that cart conversion issue for these companies.

And they charge these retailers to have their services embedded at checkout.

And their whole pitch is: we can get women to spend money here.

And they do.

Yeah.

Annie Joy Williams wrote about the rise of cute debt for the Atlantic.

Thanks so much for sharing your reporting.

Thank you so much, Amy.

Big tech companies have been in an all-out bidding war to recruit top AI researchers and engineers, maybe none more conspicuously than Meta.

CEO Mark Zuckerberg is trying to leapfrog his company's way to super intelligence, reportedly offering compensation packages in the hundreds of millions of dollars.

So, Marketplace's Megan McCarty-Carino looked to another arena to see if the strategy of collecting expensive superstars actually pays off.

When you think about a sports team that's loaded with stars, there's one example in basketball that always comes up.

Join us now as we name the Dream Team, the United States team, for Barcelona in 92.

The Dream Team is essentially probably the greatest team ever assembled.

David Berry is a sports economist at Southern Utah University.

And they go to the Olympics where nobody else has professional players, and you have the greatest professional players ever.

Magic Johnson, Michael Jordan, Larry Bird, Charles Barkley.

This was a lot of fun because we won every game by like 50 points.

The U.S.

has a field for ratio 117 to 85, and they have, as expected, won the goal here in Barcelona.

You assembled this phenomenal amount of talent, and it worked out exactly as you hoped it would.

That is unusual, Barry says.

Dream team-like dominance is rare in professional sports.

Despite all the statistical analysis and big money contracts, it's still hard to buy your way to wins, often because we misjudge what makes a player or an AI hot shot valuable.

Guess what?

A star may be a star not just because they are fantastic in their work, but because of the team around them.

Ashish Nanda is a senior lecturer at Harvard Business School.

He points out star players sometimes lose some of their luster when they change teams.

And the same is true in business.

He studied top-performing stock market analysts who lost their edge after moving to a new firm.

If you think that you can solve your problems by bringing smart people who have done well outside, paying them a ton of money and bringing them in and saying, okay, do your magic again, that's a very risky business.

Those massive paychecks could also be a risk, says economist Michael Gove at the University of North Georgia.

The research is mixed, but pay inequality between stars and other players has sometimes been found to undermine team cohesion.

Where people think things are maybe a little unfair, a little skewed too much, and so it ends up having a worse team performance.

The Yankees don't always win the World Series, and Meta's not going to win every AI battle, because it is possible to have too much of a good thing, says Eric Anisich, a management professor at the University of Southern California, who describes a too much talent effect.

You know, kind of challenging this common and quite reasonable assumption that people have that adding more and more talented people to a team is just necessarily going to always increase team performance.

He found teams with the highest concentration of stars underperformed compared to more average lineups in sports that require a high degree of cooperation, like basketball.

A player has to be comfortable giving giving the ball up, right?

Which is not often the case if you're thinking about superstars in sports contexts.

In the AI context, he says, breakthroughs can come from individual prodigies, but bringing those ideas to market requires a lot of collaboration.

However, drawing conclusions from the outcomes of American sports might not be instructive in the AI race, says Stefan Sheminsky, a professor of sport management at the University of Michigan.

He points out most American leagues impose some form of salary cap to level the playing field.

Not so in European soccer.

There are essentially no restraints on what a team can spend.

Soccer is characterized by extreme inequality between the top and the bottom.

The same teams win year in, year out.

He says the teams that spend the most generally win the most, but the ball can always bounce either way.

I'm Megan McCarty-Carino for Marketplace.

This final note on the way out today, following up on our story this week about Lego's enduring success.

Lego enthusiasts might find themselves out of luck if they're missing a piece or two from a set.

404 Media reports that the company's pick-a-brick store, which sells individual pieces usually for less than a dollar, has stopped shipping more than 2,500 pieces to Canada and the United States.

Reports link the move to today's expiration of the so-called de minimis rule that exempted small-value packages from Trump's tariffs.

Certain bestsellers that ship from a U.S.

warehouse, like skeleton leg number two or mini wig number 105,

those remain available.

Is there a skeleton skeleton leg number one?

Our theme music was composed by BJ Lederman.

Marketplace's executive producer is Nancy Fergali.

Joanne Griffith is the chief content officer.

Neil Scarborough is the vice president and general manager.

And I'm Amy Scott.

Have a great weekend.

We'll be back on Monday.

This is APM.

The Trump administration is making deep cuts to education research.

The cancellation notices started coming.

When the contract is cut, the study just dies.

It's all happening just as schools are trying to make use of research to improve reading instruction.

There would not have been a science of reading without the federal funding.

It wouldn't have happened.

I'm Emily Hanford on our new episode of Soul to Story: What the Trump Cuts Mean for the Science of Reading.

Go to your podcast app and follow Soul to Story.