Consumer spending outpaced income — again

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Today on the show, we'll of course review the nitty-gritty business news of the week.

And then we'll send you into the weekend with a trip to the beach.

From American Public Media, this is Marketplace.

In New York, I'm Kristen Schwab in for ChirisDoll.

It's Friday, the 26th of September.

Thanks for being here.

Lots to talk about today and only six and a half-ish minutes to do it.

And my timer has already started, so let's not waste another moment.

Rachel Siegel is at the Washington Post.

Amera Mokwe is at Bloomberg.

Hey, you two.

Hey there.

Happy Friday.

Happy Friday.

So I want to start with the big news of the day, at least business news.

The August Personal Consumption Expenditures Price Index went up three-tenths of a percent from the month before.

That puts overall inflation at 2.7% and core at 2.9% year over year.

Amera, when you saw those numbers, what was your gut reaction?

Yeah, inflation is a little stubborn here.

You know, that annual headline number at 2.7% was an uptick.

And so we are seeing a little bit of stubbornness.

But at the same time, I think the big sort of discussion around inflation right now is that the impact of tariffs is not really showing up as much as economists had feared earlier in the year.

So, I think by now people were expecting to see a little bit more pass-through of President Trump's tariff policies into the inflation data, and it really hasn't shown up that forcefully.

And I think that's why you're seeing a lot of Fed officials starting to talk about the possibility that the ultimate impact will maybe be less than initially feared.

And that is sort of complicating sort of how they're thinking about what's happening with the inflation outlook and how that

should balance that against

the weakening in the labor market that we've been seeing in recent months as well.

Well, Rachel, do you think that means prices are studying that maybe the price increases from tariffs have been accounted for by now?

It's a great question and one that gets to Amera's point about, you know, we expected X, are we seeing Y?

And there has been a lot of the suggestion that, you know, the tariff policies have changed so significantly.

They might look one way one week and look a different way another week that it's been very difficult to get some sort of price certainty through that.

But then again, if we're not necessarily seeing those tariff impacts break through to the headline numbers, then what sort of conclusion are we supposed to make?

We know that a lot of companies themselves are absorbing some of those tariff costs, at least as best as they can.

On the flip side of that, they're also struggling with how to plan for their own pricing, how to set their own orders, how to forecast into the future.

And I think this might be an example where kind of all of the above is true and we're left to try to string together some sort of conclusion, but still we're in some sort of situation that just hasn't exactly panned out the way we expected.

Well, more tariffs are coming on October 1st.

Yesterday, the president announced that new tariffs on pharmaceuticals and furniture and some other items will come through.

Rachel, I wonder how much these tariffs are going to affect consumers.

Well, these are all categories categories that affect people's day-to-day lives quite significantly, that affect the big slices of people's budgets quite significantly.

We're talking about pharmaceuticals that could face tariffs of up to 100%,

kitchen cabinets 50%, furniture 30%,

and also heavy trucks at about 25%.

And, you know, those obviously bleed over into healthcare costs, into transportation costs, into housing costs.

So I don't necessarily think we only look at these handful of items as isolated to their own corners of the economy.

These are changes that would bleed into other aspects that are already quite steep for many people.

If you think about prescription drugs, if you think about cars or home renovations, especially if people aren't able to buy a new home.

So here too, you know, will these policies stick?

Right now, they could go into effect October 1st, but I think we've often been challenged to have some period of stability.

And in the meantime, you get a lot of concern both from customers and families trying to navigate all of this and then the companies and industries that also will shoulder it to.

Well, a bit of a pivot, but sort of on the still the note of tariffs and inflation.

Amera, there were something like 16 Fed speeches this week.

I did not get to all of them.

I don't know how many you got to, but I'm curious to hear what came out of those speeches and what you heard from officials about what might happen moving forward.

Yeah, a ton of Fed speaking.

They were talking about a whole bunch of things.

But I think the big theme is that right now there really is a wide range of views among Fed officials about what is happening in the economy and what the Fed should do in response.

So, like, on the one end, you had the newest Fed governor, Stephen Myron, come out and lay out a really sort of in-depth case for why he feels like the Fed should be cutting very quickly and very aggressively.

He did a big speech on Monday where he argued that in his view, the Fed's policy stance is having quite a restrictive effect on the economy.

And so it risks damaging the labor market.

Then on the other hand, you had some other Fed officials who came out with a much more cautious outlook for rate cuts, signaling that they do still see inflation risks and that they still are attentive to inflation risks.

And you heard Chair Powell, he did a speech on Tuesday.

where he reiterated his view that the economic landscape is kind of presenting policymakers with a really really challenging situation because he sees risks on both the inflation side and the employment side.

And so, I think what you're seeing here is that, you know, yes, the Fed did deliver its first rate cut of 2025 last week, but it isn't necessarily going to be like a straight glide path to more rate cuts.

And I think you're going to see Fed officials continue to have a very rigorous debate about what the policy path should look like.

And you're also going to see them likely paying very close attention to the forthcoming labor market data.

Well, Rachel, Rachel, I have two more numbers that kind of represent that confusion about the economy.

Today, we got the latest consumer sentiment numbers near record lows in September, mostly because of high prices in the job market.

Meanwhile, earlier this week, we got revised GDP for the past spring, which showed a resilient consumer.

So how do you square those two things?

Yeah, on the surface, they seem like they might be at odds with each other.

But I think a lesson we have learned for a while now is that, you know, a a very large share of that economic growth, of that consumer spending is coming from a wealthier share of the population, people who have seen their wealth grow through the stock market or through their home values, and that that often has a way of masking both people on the other end of the economic spectrum, but also that kind of worry and anxiety, especially when it comes to the labor market, that we know is very much pervasive in the mood.

But when we try to map that onto whether people are actually changing their behavior, I think we just increasingly see that kind of continued growth really carried by people who are able to keep passing that on.

Rachel Siegel is at the Washington Post.

Amera Mokwe is at Bloomberg.

Thanks, you two, and have a good weekend.

You too.

You too.

Wall Street today focused less on the tariff announcement and more on the not good news, but also not bad news inflation report.

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

There was so much data packed into this week that we didn't actually get to one piece of it at the top of the show, and it is an important one.

Personal income and spending data for August.

For the third month in a row, people spent more than they made, and they're saving less too.

Marketplace's Samantha Fields has more.

In an ideal world, you want to be making more than you're spending.

But in reality, that's not always how it works.

What do households do when they see the prices for things they're buying going up?

Betsy Stevenson at the University of Michigan says often they'll keep buying what they're used to buying and just dip into savings or pull out a credit card to do it.

You know, you go to the store and you got your ingredients list for dinner and now the prices are higher.

And, you know, cognitively, do you want to like rethink your entire dinner right there on the spot at the grocery store?

Or do you just buy the stuff and then rethink your dinner for the next week?

Or if you're well into planning a bathroom renovation, like Stevenson is, and then Trump announces tariffs on bathroom vanities like he did yesterday?

You're probably going to go forward with your renovation.

Even if it means spending more than you planned, that is what people seem to be doing lately.

Consumers remain generally resilient in the face of tariff-induced cost pressures.

But Gregory Daco, chief economist at EY, says there is evidence that not all consumers are resilient.

Families at the lower to median end of the income spectrum are increasingly under pressure from a labor market that is softening and prices that are rising, while individuals at the higher end of the income spectrum are still spending relatively freely.

Many people are spending down savings and putting more on credit cards lately.

And Michael Linden at the Washington Center for Equitable Growth says that is not sustainable, especially with the labor market slowing.

You can only finance your consumption through credit for so long.

Credit is good as a bridge.

But not as a long-term solution.

I'm Samantha Fields for Marketplace.

Immigration rates are continuing across the U.S.

and are expected to ramp up as the immigration and customs enforcement budget grows.

The place where all this started this summer is Los Angeles, and people are feeling the impact.

Private sector employment of non-citizens, it dipped 12% in California after those summer raids.

That's according to an analysis by UC Merced.

Marketplace's Elizabeth Troval looks at how businesses and employees are preparing for whatever's coming next.

39-year-old Ferris has been working at the same same Los Angeles car wash for 18 years, but coming to work is different now.

There's a reason why we're not using her last name.

There's a constant fear, a fear of being arrested by ICE.

When you go to work,

fear when you drop the kids off at school or when you go to the store, she says.

But her kids in LA and family back home in Honduras depend on the $16.50 she makes an hour.

She says she can't afford to stay home in fear.

That's why it was a welcome surprise when a group of organizers dropped by the car wash this summer to help her prepare for an immigration raid.

She says she learned to have a designated place to go during a raid.

Her co-worker, Omar, was also at the training.

She says they taught him if ICE comes not to volunteer their names

to be quiet and not run away.

One of the organizers who worked with Omar Emfredis is Cynthia Ayala, who has watched the raids hit local businesses in her community.

Some folks, when it was really bad, didn't go to work.

A lot of folks, their business went down, of course.

Ayala works with the Los Angeles Alliance for a New Economy.

She and other organizers and volunteers have offered trainings to roughly 9,000 businesses to teach workers and employers about their rights during an immigration raid.

This includes putting up signs.

It says just employees only, and that's only for the office space and their break room.

The sign shows where the private property line starts.

The idea is: ICE is not supposed to enter unless they have a judicial warrant.

Ayala has even given business owners printouts of what judicial warrants look like.

He had it posted in the office just so everybody can see how it looks.

If they come in, they have to have that.

Ayala says car washes are a big target for raids because people are working out in the open air.

There are fewer places to hide.

One of the car washes she worked with already had workers deported, but now the owner is keeping a lookout in case it happens again.

Now he's like, well, now I'm walking around.

You know, we have like walkie-talkies.

And I'm like, oh, wow.

I was like, that's amazing.

He's like, yeah, man, I don't want to to put anybody else at risk.

What Ayala is doing is part of a quiet movement that has spread to other parts of the country, like New Mexico and Oregon, according to Claudia Magana, who is coordinating national know-your-rights efforts with organized power in numbers.

This is the most accessible thing a lot of folks find that they can do to support right now.

Corisa Hernandez, who owns a bar in Northeast LA, says small businesses like hers are bracing for how the next string of raids could impact their bottom line.

We have businesses right now that are away from closing.

LA businesses have gone through a pandemic, wildfires, and now this.

You're going to see these restaurant shutdowns, which will impact the community as a whole because you're losing tax revenue and jobs.

She's done know your rights training for her staff and has encouraged other restaurants to get involved as well.

Her bar hasn't been raided so far.

She knows speaking out puts a target on her back, but she says this isn't the time to back down.

Immigrants built your business.

Immigrants contribute to the success of your business.

And just as much as they've had your back, it's time to have their back.

Because without immigrants, she says, there is no hospitality industry.

I'm Elizabeth Troval for Marketplace.

Coming up.

We wish you all the luck with what you're doing with ski and snowboard.

Leave us alone.

Thank you very much.

Goodbye.

Riding snow, riding the waves, they're similar, right?

But first, let's do the numbers.

The Dow Jones Industrial Average rose 299 points, 2 thirds percent, to finish at 46,247.

The NASDAQ added 99 points, a little over 4 tenths percent, to close at 22,484.

And the S ⁇ P 500 gained 38 points, 6 tenths percent, to end at 6,643.

For the week, the Dow gave up a little over a tenth of a percent, the NASDAQ fell two-thirds percent, and the S ⁇ P subtracted 3 tenths percent.

The video game maker behind the Blockbuster Hits Madden NFL, The Sims and FIFA, that's the soccer game now known as FC, is reportedly the target of what could be the largest leveraged buyout of all time.

The Wall Street Journal reports that Electronic Arts would be valued at around $50 billion if the deal goes through.

EA scored 14 and 9/10%.

Bonds fell, the yield on the 10-year T-Note rose to 4.17%.

You're listening to Marketplace.

This podcast is supported by Odo.

Some say Odo 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 beanstock building blocks for business.

Odoo, exactly what businesses need.

Sign up at odoo.com.

That's odoo.com.

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This is Marketplace.

I'm Kristen Schwab.

We started the show today talking about consumers' appetite for spending.

Despite all the economic challenges thrown their way, they're still shopping and going out to eat.

Now, naturally, we talk a lot about the role of those places, of retailers and restaurants, as economic engines.

But there's also something to say about their aesthetic, because maybe you wouldn't call a big box store picturesque, but beauty is in the eye of the beholder.

Here's the next installment of our series, My Economy.

My name is Jake Longstreth.

I'm a fine artist.

When I was a kid, I always liked to draw and color and

draw my favorite sports heroes and rock stars.

And then

I started getting interested in painting and art history.

And so I just never stopped.

I've been doing landscape painting for a long time, and sometimes landscape painting can be pictures of nature and trees.

And sometimes landscape paintings can be the built environment.

highways, houses,

and very ubiquitous corporate retail and restaurant chains.

Walmart, Home Depot, Taco Bell, you name it.

I try to make beautiful paintings of these places that typically aren't thought of as picturesque.

In recent years, a lot of the paintings have depicted boarded up and shuttered big box doors.

Because when I started making paintings of this subject matter 20 years ago, they were really at their apex.

I don't think maybe we realized it at the time.

But

now we look back at that as the brick and mortar era.

And I think that's an interesting aspect of the work as it ages.

The meaning will change inevitably.

It wasn't, I was never painting a picture of a Circuit City or a Walmart out of a sense of nostalgia or

affection.

towards the subject, but there is sort of like an emotional charge sometimes to the paintings, and their meaning will change as the years go on.

I've thought about doing an Amazon warehouse painting, but for some reason it's just too brutal.

It's too big.

Maybe I'll find it somehow, but my back door into the world of Amazon is to paint those blue semi-trucks with a little arrow.

as it's speeding through like a mass of eucalyptus trees or something.

I feel like I've done my job when people are out there in the world and they're like, Oh, I saw a Jake Longstreth painting today.

I was pulling into the parking lot of the Toys R Us or the Chuck E.

Cheese,

and the light was hitting this group of trees off to the side of the building.

And I just, it looked like one of your paintings for a split second.

That's kind of what art does, I think.

It awakens perceptions in people that they might not have had before.

Jake Longstreth is a visual artist in Los Angeles, California.

You can tell us about your economy and where you find beauty in it at marketplace.org/slash myeconomy.

And now, that promised trip to the beach.

The 2028 Summer Olympic Games are going to take place in Los Angeles.

And though most of us bystanders are focused on matchups between veteran athletes and rising stars, or on the medal counts for us versus everyone else, there's another type of turf war happening behind the scenes over who should manage what might be the most California sport you can think of.

From LAist Jill Replogel has the story.

Lower Trestles, just south of San Clemente, is the chosen site for Olympic surfing at the LA 28 Games.

And today, the fast peeling waves are gorgeous.

It's a wave magnet.

You're almost sure to find something coming down here.

And it's called the skate park because it's so consistent and playful.

It's just like a really perfect wave, really.

That was Trevor Levin, John Lodge, and Steve Nippelle.

This perfect wave and the nearby town of San Clemente have long been a hub for professional surfers, and the surfing industry is stoked about the prestige and, let's be honest, the cash that's likely to come with hosting the Olympics at their local break.

But an outside group is trying to drop in on this once-in-a-lifetime wave.

U.S.

Ski and Snowboard is making a bid to add surfing to its roster of Olympic sports.

That would mean selecting athletes for the Olympic team, providing coaching, and helping athletes build their personal brands.

So, how can a group whose athletes wear goggles take over an ocean sport?

For us, it's a very natural kind of extension.

Sophie Goldschmidt is CEO of the nonprofit.

U.S.

Ski and Snowboard already oversees a bunch of other Olympic action sports, including half-pipe snowboarding, aerials, and free ski.

Adding a handful of elite surfers to the mix makes sense, Goldschmidt says.

Those athletes can take advantage of the group's hefty economy of scale.

The doctors, the medical staff, the rehabbing experts, the trainers.

We have all the office and back-end support.

And Goldschmidt says acquiring a non-snow-dependent sport, like surfing, would make U.S.

ski and snowboard more attractive for marketing.

That only benefits the athletes in the sports.

It means that we can invest more back, deploy more resources to help at the grassroots level and help these elite athletes achieve their dreams.

But a lot of folks in the Southern California surf community are not interested in what the Utah-based group has to offer.

We wish you all the luck with what you're doing with Ski and Snowboard.

Leave us alone.

Thank you very much.

Goodbye.

This is Ian Cairns, a former champion surfer and coach.

Cairns is backing a competing bid to oversee the Olympic team from the San Clemente-based nonprofit USA Surfing.

In his view, U.S.

Ski and Snowboard is trying to skim the cream off the top by only representing surfing's top athletes.

They're going to take the commercial rights and they're going to put those dollars into their infrastructure.

That could mean millions, both in commercial rights and in direct funding from the Olympic Committee, that would not go to support USA Surfing and its program of developing young athletes to compete on the world stage.

USA Surfing helped get the sport into the Olympics in the first place at the 2021 Tokyo Games.

But then the group had some financial troubles and they voluntarily gave up managing the U.S.

surf team for the Paris Games.

Now USA Surfing says it's cleaned up its books, has new management, and does not want to miss out on the world's biggest spotlight on their home turf.

This is about local jobs, the local economy, local businesses.

Vipe Desai heads the Surf Industry Members Association, which is also backing USA surfing.

If this money gets transferred out of state, that's not going going to service the sport or the culture or the industry.

Gold Schmidt from U.S.

Ski and Snowboard says if her organization does oversee the Olympic surf team, she wants to collaborate with USA Surfing, like the nonprofit does with other sports groups.

The U.S.

Olympic and Paralympic Committee will soon decide which of the two organizations gets the bid: USA Surfing or U.S.

Ski and Snowboard.

And surfing?

In San Clemente, I'm Jill Replogel for Marketplace.

This final note on the way out today saw this in the Associated Press.

House flipping is just not what it used to be.

This spring, the typical home flip, resulted in a 25% return before expenses.

That's the lowest profit margin for flips since 2008, according to Atom, a real estate data company.

There are a few things going on here.

Climbing home prices make the initial investment difficult.

Even properties that need work cost a lot these days.

And there's a shortage of entry-market homes, which makes competition tough.

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 Kristen Schwab.

Have a great weekend.

We will be back here on Monday.

This is APM.

This week on Million Bazillion, we're giving you an extra special history lesson on bubbles.

Economic bubbles, that is.

We'll learn all about the housing boom and bust of the 2000s.

Plus, we'll explore other famous bubbles like tulips and dot-coms to uncover why they happen and why it's so hard to know you're in one until it pops.

Don't miss this week's episode of Million Bazillion.

Listen on your favorite podcast app.