Our economic future is a black box

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You, me, Jay Powell, and the gang at the Fed have more in common than you might realize.

From American public media, this is Marketplace.

In Los Angeles, I'm Kai Risdahl.

It is Wednesday, today, the 8th of October.

Good as always, stay along, everybody.

So, you know know that thing in those magazines you see at supermarket checkout aisles, people, us weekly, whatever?

That feature they do.

Celebrities, they're just like us?

Here is the marketplace version of that.

Central bankers, they're just like us.

That's what popped into my mind when I read the minutes of the Fed's most recent meeting that came out this morning.

Long story short, the Fed is not of one mind about what's going on in this economy, given ever-changing tariff policy, a softening labor market, and inflation still stuck higher than they want it to be.

They're kind of feeling their way as they try to steer this thing.

And the fact of the matter is, it's not just the Fed.

Trying to predict where this economy is going has been tough for the rest of us, too.

Marketplace Adjustin Hoe made some calls to forecasting professionals to see how they've been getting by.

This is not a new problem.

I mean, this week, this month, this year, I have been feeling confused.

That's Winnie Caesar, global head of strategy at the research company Credit Sites.

A few days ago, she and her team finished off a report covering the team's outlook for next year.

And it specifically focuses on the U.S.

economy, corporate credit markets, and our expectations for some of the key themes that may drive the market.

Cesar says it's always challenging trying to figure out what the next 12 months are going to look like.

But this year, there have been just so many significant policy changes to stay on top of.

Just understanding, you know, deregulation versus tax policy policy versus tariffs versus a hundred other things that have happened this year.

The issue, Cesar says, is that any one of those factors has the potential to steer the economy in one direction or another.

And then when you add on the fact that we have not a lot of modern history of things that have happened this year that we can kind of look back on and make educated guesses around, that makes it very, very difficult.

Historical evidence helps economists make those educated guesses.

Most econometric models, statistical models, they take an average of how all these things interact over the last 10 or 15 or 20 years.

That's David Kelly, chief market strategist at GP Morgan Asset Management.

And then you say, okay, well, if you see something similar again, like if the Federal Reserve cuts interest rates a bit, or if you get some increase in taxes, well, how will that feed through?

The problem, Kelly says, is that there's no precedent for the Trump administration's crackdown on immigrant labor.

We haven't seen tariffs like the ones the president has imposed since the 1930s.

So Kelly says economic models are struggling.

It's kind of like if you've got a patient and you're used to giving them sort of, well, this is what happens if you give a patient an aspirin, you suddenly give them a 10 aspirin.

Well, you don't know what's going to happen because you just don't have any information what happens with the dosage like that.

There are precedents economists can use to guide their forecast now.

Seth Carpenter, global chief economist at Morgan Stanley, says the tariffs imposed during the first Trump administration can help predict how new import taxes could affect the economy.

Carpenter says we also know that big inflows of immigration have boosted the economy over the last few years.

It's sort of been a big positive supply shock that allowed the economy to grow faster and still have disinflation than it would have otherwise.

And so the inference then that immigration restriction would go in the opposite direction feels like it makes a lot of sense.

But Carpenter says those precedents have limits.

For instance, the first Trump administration's tariffs were nowhere near as high as they are now.

So?

We also just have to do a lot of going by feel, trying to listen to the individual sectors, the economy, where the pain points are, how much we're seeing prices adjust, and we're feeling our way.

Carpenter says that means he and his team are debating more about their views among themselves and with their clients.

So, in many ways, the process now is similar to the way it normally is, but it's a much more intense pressure testing each and every assumption that we make because we could be wrong.

And Carpenter says that means his forecasts these days are subject to plenty of revision.

I'm Justin Ho for Marketplace.

At the corner of Wall Street and Broad in Lower Manhattan, tech stocks had a day.

The SP 500 slightly less so.

The Dow might as well have taken the day off.

We will have the details.

Yeah, then.

With the caveat that, of course, what I'm about to say is subject to change without notice, we're less than a week away from a whole new set of tariffs kicking in.

Starting on Tuesday, softwood lumber and timber imports are going to be taxed at 10%,

cabinets, vanities, and upholstered furniture 25%.

I should add here that furniture prices are already higher than they were a year ago.

North Carolina was, once upon a time, the furniture-making capital of this economy.

That changed starting back in the 1990s as a lot of that manufacturing moved overseas.

A lot of it, but not all of it.

Alex Schuford is the CEO of Rockhouse Designer Brands, which owns Century Furniture, among others.

Alex, it's good to talk to you.

It's great to be here.

Thank you.

Do me a favor, would you, and give me the 30-second history of your company.

Yeah, absolutely.

We're a 78-year-old furniture company, third generation, manufactured here in the United States.

Original brand was Century Furniture, founded by my grandfather, 1947.

And now we are seven different brands across nine factories and about 1,700 people here down in the North Carolina area.

How's business?

Business is better than we suspected it would be at this stage in the process, but we're starting to see a little bit of weakness creep in.

Well, so let's talk about the process.

I mean, here we are now

in a new tariff regime.

Furniture in this country has been challenged in a whole lot of ways in recent decades.

What has 2025 meant for you?

Well, it's been sort of a year of chaos.

We budgeted for the year, of course, going in with the expectation that we'd start to see some lower mortgage rates.

Business would start to come back from the sort of post-COVID lull.

And then in the spring, all of a sudden we're faced with this tariff chaos/slash-changing environment.

And

tariffs are one thing, but the fact that it continues to change periodically is making it awful hard to plan.

So if you take it from there, that we have a continuing pattern of uncertainty.

The president says he wants to protect American labor and American jobs and American companies.

Is this going to be a boost for your business then?

Yeah, we're funny.

So, you know, with nine factories here, there's a near-term boost.

There's no question that we could see some people that typically import their product want to have it made or at least quoted in the United States.

But our big fear is that across the sort of medium time scale and certainly the longer horizon, it's pretty destructive to our retail furniture store base, the people that we sell furniture to, because a lot of their revenue that they rely on to pay their their bills comes from a more moderate price point than ours.

And that customer is very price sensitive.

And if they see that revenue column start to shrink, then that puts their store at risk.

And we rely on those retail outlets to be successful.

Right, of course.

And what about you as a maker, right, of mostly a maker of furniture?

I mean, could you go out right now and hire, I don't know how many would take, 1,500 new woodworkers in North Carolina if you had to?

No, it doesn't exist exist in the current environment.

Training for that level of skill will take years.

And frankly, on the time scale we're talking about, I'm not sure anybody is willing to make that investment where the payoff might be four, five, six years down the road.

Well, so let's talk then planning and those year-to-year cycles you were talking about.

So I'm going to do an agriculture metaphor here.

I talked to a lot of farmers, and they, of course, are very seasonal and planting and harvesting and all that jazz.

Does furniture have seasons?

Do you have like a planning season and then a manufacturing development season?

We do have development seasons.

So the two big trade shows are April and October, and most of the new product development is brought to market in those two timeframes.

But yeah, when we're planning right now for what do we do in 2026 as far as new product development, we're scrambling.

We don't know what country to take it to.

Do you have no imported parts in it?

Is our customer going to be willing to pay that price?

Because I think one of the things that's misunderstood is that it may well be that even with tariffs, the imported item is still less expensive than an equivalent item made here in the States.

Yeah.

When you're out at, I don't know, getting a cup of coffee or running into people at the grocery store and you see colleagues of yours in this business,

what's the chatter?

What's the sideline hubbub?

Yeah, there's a lot of nervousness among my peers.

We're in the budgeting season right now, trying to figure out what next year looks like.

And directionally, everybody is obviously pointing down.

There are a few players that see this as a positive, but I really think they're looking only out a few months and not thinking about the longer-term repercussions.

I don't want to put words in your mouth, but long-term, this is a net negative for you and for your company and maybe for your industry.

Yeah, we're exactly the type of company that this is intended to benefit.

And when we look across the longer arc of time, we see it as a net negative.

We compete pretty well when you give us a chance, but if you keep changing the rules, it's awful hard to plan.

Yeah, so let's talk about the long haul of history, but I want to go backwards a little bit.

So we were in Catawba County a year ago-ish

talking about fiber optics, which in that part of the country is kind of amazing, right?

There's plants and just incredible high-tech manufacturing happening.

But originally, you know, that part of this country was furniture-heavy, as you know.

So, here's my question: as we go back however many years you said your company's been around, 75-ish, right?

Your granddad comes back today and looks at this company and looks at the environment.

And do you suppose he turns to you and says, Alex, please don't be the last one in this family to run this company.

Yeah, I think there's real concern about the sort of viability of a variety of companies.

We're fortunate.

So for my granddad, I think he'd look at me and say, hey, look, you've built it so that you have a couple couple of paths forward.

What he would react to is the stress and strain of the environment we work under.

He would shake his hand and said, I've never had it as complex as y'all have it today.

Alex Shuford, his company is called Rockhouse Designer Brands

down in Hickory, North Carolina.

Alex, thanks a lot for your time.

I really appreciate it.

I really appreciate it, Kai.

I'm not sure if this one gets filed under unintended consequences or

people really should have seen this coming.

Costco, the chain that ironically, as you'll see in about a second, makes money selling giant portions of food, said this week it's going to start selling the weight loss drugs drugs Ozempic and Wegovi.

The out-of-pocket cost is going to be about $499 a month, lower than list price.

The thing is, the popularity of those medications, along with rising inflation, means a lot of people are seeking out smaller portions at restaurants and at the grocery store.

And brands are taking notice, as Marketplace's Kristen Schwab reports.

Coca-Cola is going to start selling mini cans at convenience stores.

The Olive Garden is testing smaller portions at some locations.

Smoothie King now has a GLP-1 menu.

Stephen Zagor is a restaurant and food consultant.

They're all trying to kind of recalibrate and look to see where the future is going to be.

Something like 12% of Americans have used GLP-1 drugs for weight loss.

As prices come down and drug companies invest in better oral versions of the injectable medication, the number of users could grow.

That's tricky for the food business because solely selling smaller portions at lower prices isn't going to bring in enough money.

Restaurants still have costs to pay.

They have fixed labor to pay.

And so when you have a smaller portion, there has to be a way of being creative.

The whole protein craze, it's related.

People on GLP1s are often encouraged to prioritize protein.

So companies are capitalizing on it by expanding their offerings and charging more.

The grocery store is filled with protein-packed everything now.

Starbucks recently started selling drinks that feature protein-boosted milk and cold foam.

That feels like that's a message for every consumer.

Lynn Dornblaser at Mintel says weight loss drugs aren't just impacting the diets of people who take them.

They inherently alter the diets of family members and friends, and they're upping the conversation around better nutrition and smaller portion sizes.

I'm sure a lot of people think, well, I'm not on the medication, but that sounds like a good thing for me to do.

Of course, there are still plenty of places places out there to get frappuccinos and fried cheese.

Robert Byrne at food service advisory firm Technomic says surveys show cravings still drive eating out at restaurants, whether people are on weight loss drugs or not.

The ordering habits that we see tend to be similar.

It doesn't change what they're ordering.

He says restaurants need to entice people with fun foods that justify the price.

In New York, I'm Kristen Schwab for Marketplace.

Coming up.

Welcome to Fabulous.

Ah, Las Vegas.

But first, let's do the numbers.

Dow Industrials down one point, a single point, as close as it gets to flat, 46,601.

NASDAQ gained 255 points, 1.1%, 23,043.

The S ⁇ P 500 grew itself 39 points, about 6 tenths percent, 67, and 53.

Advanced micro devices continued its climb.

That in the wake of the deal with the OpenAI from the other day, AMD soared 11.4% today.

Dell rocketed up 9% as the company predicted strong sales growth due to...

Come on, you guys know the answer to this one.

AI.

Tesla announced price cuts to its Model Y SUV and Model 3 sedan.

Tesla, up 1.3 tenths percent the day Ford fell again as one analyst said the loss of a major aluminum supplier could cut earnings by as much as a billion dollars for the car maker.

Ford down 1.5% the day Bond's up, yield on the 10-year 4.13%.

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This is Marketplace.

I'm Kai Rizdahl.

All right, here's an economic oldie, but a goodie.

Anybody remember adjustable rate rate mortgages?

You get a low-ish rate at the start, then it resets to market rates after a certain period of time.

If you are at this moment getting flashbacks of foreclosures and bank bailouts and other not-so-pleasant memories of the American housing market circa 2007, 2008, I hear you.

But here comes the kicker.

Adjustable rate mortgages are making something of a comeback.

Last week, they were nearly 10% of all mortgage applications, so says the Mortgage Bankers Association.

The thing is, as Marketplace's Matt Matt Lemon explains, adjustable rate mortgages are a little bit different these days.

The adjustable rate mortgage, or ARM in real estate lingo, could probably use a rebrand.

I'm brainstorming some ideas with Wharton School real estate professor Ben Keys.

What if we called it a temporary 10?

Ooh, a temporary 10.

I like that.

Get some alliteration in there.

These days, most adjustable rate mortgages lock in lower intro rates for five, seven, or ten years, thus the temporary 10.

those late aughts teaser rate mortgages that reset much faster and were loaned to anyone with a pulse, those are pretty much gone.

The kinds of mortgages that are being originated today are considerably safer than those that were originated during the housing boom.

As of last week, the average interest rate on an adjustable rate mortgage that resets after five years was 5.4%,

a full percentage point lower than the traditional 30-year fixed.

Economist Michael Fratentoni at the Mortgage Mortgage Bankers Association says that could be the difference between an affordable and unaffordable home, especially in pricier markets.

Borrowers getting a larger loan much more likely to go to that adjustable rate because on a dollar basis, it saves them more.

On their monthly payments.

Many adjustable rate borrowers think they'll sell or refinance their home before the intro rate lapses.

But Zillow economist Kara Ng says, sure, rates feel high now, but they can get higher.

higher.

My concern is if you're going after an adjustable rate mortgage purely for an affordability play, that's dangerous.

Ng says she's also worried borrowers don't understand what an adjustable rate actually means.

She says Zillow has done research looking at internet searches on the term.

What we found is like a lot of the search terms aren't about what is an adjustable rate mortgage.

It's more about the current rate, which means that people are looking to transact soon.

And not necessarily researching what the transaction means.

I'm Matt Levin for Marketplace.

You know that saying, what happens in Vegas stays in Vegas?

True in general, perhaps, definitely not true economically.

Here's the headline data point.

According to the Las Vegas Convention and Visitors Authority, visitor volume this August, that's data speak for the number of people who came to town, was down 6.7% compared to a year ago.

And that is definitely not going to stay in Vegas.

Marketplace David Broncaccio is just back from a reporting trip, and he opened up his reporter's notebook to highlight three moments in Vegas that capture the vibe.

One happens not during but after I talk to a hail fellow with ripped forearms and gray at the temples.

For 43 years, Ray Luhan has been waiting tables at one of the storied casinos here.

Ray says his tips are now down, off by as much as $1,500 a month.

It seems a lot slower, a lot slower.

I know my brother's a Bellman at one of the top hotels in town, and he's seen the traffic just cut down tremendously as well.

He attributes this, in part, to rising economic insecurity.

He says people used to book a nice dinner for before a show, but now it's very, very minimal.

So people might want to go to the show, but they can't afford both, right?

So we do see that drawback.

Domestic customers, but also familiar faces who need passports to visit.

They've come back year after year.

So you get to know them.

You're like, hey, how you doing?

And then they're like, I said, what happened to the other guy?

He said, no, they're canceled because they're upset of Donald Trump's tariffs and the way they're being talked about.

Right.

And then I said, where's Canadians?

A lot of our Canadian friends have just stopped.

I mean, they'll come, but sometimes they used to come three, four times a year.

And

they just said, listen, we're not coming back.

We just don't feel like we're wanted.

We don't feel like we're appreciated.

It's only after our conversation that I put two and two together and realized that Ray, the waiter, has a parallel career as a real estate agent in town.

Now, the irony is sobering.

As tip income declines, selling houses might not be a hedge.

Using the most recent data, the metro area with the biggest drop in home sales in America is, wait for it, Las Vegas, Nevada.

Another circle in the notebook is from my meeting with an entrepreneur, Juani Romero, created Mothership Coffee Roasters, seven stylish cafes in Vegas that source beans from women-owned farms in Brazil.

That's the country President Trump has hit with extra stiff 50% tariffs.

We talk about her rising costs, we talk about the downturn in visitors to the city creating a perverse opportunity.

The cost of rent has dropped to the point that she might be able to afford putting a mothership on the prime Vegas Strip itself.

But with visitors down, is that a good idea?

It's a gamble, which leads her to a broader point about the mood of the country shaping our willingness to take risks as individuals, as business people, and as tourists who might take a shot at the casino casino tables.

You've got to feel good to be like, you know what, I'm willing to gamble, I'm willing to risk because there's going to be another great day.

Well, right now, how many great days are there in the future?

Surveys show consumer sentiment is linked to politics.

People tend to be more upbeat about prospects for the economy if the political party they support is in the driver's seat.

But the pressures on Vegas are more than what's coming out of Washington.

There's an intense conversation about curbing prices that got silly high during boom years, and demographics are shifting.

Gen Zers are less into slots, dancing showgirls, or riding elevators playing Dean Martin.

But they will come for other experiences if the region plays it right.

Maybe a new slogan will help.

Welcome to Abbey Us.

Launched in recent weeks to replace the old line, what happens in Vegas stays in Vegas, that was never true for its economic model, Something that became clear to me on a visit to the analyst who crunches the regional numbers.

If you look at the other major metropolitan areas around the United States, they've actually become more like Las Vegas.

They have tried to have more visitor activities, more tourism-related activities.

Jeremy Aguero at the consulting firm called Applied Analysis.

When households across the board are concerned about what their position is going to be like in six months, among the top things that they cut back on is hotel stays, stays, resorts, taking vacations, those type of things.

So, whether it's Las Vegas, whether it's Orlando, whether it's Maui, whether it's Nashville, you talk about markets at Main Street USA, and I think those ought to be concerned because the economic instability that we're seeing here.

Right, it's also so many small towns that promote local attractions and a bid for the discretionary dollars of visitors, money you can't bet on in the present economic environment.

In Las Vegas, I'm David Broncaccio for Marketplace.

There's much more of David's reporting from Las Vegas coming up the rest of the week on our morning report.

This final note on the way out today, $4,063.40 is what one Troy ounce of gold will run you today.

It has been on a tear this year, as you might have heard, up give or take 50% since January.

Part of that's uncertainty because

look around.

Also, though, the prospect that the Fed's got a couple of rate cuts left in it for the year is pushing the dollar down, and that in turn makes the OG safe haven asset that gold is all the more attractive.

Our media production team includes Brian Allison, Jake Cherry, Justin Dueller, Drew Johnstad, Gary O'Keefe, Charlton Thorpe, and Juan Carlos Torado.

Jeff Peters is the manager of media production and I'm Kyle Rizdahl.

We will see you tomorrow, everybody.

This is APM.

I'm Kimberly Adams, host of Make Me Smart, a podcast from Marketplace that makes today make sense.

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