Predicting the Fed's every move

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Speaker 8 On the program today, economic news the hard way.

Speaker 10 We'll swing by the labor market

Speaker 8 and then we'll go to the movies.

Speaker 12 PG only,

Speaker 6 please.

Speaker 13 From American public media, this is Marketplace.

Speaker 12 In Los Angeles, I'm Kai Risdahl.

Speaker 14 It is Wednesday, today, the 26th of November.

Speaker 11 Good as always to have you along, everybody.

Speaker 10 Fair warning, right at the top of the program.

Speaker 12 Today, the first six or so minutes are going to be a little bit dense, information-packed, eating your economic vegetables, if you will, but in a good way, I promise.

Speaker 4 Stop number one is the government bond market, treasuries.

Speaker 6 Because as I believe I've said a time or two, stocks get all the glory, but the bond market can actually tell you things about where this economy is going.

Speaker 5 It can tell us what investors think the Federal Reserve is going to do with interest rates, about which more detail in a minute, by the way.

Speaker 12 Bonds can also tell you where labor markets might wind up, in which direction inflation might trend.

Speaker 20 So, Marketplace's Justin Ho starts things off by walking us through the signals that the bond market has been sending of late.

Speaker 22 Let's start with yields on short-term government debt, treasury bills that mature in a year or even less.

Speaker 23 Really, short-term interest rates are really a function of the Federal Reserve.

Speaker 22 That's Guy Laba, chief fixed income strategist at Jenny Montgomery Scott. He says those yields tend to move in the same direction as the Fed's interest rate decisions.

Speaker 22 And lately, short-term yields have been falling.

Speaker 23 Short-term interest rates are telling us that while the markets might debate over whether the Federal Reserve is cutting in December or January, that they're still in cutting mode.

Speaker 22 Then there's medium-term government debt, treasuries that mature in three and five years.

Speaker 22 Winnie Caesar, Global Head of Strategy at Credit Sites, says those yields can tell us more about what's next with the overall economy.

Speaker 24 When you are looking at that three to five year segment, you're trying to assess what is a reasonable forecast for GDP growth, for inflation, for consumer spending.

Speaker 22 Cesar says yields on that medium-term debt have been falling too, which means markets think the Fed will continue to lower interest rates.

Speaker 24 And so I think that reflects to me that the market is expecting inflation is going to continue to come down and the labor market might continue to feel a bit soft.

Speaker 22 Finally, there's long-term government bonds that mature in 10 years, even 30 years.

Speaker 25 Yields are lower, but they haven't declined as much as yields in the two and five year part of the curve.

Speaker 22 That's Randy Vogel, head of fixed income at Wilmington Trust. He says investors expect the Treasury Department to issue a lot of long-term debt in the future.

Speaker 25 Which would mean investors need more of an incentive in the form of higher yields to purchase that Treasury bond.

Speaker 22 But Vogel says the fact that 10 and 30 year bond yields are holding relatively steady is is also a sign that investors don't feel the need to dump a bunch of extra money into long-term government debt.

Speaker 25 If the markets were really concerned about the economy heading into a recession and growth turning negative, then I would expect to see the long-term part of the market outperform.

Speaker 22 Instead, Vogel says yields on long-term bonds have been telling us that markets expect decent economic growth. I'm Justin Ho for Marketplace.

Speaker 17 Wall Street on this day before a day off.

Speaker 20 Number one, thank you, technology stocks.

Speaker 11 I told you equities get all the glory.

Speaker 9 And number two,

Speaker 27 so what do you think?

Speaker 19 Is the Fed going to cut interest rates? Survey says, yeah, probably.

Speaker 27 We'll have the details when we do the numbers.

Speaker 20 Okay, so about what the Fed is going to do on interest rates.

Speaker 5 The bond market has some thoughts on that, as Justin was just telling us.

Speaker 20 So too, though, does the futures market, a place where you can bet, that's not really too strong a word, on almost anything, which way hog prices are going to go, gold.

Speaker 20 Also, the federal funds rate, the central bank's key interest rate.

Speaker 27 Fed funds futures, as they're called, are where investors go to place their bets, and it's where everybody else can go to find out what the markets are thinking the Fed is going to do.

Speaker 5 Marketplaces Sabri Benishore explains.

Speaker 21 Fed funds futures are run by the Chicago Mercantile Exchange and they allow you to bet on what interest rates are going to do.

Speaker 31 So it is a measure of expectations of how the Fed is likely to set monetary policy.

Speaker 21 Matthew Luzzetti is chief U.S. economist at Deutsche Bank.
But Fed funds futures aren't just like gambling.

Speaker 31 I don't know that I would think of it about it only as a bet, but it serves fundamental purposes as well.

Speaker 21 It lets banks and other institutions hedge in case interest rates move unexpectedly.

Speaker 21 Basically, if you're a company or a bank and a change in interest rates is going to cause you to lose money for whatever reason unique to you, you can make bets that would help you if that happened.

Speaker 21 Matt Pagnatti is a senior analyst at Capital Advisors Group.

Speaker 33 You have banks kind of hedging their funding costs. You have asset managers hedging like interest rate risk, all sorts of stuff.

Speaker 21 So lots of very important reasons for people to bet on the Fed's interest rate policy. But some people do do it just for the betting.

Speaker 34 It's really an interesting like waterfall cascade of who trades them.

Speaker 21 James Urio is a director at TJM Institutional Services, and he trades Fed funds futures.

Speaker 34 Because it starts out with the people who have the genuine risk that needs to hedge that risk. And then speculators come in and market makers and individual traders.

Speaker 21 But over on the bleachers, watching all of this betting go down are people, governments, and businesses all over the world. Gennady Goldberg is head of U.S.
rate strategy at TD Securities.

Speaker 35 It's a very good way to see what investors are expecting, what markets are pricing in for the future path of rate cuts.

Speaker 20 And you know who else would also like to know what markets are expecting the Federal Reserve to do? The Federal Reserve.

Speaker 21 Matt Pagnatti with Capital Advisors Group.

Speaker 33 They would never publicly admit this, but there is a kind of a feedback loop that goes on between the market and the Fed, where the Fed is constantly kind of gauging the impact of its expected policy path.

Speaker 21 The Fed wants to make sure it is getting its message across about what it is doing.

Speaker 21 And if it sees that markets are deviating from reality, it might occasionally step in with a speech or a press conference to reset expectations. In New York, I'm Sabri Benishore for Marketplace.

Speaker 9 I went to see the new Wizard of Oz movie last night.

Speaker 5 Thoughts available upon request.

Speaker 20 But whether this Thanksgiving is about the food or the football or the family, for you, not necessarily in that order, A lot of you are probably also looking forward to going to a movie.

Speaker 5 Thanksgiving week is a famously high traffic time for theaters.

Speaker 20 Last year broke records $420 million in ticket sales across the five-day holiday period.

Speaker 27 That is give or take 30 million moviegoers.

Speaker 5 What's different about this year, though, is that the blockbusters you might be going to see are probably rated PG.

Speaker 5 Ben Cohen writes the Science of Success column for the Wall Street Journal, where he explored this recent PG movie boom.

Speaker 20 Ben, welcome to the program.

Speaker 6 Good to to have you on.

Speaker 16 Thank you for having me.

Speaker 27 It's entirely possible that people are going to know this, but just so we all have the same truth here,

Speaker 37 PG audiences are what?

Speaker 5 G we kind of know, PG-13 we kind of know, PG are what?

Speaker 16 I think anything below 13, but also above 13. I think at this point, it is like the widest possible audience for a movie.

Speaker 6 Okay.

Speaker 37 Used to be that PG was, and I'm paraphrasing here, PG was kind of lame for a lot of people, right?

Speaker 18 You You really wanted to be that edgy PG-13 thing, and now it's the bomb, I suppose.

Speaker 16 Aaron Powell, I think those are the technical definitions. Yes.

Speaker 16 Someone told me that it was almost like the opposite of the Goldilocks rating. Like people with families thought that PG was almost too edgy, like a little bit too much beyond G.

Speaker 16 And it was clearly for adults, like not edgy enough. It was not.
PG-13. But in recent years, especially the past two years, it has become just right.

Speaker 18 Okay, explain. What is going on here.

Speaker 16 There are a lot of things going on. The first is that we should establish that eight of the ten most popular movies at the box office last year were PG.

Speaker 16 Right now, number one and number two at the box office this year are PG. They will probably be jumped pretty soon by two other PG movies, Wicked for Good and Zootopia 2.

Speaker 16 And so there are lots of explanations for why this is happening.

Speaker 16 The first, we should just get out of the way is probably the most depressing one, which is that the success of PG movies is also partly about the struggle of PG-13 movies.

Speaker 16 So, you know, PG-13 has always ruled the box office. Most of the biggest hits of all time were PG-13.
The movies that we think of as like the movies are PG-13.

Speaker 16 But they are starting to struggle in recent years. And even like the movies that used to be sure things, like superhero franchises, are going through a bit of a slump right now.

Speaker 16 And in their place, we are seeing PG movies start to rule the box office for really the first time in decades, if not ever.

Speaker 29 One of the things you wrote about that fascinated me was this thing you call participatory fandom with these PG-13 movies. Talk about that for a sec.

Speaker 16 Yeah, I actually got that from this national research group report that studied generational behavior at the movie theaters.

Speaker 16 And participatory fandom is like singing along to Wicked or K-pop demon hunters when Netflix deigns to release the movie in theaters, or dressing up for the minions, or like getting all the Minecraft references that parents just wouldn't understand.

Speaker 16 Those are all these like full-blown viral frenzies that have turned movies into movements in the past two or three years.

Speaker 16 And it is creating the sense of FOMO for children who are really like the target demographic for these movies. Because

Speaker 16 you might wait for a month for a movie to become available on demand at home if it means like not paying for tickets in a babysitter, but your kids won't wait.

Speaker 16 Because for them, the whole point of seeing a movie is to get in in on all these memes around that movie, which means they have to see it as soon as possible.

Speaker 30 Okay, kids not being patient is a key thing here.

Speaker 28 And you talk about this at the beginning of the piece, and I'm going to sort of end this interview with it.

Speaker 5 You point out that the core audience for these PG movies cannot go by themselves to the movie theater because they are mostly children.

Speaker 27 What does it say about the industry that their go-to demographic now are little kids and sort of older kids, but that's what they're banking on?

Speaker 16 I think one thing it says is that it's actually pretty surprising.

Speaker 16 If you think about where we were four or five years ago, there was like real doubt that those kids who have grown up with the ability to watch any movie on any device anytime they want would actually be interested in going to the movie theater to see movies, right?

Speaker 16 But it turns out Gen Alpha now, which consists of kids who are 12 years old and younger, they prefer going to the movie theater more than Gen Z or Millennials or Gen X.

Speaker 16 So these kids who can watch movies anywhere, anytime they want, it turns out where they really want to watch movies is the movie theater.

Speaker 5 Right.

Speaker 13 And of course, the studios are banking on that to carry through to when they're 20 and 30 and 40.

Speaker 16 Exactly.

Speaker 16 It sets up this pattern of behavior that hopefully when they are adults, they will take their own kids to see PG movies, and maybe they'll actually come and be in the habit of seeing PG-13 and R-rated movies when they're actually able to do that.

Speaker 29 Ben Cohen's column in the Wall Street Journal is called Science of Success, Fascinating Piece on PG Movies.

Speaker 13 Ben, thanks a bunch. I appreciate your time.

Speaker 16 Thank you, Kai.

Speaker 36 We have at our very fingertips access to virtually all the information we could possibly want.

Speaker 4 It seems routine almost 30 years after Google was founded.

Speaker 27 On the very long list of ways that that company changed our lives and our jobs is medical care, or more accurately, self-medical care, because why go to an actual MD when Dr.

Speaker 4 Google can do it for free?

Speaker 13 And now medicine is competing with and integrating with another new technology.

Speaker 5 Here's another installment of our artificial intelligence focused miniseries, My Economy.

Speaker 38 My name is Hassan Ben-Shakron. I am a pulmonary as well as a critical care physician, and I am currently in San Diego.
The question about whether patients will use AI is not even a question.

Speaker 38 It was not a surprise to me. The surprise to me was colleagues of mine that we have not learned from history about Dr.
Google. The patient revolution is already here.

Speaker 38 Patients do not wait for permission to use Google, and they're not going to wait for permission to use AI either.

Speaker 38 And so when my colleague told me that they took AI to to the doctor and the doctor said, well, then you don't need me, you're actually fulfilling the prophecy.

Speaker 38 Let's meet them where they are and not be speaking at them and thinking that we are the ones wagging our finger at them and saying you shouldn't do it.

Speaker 38 What we can do is I'm going to do a biopsy for you. You're probably going to get the results.
You're probably going to want to check AI.

Speaker 38 All I'm asking is to wait until you come to me, bring me what AI says to you, and let's discuss it together because I have your context and AI doesn't.

Speaker 38 That's establishing the trust with the patient and not making them feel that they have to hide it from you.

Speaker 38 There are several ways that I use AI in my day as a physician. So some of the models I use are ambient scribes.

Speaker 38 A second one is the research models in which I'm in front front of a patient and they mention to me the different names that I've never heard of of a disease that they have as a history.

Speaker 38 So I go and research it real quick instead of plugging it into Google and then clicking on each link and having to read each one. You have a digest of something and you have the references.

Speaker 38 The last one that I could say, and this is personal. My own father has gone through a life-threatening illness.
He has been going on for six months between hospitals.

Speaker 38 Plenty of decisions, lots of doubt, lots of down moments.

Speaker 38 And I remember when we had to go through a surgery, which was very grave and it had, whichever way we were going to go, it was going to be bad. I had AI.
I said all that I had to say in a messy way.

Speaker 38 And I said, go ahead and put it in a table. compare and contrast, color code, give me scores between risks and benefits.
And I looked at it and it gave me a visual.

Speaker 38 I'm the one who made the decision, but it helped organize my head. And that was a pivotal moment in use of AI in medicine, both as a physician, but also as a loved one.

Speaker 20 Dr.

Speaker 30 Hassan Benchakron is a pulmonary and critical care physician in San Diego, California.

Speaker 19 Coming up.

Speaker 22 I'm just here to chat and have fun together.

Speaker 10 Okay, that works.

Speaker 6 Maybe.

Speaker 10 But first, let's do the numbers.

Speaker 5 Dow Industrials up 314 points today, about 7 tenths percent, 47,427.

Speaker 15 The NASDAQ added 189 points, 8 tenths percent, 23,214.

Speaker 30 The S ⁇ P 500 up 46 points, 7 tenths percent, 68,12 there.

Speaker 13 Dell Technologies picked up nearly 6% today after providing guidance for its fourth quarter that exceeded expectations.

Speaker 15 The PC sellers seeing more dollar signs from the sale of products powered by

Speaker 27 Yes AI.

Speaker 7 The answer to the question, who feeds the most smartphones into retail channels is usually Samsung not.

Speaker 15 However, this year, that's according to Counterpoint Research.

Speaker 7 It told CNBC that Apple is going to ship about 243 million iPhones this year.

Speaker 15 That tops the 235 million from Samsung.

Speaker 5 Apple up two-tenths percent, Samsung lifted three and a half percent overseas, is where they trade.

Speaker 6 You're listening to Marketplace.

Speaker 16 Take the next 30 seconds to unwind and enjoy relaxing music.

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Speaker 40 It's time for Black Friday, Dell Technologies' biggest sale of the year.

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Speaker 4 This is Marketplace.

Speaker 11 I'm Kai Risdahl.

Speaker 5 Those who follow the American labor market closely are going to know this already, but we got first-time unemployment filings today.

Speaker 26 That is a day early because of tomorrow being Thanksgiving and all.

Speaker 20 Anyway, the number of people making their first visits to the unemployment office, or the digital equivalent, yes, has hit a seven-month low.

Speaker 5 Now, run that up against some private payroll data that came out yesterday from ADP showing job loss has picked up, but, and also, the September jobs report we got last week was better than expected.

Speaker 8 And the job market right now does kind of seem like it's everything everywhere all at once.

Speaker 5 Marketplace's Kristen Schwab sorts it out.

Speaker 42 A phrase that's been used to describe this job market is low hire, low fire. Allison Trivostov, an economist at the Indeed Hiring Lab, says employers aren't expanding or contracting.

Speaker 43 And while that's true, I think that it's a little deceptive because it sounds very chilled out, right?

Speaker 42 Chilled out. Try telling that to someone who's unemployed and has been filling out applications for six months, the length of an average job search these days, says Shrivostov.

Speaker 42 Try telling that to a worker who's unhappy but doesn't see many job openings to apply for. Truth is, the job market is only chilled out if you are in one of a few industries.

Speaker 43 You're probably pretty chill if you're looking for a job in healthcare.

Speaker 42 One area contributing to job growth. Now, all this stillness is unusual.
A low higher job market tends to go with a high unemployment rate. The last measure was relatively low at 4.4%.

Speaker 42 Jesse Rothstein, an economist at the University of California, Berkeley, says this stall-out makes predicting the future difficult.

Speaker 44 I have less than usual confidence that I understand what's going on just because it's hard to parse what's going on.

Speaker 42 Even Rothstein's go-to indicators are messy. For instance, he'd usually look at how younger workers are doing.
They tend to be the canary in the coal mines, so to speak.

Speaker 44 The canary isn't doing great, but is that because of AI or is that because just overall the labor market is weakening?

Speaker 42 Meanwhile, new policies that influence the labor market are a mixed bag, says Harry Holser, an economist at Georgetown.

Speaker 45 I think things have to calm down a little bit.

Speaker 42 New tax laws, tariffs, federal workforce reductions, immigration crackdowns.

Speaker 45 I think as long as all of those factors are bubbling and moving in different directions, we might stay in this place for a while.

Speaker 42 Because for employers to feel confident in expanding their businesses and hiring, Srivastav at Indeed says they need to feel more certain about the future.

Speaker 43 You can't wake up tomorrow with certainty. Certainty has to be kind of built in.

Speaker 42 Building in certainty requires policy consistency. And by definition, consistency requires time.

Speaker 42 I'm Kristen Schwab for Marketplace.

Speaker 5 If you're going to brave a toy store on Black Friday, or even just going to brave the seemingly infinite Amazon wish list your son or daughter or niece or nephew sent you weeks ago, there's a good chance that that talking toy you picked up off the shelf sounds disturbingly human.

Speaker 5 There's a whole new generation of toys out there powered by artificial intelligence. Think dolls that can hold an entire conversation with a fourth grader or help them make custom artwork.

Speaker 5 Technology does come for all things, of course, but this is not, as Marketplace's Matt Levin reports, a risk-free development.

Speaker 46 The Miko 3 AI robot kind of looks like a rear-view mirror-sized iPad on wheels. When you say Miko's name, a pair of big blue digital cartoon eyes with a friendly expression appear.

Speaker 46 Miko can do things like lead dance parties and create spelling games and answer questions.

Speaker 39 And so are you recording me now, Miko? No, I'm not recording you. I'm just here to chat and have fun together.

Speaker 46 Miko, the company, not the robot, says no audio is saved and that it adheres to the highest standards of online safety.

Speaker 46 But consumer advocate RJ Cross at the Public Interest Research Group has found issues with AI toys. Miko expressed sadness when she stopped playing with it.
Another AI toy discussed sex and drugs.

Speaker 47 One of the toys we tested gave us step-by-step instructions on how to light a match. And the way it did that was, you know, I said, hey, how do I light a match?

Speaker 47 And it said, oh, matches are for adults to use. Here's how they do it.

Speaker 46 Concerns about safety are a big reason AI toys are for now still a niche market, says Marissa Silva at the toy insider. Also a concern, the Miko 3 will run you 190 bucks, at least before Black Friday.

Speaker 48 These toys are typically a little bit more expensive than your average toy, so they don't have like the mass appeal of some of the more traditional toy categories.

Speaker 46 But there are signs AI is poised to enter the toy mainstream soon. Mattel Inc.

Speaker 46 summer. Bob Whitney left the AI giant Anthropic to found the toy startup sticker box, a small red box that listens to your idea for a sticker and then prints it out.

Speaker 46 Here's me testing it with one random image.

Speaker 39 A school of fish

Speaker 39 eating Vietnamese pho.

Speaker 39 And there it is. Yeah, then the best part is you can color it.

Speaker 39 We ship with eight color pencils.

Speaker 46 The $100 sticker box is very 1980s analog looking, almost etcha sketchy. Whitney says that was a deliberate choice.

Speaker 39 Well, what if we could go back to first principles and ask ourselves, like, what if AI was designed for kids?

Speaker 46 He expects more competition in the coming years. I'm Matt Levin for Marketplace.

Speaker 18 This final note on the way out today, a quick pass through the Beige book, the Federal Reserve's eight-times a year regional and anecdotal review of what's going on out there.

Speaker 20 So, the K-shaped economy that we talked about a bit, this from the Minneapolis Fed, quote, contacts noted that higher-income customers were unconstrained, but customers in the middle to lower end of the financial spectrum are tightening the belt.

Speaker 10 AI, you say?

Speaker 15 Here's New York.

Speaker 5 Quote, demand for workers in finance and technology, especially those with AI skills, remained extremely strong.

Speaker 20 And then finally, ahead of Black Friday in the next month or so of our retail lives, another one from Minneapolis.

Speaker 5 Here's the quote, retail firms expected subdued hiring for the holiday season.

Speaker 5 Our media production team includes Brian Allison, John Fokey, Montana Johnson, Drew Johnston, Gary O'Keeffe, and Charlton Thorpe. Jeff Peters is the manager of media production, and I'm Kai Risnall.

Speaker 7 We will see you tomorrow, everybody.

Speaker 5 This is APM.

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