Small businesses walk an affordability tightrope

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The data's old. The analysis is right up to date.
We're going to do our Friday thing today from American Public Media. This is Marketplace.

In Los Angeles, I'm Kai Rizdahl. It is December the 5th today, Friday.
Good as it always is, everybody, to have you along. You're dying to find out, I know, what happened in this economy in September.

Lucky for you then that we got some data on that today. It's where we're going to start with David Gura.
He's at Bloomberg. Katherine Rampel is at MS Now and the Buller.
Hey, you two.

Hey, Kai. Hey, Kai.

Mr. Gurrow, we start with you and September PCE Personal

Consumption Expenditures Index.

The Fed's preferred measure, as I'm required by law to say.

Up a tad, but within expectations.

However, it's three months old. How useful is this, do you think?

Yes. In Wall Street Parlance, this is a moderate monthly advance we saw in that inflation read.
You're right. It is the one that the Fed likes to look at.

Look, these data are old. They were supposed to come out on October the 31st.
We're well over a month away from that date.

I don't envy Fed policymakers who are kind of fumbling their way through all of this right now.

And yes, we're sort of seeing the mechanism of economic statistics cranking back into gear after the government shutdown, but it is handicapping policymakers as they head into their meeting next week.

The Fed's going to meet on Tuesday and Wednesday. Normally, they have this amazing dashboard in front of them, a panoply of data to look at.

I think like other policymakers and Wall Street economists, they've been leaning more heavily on private data, more real-time data. But this is something that they've grown accustomed to using.

They're not going to have it as up-to-date as they need it.

And as we've talked about so many times on the show, this is a moment in this economy's evolution when not having the best data one can have about the economy is certainly a handicap.

Let's talk then, Catherine Rampel, about some of that data. This is a soft variety.
Consumer sentiment, the highest it's been in five months.

And yet

consumers are spending. They continue to rescue this economy.

You wrote this week about the affordability conundrum, the conjob, technically that you called it, that the president is trying to put on, and the Gallup Economic Confidence Index.

What do you make of the American consumer right now, and can they keep on saving us?

Sure. To clarify, though, it was the president who referred to affordability as a conjob, not me.
Yes. He was the one who said

it was a hoax and a conjob and fake news.

i mean it is perplexing that consumers in america have been really down really dour they seem to hate this economy but they have hated it for quite a while like if you look at gallup's recent um economic uh sentiment measure it's been underwater for years at this point i think since 2021 maybe um it's been mostly underwater it was i just looked before i came in actually yeah yeah yeah so people have been really down on this economy for a while.

And

even that's that's the case, even though on paper, like by the traditional metrics, assuming we have the traditional metrics going past September, the economy doesn't look so bad.

I mean, it doesn't look great in some ways. Like it looks like unemployment is ticking up and inflation is still running hotter than the Fed would like it.

But it's not nearly as bad by most traditional metrics as it was, for example, during the financial crisis or other periods when sentiment is actually quite comparable to what it is today by a bunch of these measures.

So it's a little bit perplexing. And as you say, consumers seem to continue spending, although that same Gallup

survey, I should say, did suggest that consumer spending plans are softening. They always ask people every year, how much are you going to spend for the holiday shopping season?

And they ask them a couple of times during the shopping season. And most years, people revise down what they say they're going to spend as the season goes on.

And this year, they really revised it down by the most on record. So there does seem to be some softening here.
Again, like whether that'll translate to actual behavior, we need to wait and see.

Yeah.

David,

to the policymakers at the Federal Reserve, it is...

All right, fine. I'll go out on the limb.

Kevin Hassett's going to be the next Fed chair. Read the tea leaves.
Tell me I'm wrong. but that's what it certainly looks like.
That said,

what's it going to be like? And I've asked this before, not to you, though, what's it going to be like when the chair of the Federal Reserve is on Fox News like four times a week?

Well, Kevin Hassett certainly is. And you look at the way he's led the NEC, how he's been the president's economic advisor.

He's kind of reformed that job to be the spokesperson for the president's economic policy. And

you're going out on a limb there. I should say Bloomberg is reporting that he is the front runner on this short list of five names.
So I can meet you most of the way there.

Watch me be wrong. Watch me be wrong.
Holy cow. You know, we'll reconvene and we can make fun of you then.
But look, he's an academic economist. He has a PhD from Penn.

Throughout most of his career, he was somebody who advised John McCain, George W. Bush.
He's become a Donald Trump true believer since the start of this administration.

You ask how this is going to play out. Look, we're hearing a lot from this administration about reforming the Federal Reserve, and I think that might be where he takes this.

Sure, he could be speaking more on television about what the Fed's doing. We should point out here, the Fed operates by committee.

The chair only has so much power and responsibility, but he could do a lot more job owning on cable news or certain cable news channels if he wanted to going forward here.

But in terms of reform, I mean, we heard from Treasury Secretary Scott Bessant this week that he wants to impose new rules on who can be presidents of regional Feds, for example.

For a long time, it seemed like another candidate for the Fed, Kevin Worsch, who's going to be the reform candidate.

But I think that the messaging has changed here such that this administration really wants to change the way the central bank operates.

And if he is picked and nominated and confirmed, I expect that Kevin Hasse will be pushing for that as well.

We should be clear here that it is not all sunshine and light at the central bank, Catherine.

But what I want to understand is what's it going to be like both inside the room and outside the room in the economy when the chair is so closely aligned with the president?

Well,

that has not led to good outcomes in other countries where the central bank has been politicized or basically the money supply has been under the control of politicians who have very different priorities than a central banker who's an appointed technocrat would normally have.

So politicians'

incentives are always to try to juice the economy as much as possible leading into an election, right? To run the economy hot. Generally, that means cutting interest rates.

But that can be very bad for long-term inflationary outcomes.

And there's a bunch of economic research to suggest that when you have less independent central banks, when politicians are, you know, again, incentivized to like lean a little bit more towards lower rates, more liquidity, a hotter economy, that leads to longer-term, worse inflationary outcomes.

And that's really the fear here. And you don't have to go as far as Venezuela or Turkey or other places that have found themselves in this situation.

We actually experienced it here in the 1970s when Arthur Burns, the chair of the Fed, was leaned on by a couple of different presidents, LBJ and Nixon, you know, probably ran the economy too hot, and we experienced some very painful inflation slash stagflation.

So that's really the fear here. And you say, you know, Hassett is expected to get the job.

Maybe that he has been the frontrunner, but there was also a story in the FT a day or so ago about how bond investors had spoken to Scott Besant, the Treasury Secretary, and said, hey, this guy's going to be too controlled by Trump.

Maybe you should think again.

We shall see. We shall see.
This is one of those where I could have gone like another four or five minutes, but they're yelling at me to go.

Catherine Rappelle, MS Now in the Bulwark, David Kura at Bloomberg.

Thanks. We'll talk to you soon.
Thanks, Kai. Appreciate it.
Thanks, Kai.

Wall Street today. I'm going to make it three days in a row.
Even though we know with very high confidence what the Fed is going to do next week, traders continue to sit on their hands.

Details, numbers, when we get there.

There's Netflix and chill, and then there's Netflix and dominate the streaming universe. $83 billion will do that.

That's the price the company is going to pay for Warner Brothers and its subsidiaries, if regulators approve, of course. There's still a lot of ground to be trod there.

What, though, is it going to mean for you and for me?

And for Marketplace's Smith Fields. These days, Michael Smith subscribes to six streaming services.

If the Netflix Warner Brothers HBO deal goes through, the Carnegie Mellon Professor would be down to five, which could have its upsides.

It simplifies the marketplace for consumers versus a world where I've got six different streaming platforms I subscribe to, and I can never remember which of my shows is on which platforms.

It could also mean one less subscription to pay for. I pay 25 bucks a month for Netflix and 20 bucks a month for HBO Mac, so 45 bucks.

If Netflix raises its price by five bucks, that's a great deal for me. It would be less than paying for both.
No one knows what Netflix will charge if it does absorb HBO and Warner Bros.

Tim Hanlon at the Verter Group says it might not be a good deal for customers. Usually these kinds of mergers result in a bigger entity and a lot more market power to raise prices.

Netflix is not likely to keep their same pricing with a gigantic new library of content. There's also the question of what happens to that gigantic merged library of content.

Charlotte Howell at Boston University says Netflix would likely have to make some choices. The cloud is not an endless available space in the air.

It is server spaces and server farms that have to be cooled and powered, and that is expensive. When Warner Brothers and Discovery merged, she says they started to remove a lot of streaming content.

Westworld disappeared from HBO. HBO Max originals like the Gordita Chronicles got removed.
A number of animated shows just disappeared from availability.

Plus, Howell says fewer streaming companies and studios means fewer options for pitching ideas.

The less competition, the less different places there can be to find new voices, find homes for new movies, new types of movies, different genres, different kinds of stories.

Which could mean, she says, that we as consumers might not get as wide a range of movies and shows to stream. I'm Samantha Fields for Marketplace.

Artificial intelligence gets a whole lot of flashy headlines, right? But it's in the day-to-day that a lot of its real benefits come through.

Accessibility for people with disabilities is our slice of it today. I think screen readers and captions and note-takers all can be powered by AI.

But even as that technology pushes forward, there are still big gaps, which brings us to today's installment of our series, My Economy, where AI and accessibility isn't just an afterthought.

My name is Taylor Arndt. I am living in Austin, Texas, and I am the chief operations officer at Techopolis Online Solutions, where I work on apps, AI, accessibility, and making a difference.

So technically, I have blindness. So I have an eye condition, septo-optic dysplasia.
My optic ear fully didn't develop, and that caused a bunch of other things.

I grew up in a small town in Michigan and resources were kind of scarce. So I had to to be my own advocate at the age of like 10 or 12.
I'll just give you a couple of examples.

Like I got homework that wasn't accessible. It was just on paper.
How am I going to use it? Okay, great. I'm going to have a scanner.
I bought myself a little affordable scanner that I have.

So when the teacher would hand out paper, I'd grab the scanner, put the work in there. And what it does is it takes the printed objects and it puts it into text.
so that I'd be able to complete it.

That kind of led me to coding at 14 because I'm like, well, if I can solve these problems for myself, I could solve these problems for other people.

Accessibility and AI are really important to think about as a pair. AI is a great equalizer, however, it can also be a great unequalizer.

The thing is, every coding job, I guess, is now being helped with AI. I'm not saying it's being fully done with AI.

Yes, people are what are called vibe coding, where they're just like all with the vibes.

But here, because I am a professional software developer and I'm writing production code that people will use, I don't always want to quote unquote vibe code it.

So I do what's called partner coding where I look at the code and I instruct what it needs to do.

Now, the thing with this is that if I were to vibe code, there's a lot of websites online that have been vibe coded. And A trend that I see is that they're inaccessible.

Again, the buttons aren't labeled properly. There's no labels on the form fields.
No headings.

Like all of these different things that I rely on are not accessible because AI doesn't know how to put them in.

Things like this are huge problems. I shouldn't have to ask the AI agent to make something accessible.
Because imagine if we can get to a day when all websites are accessible that are made with AI.

And the only way we're going to solve it is for the Frontier Labs, you know, so Google, OpenAI, Anthropic, and others to include people with disabilities and get curated accessible coding examples so that way the AI can learn the correct thing to do and not the wrong thing to do.

Taylor Arndt, the COO at Technopolis in Austin, Texas.

Coming up. It's absolutely maddening, but that is agriculture.
Indeed, it is. First, though, let's do the numbers.
Dow Industrial is up 104 today, two-tenths of 1%, 47,954.

The NASDAQ skipped up 72 points, about a third of 1%, 23,578. The SP 500 added 13 points, 2 tenths percent, 6870 there.
For the five days gone by, the Dow grew about a half percent.

The NASDAQ increased nine-tenths of one percent. The SP 500 improved itself three-tenths of one percent.
The former DVD rental place, Netflix? Netflix? Netflix lost two and nine-tenths percent.

It just happens. Warner Brothers Discovery added six and a third percent.

Their competitors in the streaming space, it's streaming space, rather, Paramount Skydance, sank nine and eight tenths percent today. Walt Disney tipped about two-tenths percent.

You're listening to Marketplace.

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This podcast is supported by Odoo. 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 Odo'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 Odo.com.
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This is Marketplace. I'm Kai Rizdahl.
We talked about this up at the top of the program a little bit, Catherine and I.

The big theme in this economy right now, affordability, and how basically it's a buzzword, you know.

Thing is, however politicians decide to use it, it is a very real thing for a lot of businesses that are having to make very real decisions to keep things affordable for their customers, even or especially when that comes at a cost.

So Marketplace Justin Ho talked to a couple of business owners who've been trying to find a balance between keeping things affordable and keeping the lights on.

Affordability has been coming up a lot this year at Bright Start Early Care and Preschool in Washington, D.C.

One family said, this is the highest bill on our budget. It's higher than our mortgage.
Marcia St. Hilaire Finn is the owner.

She says many families have been hesitant to sign up for child care, which averages around $2,800 a month. Some of her current families are considering taking care of their kids at home.

So instead of raising tuition this fall like she usually does, we are like, oh, we're just going to have to keep it where it's at.

We can't raise it until, you know, it's stabilized and people have better paying jobs or the economy is more stable. St.
Hilaire Finn says she's also trying to figure out ways to lower her prices.

For instance, she's thinking about dropping some programs at the daycare that currently come standard, including soccer, yoga, and dance classes.

That way, she can offer those classes a la carte and knock a couple hundred bucks off of her base price. So for us, it will be a loss, yes.

But if cost is becoming you know a hindrance then you have to get creative and make it optional the goal she says is to ensure that enrollment stays high because whether you have enrollment high or low you still need the teachers you know your rent is fixed your lights you still have to pay this right so the goal is to have your high enrollment so you can cover those and still have you know imagine That said, keeping prices affordable can put a lot of pressure on a business's profit margins.

We work off very low margins to begin with. Chris Duong is the manager of Hawaii Supermarket, an Asian grocery store near Los Angeles.

He says the grocery business is extremely competitive, especially in his area, and that limits what he can charge, even though rising wages and tariffs have pushed up his costs.

So Duong says his strategy has been to lean on his suppliers.

We'll try to put more pressure on the distributors, on the wholesalers, to give us better deals and, you know, squeeze their margins on that end.

Duong says he's also been offering less variety of products at the store. That way he can buy more of the products he does sell.

The more you are able to purchase of an individual item or a certain brand, that gives us more leverage when we're negotiating with the wholesaler.

And Duong says that's allowed him to keep his prices steady. With certain items, he's lowered prices, including on cleaning products and other household supplies.

Duong says that's helping him stay competitive at a time when his customers have been pulling back.

If we can bring deals to the table, then we're confident that the customer will realize that and hopefully give us more business. Not every business is facing resistance from customers.

Randy George is co-owner of Red Hen Baking Company in Middlesex, Vermont. He says the baked goods and sandwiches he sells range from $4 to $15.

And while he has raised prices recently, he says his customers have been okay with it. So when we raise the price of something by 25 or 50 cents, that makes a huge difference in our bottom line.

But if you're a customer in the store buying a loaf of bread or coming into the cafe and buying a sandwich, it's usually not that big of an impact.

Still, George says he's taking steps to bring his costs down. He's in the process of moving the business into a new location with cheaper rent and more square footage.

He says the bigger space will let him store more flour on site instead of having to pay to store it somewhere else and truck it in.

So that type of thing will also save us money because we won't be doing as much trucking and warehousing.

George says he's doing this because he wants to ensure that his customers don't think twice when they're paying.

Really, one of the reasons I've always been attracted to baking and the business of baking is that you can have that kind of place in the community where you're a regular stop for people.

But if his prices get too high, his fear is that regular stop would become an occasional splurge. I'm Justin Howe for Marketplace.

Some call the Midwest America's heartland, some call it the breadbasket. More pejoratively, sometimes it's just flyover country.

But the agriculturally minded, for them, it's mostly corn and soybean central.

There is, though, a group of farmers in Minnesota and Iowa that's gambling on diversification, planting their fields with something not so widespread.

Minnesota Public Radio's Clay Masters has more on that one.

Farmer Shaylin Ramthan walks to one of the barns on her southern Minnesota farm where tons of her oat harvest this year sit in a large semi-truck.

That's some of the dry oats running through my fingers. My grandpa always talked about the importance of diversification and what oats will do for the soil.

On her family farm, the fields have been full of corn and soybeans for much of the past six generations. She started leveling up with oats in recent years.

But as we walk to the barn, she tells me she's taking a big loss on that crop.

And of course, right before the oats were harvested, we had 70 mile-an-hour winds and it flattened the oat field, which meant oat harvest is a bit more challenging.

Also challenging, dealing with higher costs for farming. Trump administration tariffs mean higher prices for fertilizer and equipment, and in some cases have limited access to global markets.

It's absolutely maddening, but that is agriculture in this year, especially. It doesn't matter what commodity.

They're all down and hard decisions are being made right now. Hard decisions like selling her oats at a loss.
Ramthan and a group of other farmers have tried to interest some U.S.

cereal makers in their oats with no luck. They do source a lot of their oats from Canada.

That's Kevin Smith, a professor in the Department of Agronomy and Plant Genetics at the University of Minnesota.

He says Quaker Quaker Oats and Minnesota-based General Mills already have markets locked in. I think both

companies would be interested in sourcing more oats locally, but,

you know, that's something that just has to work its way through the system. Growing oats is good for the environment because oat plants absorb excess soil nitrates.

That's a byproduct of commercial fertilizer. The oat roots prevent nitrates from leaching into waterways.
Plus, Smith says this northern climate works well for oats.

So it's certainly a crop that can be grown in this region. And the economics really depend on the markets and those are

pretty complicated these days. So instead of selling to the big guys, what could be helpful for oat farmers here is to mill and sell their oats locally.

That's where an Iowa farmer named Landon Plaguey comes in. He's building Green Acres Oat Mill just across state lines in Albert Lee, Minnesota.

We need to move beyond being just commodity producers and we have to do it at scale and we also have to do things that are better for the environment.

On this day, Plaguey walks through the mill under construction, sporting a yellow hard hat and safety glasses. So there'll be concrete poured on top of that

and fill in those beans and then this will support the killing area. The hope is that the mill will eventually process 4 million bushels of oats each year.

Plaguey says consumers will be able to trace oats back to their farms and having a local mill means farmers here can increase oat production.

We're quadrupling the number of acres of small grains that we grow and then you multiply that by the corresponding impact on your corn acres, your soybean acres.

This mill will change the rotation on 120,000 acres of farmland in northern Iowa, southern Minnesota. And that's scalable change that can make a difference.

If construction stays on track, the new mill should be up and running by harvest time next year. In Albert Lee, Minnesota, I'm Clay Masters for Marketplace.

This final note on the way out today, which I saw this morning when I went to check on something, but I just clicked on past it. Wikipedia has gotten into the whole yearly wrapped thing.

Spotify tells you what you listened to and for how how long. Wikipedia tells you what rabbit holes you went down.
Maybe this is just me, but I'm not sure. I want to be reminded, you know?

Our theme music was composed by BJ Lederman. Marketplace's executive producer is Nancy Fargalli.
Joanne Griffith is the chief content officer.

Neil Scarborough is the vice president and general manager. And I'm Kyle Rizdell.
Have yourselves a great weekend, everybody. We will see you back here on Monday, all right?

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