Marketplace - Disposable income growth chugs along

Episode Date: September 28, 2024

Disposable income was up 0.2% in August from July, the latest personal consumption expenditures report shows. It’s good news that income is outpacing inflation, but major life expenses like homeownership or retirement are still out of reach for many Americans. Also in this episode: Kamala Harris’ presidential campaign may benefit from Divine Nine-affiliated PACs, California decides how best to recycle EV batteries, and Denver property owners will pay an annual tax to fund sidewalk maintenance.

Hi, I'm Kyle Rizdal, the host of How We Survive. It's a podcast from Marketplace. In 1986, before I was a journalist, I was flying for the Navy. Mr. Gorbachev, tear down this wall. It was the Cold War and my first deployments were intercepting Russian bombers. Today though, there's another threat out there, climate change. This could be the warmest year on record. Climate change is here.

Temperatures here are warming faster than anywhere on earth. And while the threat seems new, the Pentagon's been funding studies on climate change since the 1950s. I think we will put our troops and our forces at higher risk if we don't recognize the impact of climate change. This season, we go to the front lines of the climate crisis to see how the military is preparing for the threat. Listen to how we survive wherever you get your podcasts.

We will do our Friday thing. We will talk about electric vehicles, thinking, batteries, and then we'll go for a walk. From American public media, this is Market Plans. In Los Angeles, I'm Carl Rizdal. It is Friday today, September the 27th. Good as always to have you along, everybody. This has been a week of acronyms in this economy. Initialisms, actually, I think,

is what they are properly called. Economic indicators, by any other name, GDP and PCE, to name just a couple. Anyway, Gina Smilich is at the New York Times, Katherine Rimpel is at the Washington Post. Hey, you two. Hey, Kai. Hey, Kai. So let's see, Gina Smilich, you get to go first. PCE two. Hey, Kai. Hey, Kai. So let's see.

Gina Smilich, you get to go first. PCE came out today, personal consumption expenditures. The Fed's favored, as we all know, and we say on this program every time we bring it up. 2.2% year on year, a 10th of a percent up from August. What do you like in this report and what do you maybe not like so much? Yeah, so there was a lot to like in this report. I would say I liked everything in this report from an inflation perspective, more or less.

So that the headline inflation number ticked down to 2.2%. As you mentioned, the core number ticked up, but just by a 0.1. So not very much at all. And if you actually look at the month over month number, which is the one we kind of care about when we're looking at the core inflation, that was actually a little softer than economists expected. It came in at 0.1%. And so that's a bunch of numbers that I just threw out, but they all add up to one thing,

which is that inflation is really slowing pretty steadily, in fact, slowing even a little bit more than economists had expected in this number. And I think the Fed is going to take from that, that they're headed in the right direction. They are very, very close to hitting their inflation goal. 2.2 is about as good as you get. That's pretty much 2%. And so I think that they're in good shape on the inflation front at the moment.

I'm obliged to point out though, Katherine Rampel, that services inflation, which we've been talking about for a while now, ever since the goods spasm that we all went through buying stuff, services inflation is still kind of sticky. Yeah, that is troubling. I mean, I don't think it's anything to panic about, but it is concerning in the sense that we kind of understood what was going on with goods inflation to some extent, right? You had these like supply chain problems and strong demand,

and one supply chain problems unwound themselves and people spent down most of their excess savings, so to speak, some of the inflationary pressures in the goods market or the goods sector would cool. With services, that suggests that obviously there are things that go into this, you know, services companies still do buy supplies, for example, but it does suggest that there may be a little bit more stickiness to inflation, but you know, like Gina said,

we're on the right path. We're not yet at target, but we are definitely heading there and wouldn't worry too, too much about this right now All all of that noted and I wish specifically not to rain on anybody's economic parade But it has to be said Gina smile like that price levels are still elevated and we will be feeling as you wrote about in The paper not too long ago. We will be feeling the scars of this inflation for a little while at least Yeah, I think this is a really important thing to we will be feeling the scars of this inflation for a little while at least. Yeah, I think this is a really important thing to express awareness about

anytime you're talking about inflation. When you talk to people in the real world, they will be like, you are a crazy nerd, you journalist lady, what are you talking about? My price levels are so high. You get that too? Oh my goodness. Yeah, so I think people in the real world give us a regular reality check on this point.

It feels bad to a lot of people still that price levels are up a lot relative to where they were in 2019. And I think that it's important to remember that there is this legacy that high inflation has. And I think it's important to remember when we're talking about policy because I think it's an important reminder as we sort of weigh trade-offs and think about how we design policy that we, I think as a journalist and as economists, I think in recent years, we've talked a lot about the pain that comes with long periods of weak labor markets. But I think that because it's been such a long time since we've had an inflationary episode, we don't often think about the pain that comes with the short periods of very rapid inflation. And we just had a really real world experience of that.

There are a lot of people who are still really trying to adjust this new world with higher prices and that hasn't been a pleasant experience for them. And I think they're telling us that loud and clear. And so I think it's a thing to keep in mind, good inflation's coming down, but also worth noting that it was painful in the process. Right, an observation here about the economy at large, Catherine, GDP came out this week, gross domestic product, 3.0% on an annualized basis in the second quarter, basically double what it was in Q1.

This economy saved the labor market, which is softening in a got to keep an eye on it way. This economy is very strong. Yeah, it is softening in a, gotta keep an eye on it way, this economy is very strong. Yeah, it is an economy that so far will not quit. It's not only that the latest quarter was good, but there were a bunch of revisions. This is very technical, but basically, the Bureau of Economic Analysis determined

that things were even better than they had initially Surmised them to be for the last several years. I think they revised back to at least 2021 and found that GDP was was faster than they had expected that 2-quarter period where we had what some people referred to as a technical recession where it looked like we had referred to as a technical recession where it looked like we had two quarters in a row where the economy shrank. That no longer happened. A lot was made of that at the time. And so, yeah, by a lot of different metrics, the economy is looking good. In fact, not just better than had been in the draft measures, let's say When when these numbers first came out, but actually the economy is doing better than had been forecast before the pandemic began like if you look at where the congressional budget office thought that

GDP would be that incomes would be incomes per capita would be by now We are actually doing even better Whatever scarring effect people may have worried would have happened to this economy because of the pandemic, we have not experienced. In fact, we are doing better than had been predicted back then. All right. So I want to pause here for a moment, Gina, and just talk about the politics of inflation and prices in this economy.

Conventional wisdom is give or take six months out from election, people's opinions on the economy are baked and they are what they're gonna be on election day. What we are seeing now is number one, both candidates running hard on the economy, but also number two, people listening to that message. And I wonder why you think that is.

Is it because number one, inflation, and number two, we're just out of the pandemic and it's weird this time? Yeah. It's interesting. I think one thing that's important to note here is it does seem that you wouldn't think this, I think, had it not happened, but it does seem that Kamala Harris entering the race changed how people viewed the economy and the outlook for the economy, particularly among Democratic voters.

So I think it goes without like, just as necessary to acknowledge that like there was a shift in consumer sentiment that seems to have happened around that, that has been found in several polls and surveys. And so I think that's an important thing to note. But I think otherwise, you know, it's this really interesting moment where people are trying to parse a lot of incoming economic data at the same time. Inflation is slowing, but price levels are still high. That feels confusing to people.

Interest rates are coming down, but they're still high. That feels confusing to people. It's this very bizarre moment in the economy as people approach this election. I think that's going to make it a little bit more ambiguous and a little harder to vote on the economy this time around. But we will see. Katherine, super quick on that same point, because I know you've been writing a lot about specifically former President Trump's economic policies and how they would be inflationary. And I know this is something you're thinking about. Yeah, it has been very hard to communicate to the public about what would likely happen under the presidency of Harris

versus Trump, in part because there are a lot of things that may sound good on the surface, but they're not always intuitive, like how they would manifest in the economy. Things like tariffs tend to be popular, telling the Fed to cut interest rates, you know, having the president tell the Fed to cut interest rates, that sounds nice. You know, cutting taxes on everything from tips to overtime to Social Security. All of that sounds great, but many of the things that I just mentioned are likely to raise prices, things, particularly tariffs and politicizing the Fed, or may not, you know, be terribly equitable in how they would be manifested like those tax ideas. So it's been very challenging to help explain those likely consequences.

It is very tough explaining this economy, especially right now. Gina Smylek at the New York Times, Katharine Pell at the Washington Post on a Friday. Thanks you two. Thanks, guys. Thanks, guys. Have a nice weekend. Wall Street today, a little of this, a little of that. Details, numbers, youall know the drill. Included in that PCE report this morning was data on disposable personal income, how much

Americans made after taxes, yes, from wages, but also from assets, interest and dividends and the like. Overall, up two-tenths percent in August, up about three percent from a year ago. And that has been pretty consistent in 2024. Real disposable income growth, that is accounting for inflation, has been at or above three percent year over year every single month since January. It's a sign the economy is looking something like normal, as Marketplace's Henry Epp explains. Like so many charts that track different aspects of the economy,

the one showing the change in disposable income jumped all over the place starting in 2020, all the way into 2023. But now... It seems good. Allison Lidke is an associate professor of economics at St. Olaf College in Minnesota. We're like evening out from that big jump and big drop

and big jump and big drop. And finally, that change in income has stabilized around 3% a year, which means our standard of living is about 3% better. And historically, that's a good place for any economy, says Betsy Stevenson, a professor at the University of Michigan. If we look over the last hundred years, you know, sort of averaging two to three percent improvements in living standards year after year after year is, you know, what is normal. Of course, this is the broad view of the money Americans are bringing in, ranging from people

raking in stock dividends to people living on Social Security checks. Mark Hamrick with Bankrate says even though incomes are rising above the rate of inflation, purchasing a home, purchasing a vehicle, or even retiring, are seen as huge challenges for a significant component of the American population. So it's probably not great news to those folks that while disposable income growth continues to be pretty good, it's slowed down a bit the last few months. But that's a welcome sign to economists who've hoped to see inflationary pressures ease, says Wendy Adelberg at Brookings.

Now she says it needs to stop slowing. We've gotten to a good place. Now we just need to stand pat. We need to stick the landing. If we can do that, she says, the economy could be in a sustainable place for a while. I'm Henry Epp for Marketplace. As of last year, there were more than 3 million EVs on the road in this economy. 3.3 million, to be precise.

That's from Experian Automotive. That is also 3.3 million lithium ionion batteries on the road in this economy, and counting. They're great from a carbon emission standpoint, but EV batteries can be dangerous to dispose of. They suck up a lot of resources to produce in the first place as well. That's why California lawmakers want to get as much life out of them as possible. They have just passed a bill essentially forcing battery manufacturers to do just that. It's currently on Governor Newsom's desk, and if he signs it, as Marketplace's Kayleigh Wells explains, it is not going to affect just Californians.

If you've ever gotten rid of an old beater, maybe you traded it in or sold it for parts, or in my case, gave it to the local mechanic for cash so he could, well, I don't know. The whole point is I didn't really have to think about what happened next. But there's a whole industry that does, and it's actually pretty efficient, says Emil Nussbaum with the Automotive Recyclers Association. 86% of a vehicle by weight is either reused, repurposed, recycled, or the parts go to remanufacturing. But EVs don't have cast metal engines or traditional gearboxes. Their batteries have complicated components. These cars can't just get thrown into the existing recycling system.

I had a tow truck operator who reached out to us. He had a crash damaged Tesla. The vehicle is essentially just a lot of carbon and metal. And unfortunately, this tow truck operator, he has nowhere to send this battery or this vehicle to at this point. Nussbaum says that Tesla is currently just sitting at a facility waiting for some solution.

Now, one totaled EV isn't a major waste issue, but Tesla's first hit the market 16 years ago. The supply of retired EVs is coming. We don't have a huge problem per se right now on the recycling end, but it will be a problem in the future if we don't take steps to ensure that there's a process in place to recover these batteries. Nicole Hutchinson is the state policy director with a clean transportation nonprofit called CalSTART. She says the bill is environmentally a good idea.

This policy prevents environmental impacts on the front end by reducing a reliance on virgin materials and it also reduces environmental harm on the back end by ensuring that we don't have hazardous waste in our landfills. It forces the producer to actually spend some time thinking about the end of life of the product. State Senator Ben Allen wrote the bill. He says it puts EV battery suppliers on the hook to repair, repurpose, and eventually recycle batteries. And it's got implications beyond state borders, Allen says, because if manufacturers have

to recycle batteries in the most populous state, they'll build them differently. Which will make it so much easier when a car is brought into the shop and you make it easy to extract, you make it easy to separate, you make it easy to refurbish, you make it easy to recycle. The bill standardizes what Allen calls an inefficient Wild West recycling industry. The Automotive Recyclers Association is on board. So are environmental advocates. But the automotive trade groups are mixed.

After all, the manufacturers will bear a lot of the responsibility. The Alliance for Automotive Innovation declined an interview, but said in an email it opposed the bill. John Moffitt spoke on behalf of the trade association at a state committee meeting this summer. Let the market do its thing. It is out there working. Many of my, if not most of my member companies already have contracts with other entities out to make the secondary use of these batteries once they're done in the vehicle. The state's auto repair shops are neutral.

Dave Cusa with the Automotive Service Councils of California runs his own garage. And I'm a small shop, right, but we may do two hybrid batteries a month, maybe. So I have two pieces of paper to fill out, big deal. He estimates that's less than 2% of the cars that come through his shop because, Cusa says, EVs just don't fail that often. I'm Kayley Wells for Marketplace. Coming up. We fell so hard in love with cars and thought we'd never need to walk or use any other

form of transportation again. Sidewalks matter people, sidewalks matter. But first, let's do the numbers. Dow Industrial is up 137 today, a third of 1%, 42,313. The Nasdaq went the other way, down 70 points, 4 tenths percent, 18,119. The S&P 500 down 7 points, a tenth percent, 57 and 38. For the five days going by, the Dow was up 6 tenths percent, the Nasdaq gained just under 1 percent, S&P 500 gained 0.6%.

Bond prices went up. The yield on the 10-year T-note down 3.75%. You are listening to Marketplace. This is Marketplace. I'm Kai Rizdal. In an election as tight as the one we are living through, turnout is going to be key. So both candidates are doing everything they can to get their bases engaged and activated. And for Vice President Harris, some of that support is coming from the historically black fraternities and sororities, collectively known as the Divine Nine.

Harris is a member of one of them, Alpha Kappa Alpha Sorority, Incorporated, which, as it happens, recently launched its own political action committee. Marketplace's Kimberly Adams explains the political and economic power of those organizations. The Divine Nine fraternities and sororities have about two and a half million members, says R.J. Johnson, national vice president of their umbrella group, the National Pan-Hellenic Council. Next to the Black Church, the NPHC, the Divine Nine, is the largest single organization that has a combined group of the Black constituency.

Johnson is a member of Kappa Alpha Psi Fraternity, Inc., and also chair of the Divine Nine Votes Campaign. He says while there isn't hard research on the topic, it's pretty common to see members of these groups in high-ranking and high-paying jobs. Our members are members of C-Sweets. They are attorneys, doctors, lawyers. We contribute as our conclaves. We make multi-million dollar impacts. In July, Vice President Harris spoke at Zeta Phi Beta Incorporated's annual convention, known as their Grand Boulet, in Indianapolis, and acknowledged the group's long history

of political activism. During the civil rights movement, you marched for voting rights, economic justice, and an end to segregation. The Divine Nine organizations have made a lot of those things priorities since they were founded starting in the early 1900s. If you look at all of the key figures in the civil rights movement, 90% of them are members of these groups. Walter Kimbrough is interim president at the historically black Teledega College in Alabama

and member of Alpha Phi Alpha Fraternity, Incorporated, the oldest group in the Divine Nine, founded in 1906. Of course, people would think about Martin Luther King Jr., but Jesse Jackson, Ralph David Abernathy, Coretta Scott King, even if you look at Thurgood Marshall, the first African American on the Supreme Court, they're all members of these groups. Members of these organizations tend to stay at least somewhat involved for life, engaging in community development and, especially during election years, focusing on voter registration and black turnout. Tamara Brown, provost of the University of Texas at Arlington,

is a member of Delta Sigma Theta Sorority, Incorporated, and co-edited a book on the Divine Nine. Matheta Sorority, Inc., and co-edited a book on the Divine Nine. They've met in chambers with key leaders, including presidents, to express, you know, perspectives and views on important issues affecting the African American community. These organizations are nonpartisan nonprofits, but they have affiliated political action committees. And now, with Harris at the top of the Democratic ticket, the PACs say they've been ramping up operations. They're endorsing candidates up and down the ballot and say they will be making donations. So far they haven't reported giving much, just over a hundred thousand dollars, all of

it to Democrats. In Washington, I'm Kimberly Adams for Marketplace. Cities generally speaking are responsible for things like potholes and road construction. With sidewalks though, it's not that simple. In a lot of places, property owners are on the hook, and that often leads to sidewalks in terrible condition. But voters in Denver did something unusual a couple of years ago. They approved a fee on those property owners to fund sidewalks, which in the way these things work means the city is newly responsible for a massive piece of

infrastructure. Colorado Public Radio's Rebecca Talber has more. Recently, I took a walk through downtown Denver with Jill Locantore. She runs Denver Streets Partnership, a pedestrian and transit advocacy group. Tell me where we are right now. We are on Colfax Avenue, which is one of Denver's main streets. It's got an amazing collection of locally owned businesses, schools, churches, government institutions, and it's also designed like a highway. Like a

lot of commercial and residential streets in Denver, Colfax isn't the most pedestrian friendly. The sidewalks are often broken or cracked, but at least they exist, which isn't something you could say about the entire city. That's very common in a lot of US cities. We fell so hard in love with cars and thought we'd never need to walk or use any other form of transportation again. A lack of sidewalks can be an equity issue. That's according to research from Gregory Rowengold, an associate professor of civil environmental engineering at University of Vermont. Sidewalks were generally in more disrepair and lower income neighborhoods, in neighborhoods

that had more people of color. And in Denver, it used to be that property owners were responsible for sidewalk upkeep in front of their homes or businesses. Now that's the city's job. Roengold says there are other US cities that do that, but usually there's not enough funding. That's the case where he lives in Burlington, Vermont. I think we recently increased the amount of money available for sidewalk repair, but they can repair something like three miles

a year. We will never, never be able to fix all the sidewalks. In Denver, most property owners will pay $150 annually starting in January. That should bring in about $40 million per year. With that kind of money, the goal is that the city can build and fix all sidewalks in a decade. Before the ballot initiative, the city estimated it would take 400 years to do the job. Homeowner Larry Lysinski thinks the new fee will ultimately be worth it. Years ago, he shelled out $500 to repair one small piece of sidewalk outside his house.

A few weeks later, a trash truck cracked it again. Financially, I think it's still a big win for the homeowners. He thinks the new program will be an improvement as long as the city can actually deliver. I guess with the state of the way the sidewalks were maintained previously, it's kind of a low bar. But it's ambitious. No one really knows how much this will actually cost or where to get all that concrete. Some people are worried about shouldering the new costs, even with discounts for low income property owners. But if it works, advocates like Locantore think Denver could be a model for other cities.

As we continue our walk through downtown, she points out where Denver's sidewalks have room for improvement. It's got lots of dips and tripping hazards. If you were in a wheelchair, you would have a very hard time traversing this. So you would probably be in the street with cars. But if it all goes according to plan, these and other sidewalks in the city will be much more traversable in a number of years. In Denver, I'm Rebecca Tauber for Marketplace. This final note on the way out today meant to get to with Catherine and Gina and ran

out of time. The University of Michigan came out with its regular reading on consumer sentiment today. We are feeling a little bit better about things, but that's not the reason I mentioned it. Nice though it is. We talk every now and then about inflation expectations and how, if people think prices are going to go higher, that can actually happen. Anyway, the promising item in this report today is that we, consumers, nice job gang, we figure inflation is going to be about 2.7% over the next year.

That is down a tad from the earlier reading and that is, again, promising. Our theme music was composed by BJ Liederman. Marketplace's executive producer is Nancy Fargalli. Donna Tam is the executive editor. Neil Scarborough is the vice president and general manager. I'm Kyle Rizdahl. Have yourselves a great weekend, everybody. We will see you right back here on Monday. This is APM. Hi, I'm Kai Rizdal, the host of How We Survive. It's a podcast from Marketplace.

In 1986, before I was a journalist, I was flying for the Navy. Mr. Gorbachev, tear down this wall. It was the Cold War and my first deployments were intercepting Russian bombers. Today though, there's another threat out there, climate change. This could be the warmest year on record. Climate change is here. Temperatures here are warming faster than anywhere on earth. And while the threat seems new, the Pentagon's been funding studies on climate change since the 1950s.

I think we will put our troops and our forces at higher risk if we don't recognize the impact of climate change. This season, we go to the front lines of the climate crisis to see how the military is preparing for the threat. Listen to How We Survive, wherever you get your podcasts.