Marketplace - Feeling meh about the economy and anxious about the election

Episode Date: October 17, 2024

Recent surveys have found that uncertainty surrounding the presidential election is impacting consumer’s outlook on the economy. Why are people feeling this way despite strong spending numbers and the recent interest rate cut? Also in this episode: Asheville businesses cope with water scarcity, oil markets are in “backwardation,” and clothing resale platforms struggle to turn a profit.

Election anxiety. It affects how we spend money too. From American public media, this is Marketplace. In Baltimore, I'm Amy Scott. In Percay Rizdal, it's Thursday the 17th of October. Good to have you with us. Retailers started the fall shopping season in pretty good shape after a slump in August. September retail sales rose four tenths percent, more than economists expected. And if you take out sales of cars and trucks, which were flat, and gasoline sales, which fell dollar-wise due to a drop in prices. Anyway, if you take those things out, sales were up an even stronger 7 tenths percent, which is maybe a little surprising given that surveys of consumer sentiment suggest people are feeling pretty

meh right now about the economy and their personal finances, and the uncertainty swirling around the election, which is less than three weeks away, I know I don't have to remind you, isn't helping. Marketplace's Mitchell Hartman has the story. Mitchell Hartman This is one of the last government reports on consumer activity we'll get before the November election. Mickey Chata is an analyst at Moody's Ratings. Mickey Chata Consumers are still spending and that bodes

well for the economy as a whole. Now, there is a big contradiction in this continued retail spending rally. For the past two years, we've seen pretty strong consumer spending in spite of the fact consumer sentiment has been below average. Joanne Shue directs the University of Michigan consumer surveys. And the reason for that is that incomes have been very strong. But now, says Shue, there's another factor coming into play. People are incorporating their election expectations into their economic views.

Uncertainty about future economic conditions is increasing. Polling firm Ipsos, meanwhile, finds that half of consumers are planning to spend less and save more in the run up to November 5th, says Ipsos senior VP Chris Jackson. Consumers kind of holding their breath, pulling back a little bit, not necessarily being as willing to take risks or big spending. Lately, the economic news has actually been pretty good. Inflation down, job market strong, stock market up.

But Jackson says consumers take that news in or don't, largely based on their partisan affiliation. In a survey Ipsos just released, We asked people, is it true or false that the stock market is at or near all-time highs? Only about 40% said it was true. And that connects almost directly to how people view the election. People who know that the stock market is at or near all-time highs are overwhelmingly supporting Harris. And people who do not think that are overwhelmingly supporting Trump.

This summer, the University of Michigan survey found that as Kamala Harris rose in the polls, sentiment among Democrats improved while Republicans got more bummed out about the economy. As the polls tightened, that gap diminished. I'm Mitchell Hartman for Marketplace. Wall Street pretty much sat this one out. We'll have the details when we do the numbers. Even after all these years, sometimes an economic indicator pops up on the show I swear I haven't heard of. Today that's capacity utilization. Basically how much of a factory or mine or other companies capability to produce is actually being put to use. Turns out it's 77.5% right now according to the Federal

Reserve. So what does that actually mean? Marketplace's Sabri Benassur has our explainer du jour. Have you ever been on a flight where there was like nobody on the plane and you were like, this is weird? Or have you been on a flight where everybody was on the plane and seven toddlers just screamed for eight hours? What you are experiencing is capacity utilization of that plane. How much is it being used? You can ask the same question about the entire U.S. industrial economy. Aaron Flahn asks every month. We have nearly 300 different individual measures of specific industries and aggregates of industries that we measure every single month. Flahn is a principal economist at the Federal Reserve Board of Governors,

and the Fed, with help from the census, literally asks factories and mines across the country, how much could you produce in a perfect world right now? And then they ask, but really though, how much are you actually producing? A little bit of math later, and they have this percentage of how much of the country's industrial capacity is being used. That typically falls somewhere in like the 70% range. This month, it was 77.5%. We've only ever really pushed up beyond 90 percent for any period of time for manufacturing as a whole, you know, during times of like wartime.

And much like the airplane, you really do not want to be at max capacity. Because when you get up close to not just 100 percent, but close to 93 percent, oh, that's when price pressures really hit. Gary Huffbauer is a senior fellow at the Peterson Institute. He says when supply is at its limit, producers can jack up prices. You get reliably more inflation.

But the capacity utilization numbers don't show that right now. And yet we have some residual inflation in the economy. Diego Comín is professor of economics at Dartmouth. The Fed is having a harder time with the last mile of inflation. Because it's not that the industrial economy is maxed out like it was in the pandemic. It's something else. Labor costs, housing shortages, he says, things that are a little harder to In New York, I'm Sabri Benashur for Marketplace. When the remnants of Hurricane Helene swept through Asheville, North Carolina last month.

Flooding devastated the area's water system, wiping out treatment centers, ripping apart pipes and muddying a reservoir that supplies water to the community. And with no clear sense of when the taps might start flowing again, at least with clean, drinkable water, some businesses and organizations are tapping into other sources. Laura Hackett from Blue Ridge Public Radio has more. More than two weeks after the hurricane, water is just starting to flow from faucets in Asheville. But it's non-potable and sometimes looks like chocolate soup. The lack of clean water

has made doing business here nearly impossible. Hey, what can I do for you all? Want a sandwich? At Mother Bakery and Cafe in downtown Asheville, a volunteer hands out free sandwiches to a line of hungry locals. Owner Brett Watson says without clean water, the cafe can't legally sell food. So he's bringing in giant cisterns of water. What we are doing is working on having pumps and hoses plumbed into our existing lines to bypass the city water system. So we're working on that right now, probably a couple weeks away. In the meantime, the

cafe can only serve food in exchange for donations. This is either turkey or ham, spicy mayo and tomato on a house made focaccia, and we've got our classic ham and butter on a baguette. Donations go to staff who have been temporarily laid off. Co-owner Heidi Bass says her workers are getting unemployment benefits, but the checks are not enough. A tiny fraction of what they would make on a normal basis, that's what's going to keep people from defaulting on mortgages and not being able to pay rent. There are some 20,000 hospitality workers in Asheville who are in a similar situation,

says City Council member Sage Turner. I am very worried about our business community, the backbone of our community, really. Our big job providers, employment, employers, facilities, all of it. Typically, October is peak tourism season. So with so many businesses unable to operate, it's a gut punch. Losing this much revenue this time of year and then having so many of your workforce and friends and neighbors also struggling is a lot. The lack of water is slowing everything down here.

Residents haven't been able to take showers or cook with tap water. Churches, schools, and hospitals can't provide some services. And it's still not clear when clean water will come back to the entire city. So some businesses and organizations are getting scrappy. They're digging their own wells. When we saw water start gushing out, we literally all started cheering. It was a really kind of wild moment. Pastor Andrew Sluder says of the well at Bible Baptist Church, and he says the well will serve his community of about 100 after the water is tested and deemed safe for drinking. They just couldn't wait for city water to come back on. Because right now people are practically living

off of cases of water. Dozens of business owners and organizations have applied for permits for wells, including Adam Roper. He owns a funeral home in West Asheville. We absolutely have to have water to care for the deceased loved ones in our care, you know, when it comes to bathing and washing hair, but also for embalming. And funeral services are essential right now in the wake of the storm. There have been more than 70 confirmed deaths in the county. Roper had to get a permit to drill, and connecting the well water costs tens of thousands of dollars. But Roper says these

services and ceremonies are important. RAPHAEL ROBERTS It's important to be able to come together and remember a life. LESLIE KENDRICK Until clean water starts flowing through the city again, business owners and It's important to be able to come together and remember a life. Until clean water starts flowing through the city again, business owners and city leaders will keep doing whatever they have to do to get by. In Asheville, North Carolina, I'm Laura Hackett for Marketplace. Coming up. So there is like 40, $50,000 that's right off the bat we have to toss. Well that's gotta hurt.

But first, let's see the numbers. The Dow Jones Industrial Average rose 161 points, 3 tenths percent to close at 43,239. Another record. The NASDAQ added six points, less than a tenth percent to finish at 18,373. And the S&P 500 lost just one point and at 5841. The world's largest chipmaker, TSMC, saw its US listed shares jump nearly 10%. That's after reporting a 54% increase in profit for the third quarter. Chipmaker Advanced Micro Devices rose less than a tenth percent. The top seller of chips

for AI applications, NVIDIA, lifted nine tenths percent after hitting a new intraday high along the way. Bond prices fell. The yield on the 10-year T-note rose to 4.09%. You're listening to Marketplace. This podcast is supported by Fundrise. Buy low, sell high. It's easy to say, hard to do.

For example, high interest rates are crushing the real estate market right now. Demand is dropping and prices are falling, even for many of the best assets. It's no wonder the Fundrise flagship fund plans to go on a buying spree, expanding its billion-dollar real estate portfolio over the next few months. You can add the Fundrise flagship fund to your portfolio in just minutes and with as little as $10 by visiting fundrise.com. That's fundrise.com. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the funds prospectus at fundrise.com. This is a paid advertisement.

What do they say? More money, more problems, and way more questions from your kids, right? But not to worry. Million Bazillion, a podcast from Marketplace, has you covered. I'm Bridget Bodner and with my co-host, Ryan Perez, we take you and your young ones on grand adventures and comedic sing-alongs to answer all the questions your little ones have about money. Join us as we explain how banks work, why name brands are more expensive, and what happened

to Black Friday sales. Listen to Million Bazillion wherever you get your podcasts. Amy Scott This is Marketplace. I'm Amy Scott. I mentioned falling gas prices at the start of the show. Well, something funny has been happening with oil prices generally. It's known as backwardation when the price of oil in the future is lower than what it is today. It's not really how futures markets are supposed to work. Under normal conditions, the price of a future contract is generally

higher because of the extra costs of storing commodities like crude oil. Marketplace's Elizabeth Troval looked into what's going on. The keyword in the term backwardation is, you guessed it, backward, says Tom Sang with Texas Christian University. You have a market that's backwards. The prices in the near months, let's say that in the next 90 days, those prices are higher and then we see prices fall off every single month after that. So if you put prices of oil on a chart,

they would be declining. You'd see this curve going lower and lower and lower and lower as we move out. The price of crude oil in December 2025, for instance, is $3 less than it is today. $25 for instance is $3 less than it is today. It boils down to the balance of current and future supply and demand. Factors like what OPEC and other major producers are planning. The US will probably continue to grow oil production maybe at a slower pace than in previous years. That's analyst Denton Cinquegrana with Opus, who says today's backwardation actually reflects politics, geopolitics, threatening supply.

The world is obviously a dangerous place, so we're not quite sure what's going to happen next. Andrew O'Connor with Morningstar points to war in the Middle East. When the fear of escalation was reaching a crescendo after the first Iranian missile barrage on Israel, the futures curve shifted higher and steepened because there was a fear of a shortage today. Therefore, the spot price was bid higher. He says these and other tensions are driving today's backwardation. Because there's this threat of escalation of ongoing conflicts.

And then there would be fear of a disruption that is associated with that. Okay. That is tending to cause the spot price to be bid higher. But he says even so, that downsloping oil futures curve has actually been flattening. Crude oil is still finding a way to market despite global unrest. I'm Elizabeth Troval for Marketplace. oil is still finding a way to market despite global unrest. I'm Elizabeth Troval for Marketplace. We started the show with today's retail sales numbers up just shy of half a percentage point in September. And a not inconsequential part of those sales is clothing.

Would you believe Americans acquire on average at least one item of clothing per week? Not all of it is new. Last year the market for used clothes grew seven times faster than for new clothes. And platforms for buying resale clothing, think ThreadUp, Poshmark, The RealReal, are ready to capitalize on that. And yet, those platforms have struggled to make a profit. Amanda Mull wrote about it for Bloomberg. Welcome back. Thank you so much for having me. Okay, so I just went to a big pop-up vintage market here in Baltimore. Vintage Palooza it's called.

And the place was packed. I mean, it really seems like the demand for used clothes is there. So why aren't these sites making money? Yes. Used clothes have never been in as much demand as they are now, especially among buyers under 40. I think that people are a little bit bored with what's available new now. There's a huge abundance of new clothes, but a lot of it looks sort of the same.

So used clothes are a great way to find something that looks a little bit more interesting and might be better quality. So clearly, there is a business case for opening these types of really high-scale, far-reaching marketplaces online. might be better quality. Trying to do that at a really, really huge scale and across a really complicated logistics setup costs a lot of money in a way that the prices of used clothing can't necessarily offset. SONIA DARA-MARGOLIS You also write that it's hard to compete against fast fashion because you could buy a dress on Shein for $5 where a vintage item, partly because of the work that goes into finding, cleaning, selling,

marketing it, is going to be more. What is the role of fast fashion in this dynamic? Fast fashion is a big problem on a couple levels for resale. The biggest thing that it does, I think, is that it just depresses the amount of money that people perceive as appropriate to pay for particular types of clothing. If you are a fast fashion consumer and then you want to get some cool second hand stuff, and the second hand sellers have priced things at $30, $50, the stuff that they're selling may be higher quality $50.

If nobody is willing to pay, to end up eventually listing that fast fashion on these platforms. And if a new user logs onto a platform and wants to find a beautiful vintage dress or an old leather jacket or something like that. And when they search for a leather jacket, all they come up with are a bunch of faux leather chien pieces or something from Forever 21 that's pleather. It looks to buyers like, actually, it's not like I'm not doing myself any favors by doing this the hard way. It's all fast fashion. I could just buy fast fashion. So you've got a bunch of different problems that that industry creates. We do know that younger shoppers are more interested in sustainability and more concerned

about the impact of their buying. Is that not enough of an incentive for consumers if the prices are just the math doesn't work? Lauren Henry It's really hard to overcome the math not working. Lauren Henry Especially among younger consumers, people who really, really want to buy secondhand. A lot of those same shoppers are people who grew up in a consumer market where you could have anything you wanted at your door in one to two days with free shipping and a minimal outlay of cash.

And when you have been sort of like socialized into that understanding of how shopping works, anything that doesn't work like that or anything that has more friction or costs more is really difficult to convince yourself to buy into. So personal values in the consumer market have a real hard time winning the battle against math. Well, do you or the people you talk to see a path to profitability for these platforms? They just have to figure it out?

Right now the market is pretty crowded. I spoke to several people who thought that there was going to be a lot of sort of a shakeout in this group of companies and eventually like a winner that has like better, more efficient processes and that is able to acquire scale from some of these other companies. And then there's always eBay. eBay probably sells more secondhand clothing than any of these platforms, honestly. The original, right? I mean, people have been buying and selling used clothes on eBay forever.

Yeah. eBay has the benefit of selling a lot of stuff that isn't clothing, a lot of stuff that has a much higher price point and that can generate much higher fees for them, which can then offset and subsidize some of the really low dollar sales that you see in the sort of mass market resale arena. Okay. So what about you? Do you shop on any of these platforms? I shop constantly on these platforms. I am wearing a dress right now that I bought on Poshmark. I would say probably about half of the things that I wear regularly are secondhand in some

respects because you do just find more interesting things. The things that I get compliments on the most consistently are almost all secondhand finds. All right. Amanda Mull writes at Bloomberg. We have her on a lot. Good to talk to you again. Thanks so much. Thanks so much for having me. Keeping with the theme of retail, let's take a trip to the other side of the checkout counter for the latest installment of our series, My Economy. My name is Sam Newell. I'm the owner and operator of Fruit Fair Farm and Fruit Fair Supermarket, and we are located in Chickpea, Massachusetts.

Back in 2019, me and my husband wanted to buy a farm, and then we didn't see any available, so we tried to buy a grocery store that does a lot of business with the local farms. This is the oldest grocery store in Chickpea. It was started in 1936, and it started as a farm stand so we're like okay this is probably what we can go for but we didn't realize that the past couple owners ended up not really updating any refrigeration, any cases. So all the HVAC, the floors, the equipment, everything was

way past its service life. Out of the inventory, a quarter of it was dated, like out of code. And we were like, okay, so there is like 40, 50 thousand dollars that's right off the bat we have to toss. So we overpaid a lot for the grocery store. We ended up paying 1.6 million for it. But if we caught the inventory, if we caught the equipments that were failing, we would have paid probably 600 to 700 thousand for it. It's been five years and we have yet to be profitable for a single year. It's been really scary. It's been a constant 70, 80 hour work week. Hopefully in 2025 we are going to break even or see a profit. That's my goal for next year.

As far as making it work, I have made it work. We have replaced all the refrigeration. We have replaced the HVAC. We have replaced the full floors, the point of sale, pretty much everything that you could possibly think of. As we started doing more and more updates, our customers who have been coming for like 20, 30 years, they saw the improvements and right away they were like,

you're saving this store that nobody took care of for a long time. And then it was a reaffirmation after hearing it from hundreds and hundreds and hundreds of people. Sam Newell, owner of Fruit Fair in Chickpea, Massachusetts. You know, we can't do this series without you, so please let us know what's going on. Marketplace.org slash my economy. Okay, this final note on the way out today. Here's a non-terrifying story about AI, unless I guess you're trying to rip off the federal government. The US Treasury Department said

today that machine learning helped officials detect $1 billion worth of check fraud this fiscal year, almost triple the amount the department recovered last year. Machine learning is especially helpful in detecting financial crimes because it can comb through enormous amounts of data and detect patterns in as little as milliseconds. Unfortunately, thieves know how to use AI, too. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher, and Stephanie Seek are the marketplace editing staff, Amir Bibawe is the managing editor, and I'm Amy Scott. We will see you tomorrow. This is APN.

I'm Kyle Rizdal, and on how we survive, we've embedded on the front lines of a fight between the U.S. military and climate change. But that fight's not happening on traditional battlefields. Instead, it's at places like the edge of the Arctic Ocean. Oh my God! It's a little windier out here. Just a little. On changing terrain.

And sea level rises. Storms like that will do more and more damage. And in state-of-the-art military facilities where I became a lab rat. We're going to drop it from 110 degrees Fahrenheit down to 34 degrees Fahrenheit. I can feel my muscles tensing, right? Discover how the U.S. military might shape our climate future. Listen to How We Survive wherever you get your podcasts.