Marketplace - U.S. exporters are on edge as port strike continues

Episode Date: October 3, 2024

The United States is the biggest importer and second-biggest exporter in the world. So if the dockworker strike lasts, some sectors may have to look for other ways to get their goods overseas — or pay to store them until cargo starts moving. Also in this episode: Prices probably won’t fall with inflation, economists keep an eye on the diffusion index, and Kai Ryssdal visits a remote atoll in the Pacific Ocean that’s important to U.S. security but vulnerable to climate change.

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.

On the program today, the flip side of the port strike, a different way to think about tomorrow's jobs report, and we will take a trip to the islands. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdall. It is Thursday today, the 3rd of October. Good as always to have you along, everybody. The United States is the world's biggest importer of stuff. Makes sense, right? World's biggest economy, relatively affluent consumers who like to buy stuff that is made

overseas, $3.2 trillion worth of stuff in 2022, so says the Office of the U.S. Trade Representative. So the port strike now in day three is a big deal. The United States is also though behind China, the world's second biggest exporter of stuff. A bit more than $2 trillion worth of goods going out the metaphorical door. Again, that's from the USTR. And that means that the from the USTR. And that means that the longer the strike goes, there are, yes, going to be strains on businesses and consumers waiting for their imports. Industries that rely on East and

Gulf Coast ports to get their products to overseas markets, they're going to be feeling it too. Marketplace Adjust-and-Ho starts us off. One industry that's bracing for impact is agriculture. This couldn't have come at a worse time. That's Naomi Bloom, senior market advisor with Total Farm Marketing. She says we're in the middle of harvest season, a time when American farmers sell soybeans, cotton, nuts, and other ag products to the rest of the world. Because usually the prices are cheaper for other countries to buy our products because this glut of harvest is coming to the market.

And Bloom says a lot of farmers, especially in the southeast, rely on east and Gulf Coast ports. And now if this strike lasts for a long time, it could be something where those farmers are told, well, hey, we don't want your product right now, so store it at home. The longer the strike goes on, storing all those ag products starts getting pretty costly, says Megan Schoenberger, senior economist at KPMG. Because of the propensity for disease, for pests, things like that, so you don't want to store these things for very long. Other big U.S. exports that could be affected include chemicals, machinery, and electronics.

Emily Blanchard is an economics professor at Dartmouth College and former chief economist at the State Department. Certainly aircraft, helicopters, engines, big engines like those huge ones you put in semis. Blanchard says East Coast ports handle a lot of pharmaceutical exports too. Almost half of those exports in 2022 anyway and and on average, they're to Europe. And so these are East Coast or Atlantic trade, if you think about it that way. They're heavily exposed to the stock worker shock. If the strike continues for a while, exporters will probably start looking for other options, says Wanfeng Wang, an economics professor at the University of Oregon.

Maybe some of these goods could get moved over to the rail network and then onto the West Coast ports. But Wong says things get more complicated when entire industries start rerouting their supply chains to the West Coast. The West Coast ports are really busy ports. They're very large ports. There's a lot of ships coming in and leaving already. And so the added traffic is certainly going to increase the level of congestion.

That could mean more delays for exports and imports and higher costs for consumers. I'm Justin Ho for Marketplace. On Wall Street today, it is not entirely clear the traders had that strike on their minds. My guess is they're waiting on the September jobs report coming out tomorrow morning. We will have the details when we do the numbers. This next story requires a little bit of a geography lesson. Picture a map of the Pacific Ocean. About halfway between Hawaii and Australia, in the Marshall Islands, there is a very tiny island called Kwajalein. The whole place is actually a military base, and it's tough to get to and to get into.

You need permission to go in the first place. It takes a couple of flights to get there, and there are only a handful of scheduled flights every single week. And even after you get off the plane on Kwajalein, you have to hang out in a tin roofed, fenced-in concrete waiting room, which some affectionately call the cage. And you gotta wait there until you pass a security check. Here we are, going on our three of waiting to be admitted to the US Army Garrison. It's like 85 degrees, 85% humidity.

We're all very tired. Yeah, I was a little bit tired. That was back in July, a reporting trip for our podcast, How We Survive, to see how climate change is threatening this remote place that few people are ever going to get to see. We went because Kwajalein is a critical piece of our national security strategy. The United States does missile testing out there, a mission that is being complicated by climate change. Sea levels are rising much faster in Kwaj

than elsewhere in the world. One study led by the US Geological Survey suggests islands in the area could be uninhabitable by the middle of this century. As I think you've heard me say on this program a time or two, history matters. So I wanted to get a sense of Kwajalein's history and why the United States is there.

This is Bob. Hi, Bob. He's real. He is? Okay, we should say it's a skeleton. He is a skeleton. So this is a normal femur. Yeah.

It's smooth, flat. This is a femur that we found here on Quaj. It's from 803 across from the baseball fields. It's pitted and pockmarked. Susan Underbrink is the senior archaeologist and actually the only archaeologist on Quaj. She's showing me the difference between a healthy femur, Bob's femur, and a diseased one she found while doing an excavation. And if you're wondering why an army base would need an archaeologist, well, fair question.

It's because these islands are full of pieces of our past. This must just be a fascinating place to work. It is. You never know what you're going to find. Eighty years ago, during the Second World War, American soldiers and Marines captured Kwajalein and neighboring islands from the Japanese. And just walking around today, you come across a lot of old concrete Japanese bunkers still standing. After World War II, this place was critical to the United States competing in the Cold War.

And today, like I said, it's a key part of our ballistic missile infrastructure. There are artifacts all over the place in Susan Underbrink's office, many of which were discovered during construction projects. So the items on the table are from an excavation that was done in 2022. There's a new building being it's still being structured. Oh and they found as they were digging they found all this stuff. Yes so we stopped construction and we uncovered a minimum number of five individuals along with the artifacts that are here. These two weapons are Ar ninety-nine so which was the typical weapon

of a japanese soldier it's the last bolt action rifle the japanese man i believe uh... recognizable as a as a rifle but badly corroded and deteriorated well if you were three feet down under for you know water for eighty years you have to look great and i don't know if it wouldn't there are a lot of bottles.

The Coke bottle is the most common bottle found on Quaj. And the Quaj will run at that. The second is the American beer bottles. Yeah, makes sense. And just so you know, this is what they look like usually when I get them. So describe that. Use your archaeological descriptive tools. This is an encrusted Coca-Cola bottle which I just haven't cleaned yet. And it's easy to get off.

You can use soap and water or vinegar and water and it cleans off really well. How long you figure that thing was in the ground? It's from 1944 or 45, more than likely. So I have over 500 Coke bottles in the collection and most of them are from 44 and 45. Well the glass is a lot thicker than the glass today. Yes it is. I wonder if that's how they survive. So here's three things on it. The first number is the plant.

The middle thing is, this is Owens, Illinois. So it's the glass manufacturer. And then this is the date. Oh, there's the date. 44. 44. Oh, it's heavy too. Yes. So when you put six ounces of Coke in it, it weighs a pound. That's just like a logistical nightmare. Can you imagine being in charge of transporting all these Coke bottles to the middle of the Pacific Ocean?

Yeah. The thing about these 80-year-old Coca these Coke bottles to the middle of the Pacific Ocean? Yeah. The thing about these 80-year-old Coca-Cola bottles that are thousands of miles from the United States is that they're a little slice of American economic history. The president or CEO of Coca-Cola, he was a smart man. He made a deal with FDR, said if you don't ration my sugar, I will guarantee that soldiers anywhere in the world can get a Coke for five cents. Smart guy.

Smart guy. So for example, off the end of Echo Pier, they're doing some work. They took two scoops out of the ground. Like recently? Like two years ago. I found 150 Coke bottles, one Pepsi. Come on, that's great, right?

Come on. So that just shows you how Coke got to be so popular. That's amazing. Oh, I love that. Fun as the idea of finding 150 old coke bottles is, as climate change and storm-driven flooding out here intensify, there's real risk that artifacts and remains that haven't yet been uncovered

could wash away and be lost. So what do you think of when you think that in 40 years, all of this culture and history that's in this room could conceivably be underwater, or these islands might not be inhabitable. You're a woman of history. What do you think of that? Well, I mean, the same thing happened with the Neanderthals. What can we do but decide to just do our best to try to document what we find? And that's what I try to do.

So if I find anything that's Marshallese, it goes directly to the National Museum of L.A. and Measuring. So we do our part to try to do that, help them. We spent a week on Kwajalein and a couple of the neighboring islands. And for all you hear or read about climate change and rising sea levels and the risks that we face, it really hits home when you're on an island that's 10 feet above sea level

surrounded by thousands of miles of water. The threat out here is existential. It's existential for the military's mission. It's existential for the critical national security infrastructure on Quodge. And it's existential for the thousands of Marshallese people for whom these islands are home. Episode four of this season of How We Survive is out now.

You can subscribe wherever you get your podcasts. When the Fed cut its key interest rate last month, it was, one obviously hopes, a turning point in the inflation this economy has been dealing with for a couple of three years now. And indeed, inflation does keep falling. We saw that in the personal consumption expenditures index out last week, which, great. But what's that going gonna mean for prices? Marketplace's Kristin Schwa breaks it down for us with one of New York's most iconic foods. I visited Matt Kliegman at his Manhattan bagel shop

to ask the tough questions. Do you believe in toasted or untoasted? I believe the customer should have whatever the customer wants, whether it's toasted or untoasted. Okay, he dodged that question. But that's not really why I came to Black Seed Bagels. I came to talk about inflation and how that's affected Kliegman's menu prices.

He's raised them for most items anywhere from 50 cents to a dollar over the last few years, which he says he was hesitant to do. You kind of hold on as long as you can. And that came for many of us in this kind of period after COVID. We all know what happened. Demand surged, supply chains became snarled, workers were hard to find, things got expensive. And now, years later, inflation is falling. But that doesn't mean we're going to see prices falling.

I asked Kliegman to break it down. Let's say a bagel is $2. The ingredients — flour, salt, poppy seeds — they cost roughly $0.40. But that's not all that goes into making bagels. There's rent, $0.20. Repairs and maintenance, $0.10. That brings us to $0.70 out of our $2 bagel. Napkins and bags are another 10 cents, plus utilities, marketing, insurance, 40 cents.

And Cleveland's got to make some profit, about 30 cents. But the biggest cost of that $2 bagel? A whopping 50 cents? The biggest line item in food and beverage is labor. Taking your order, making the dough, spreading the cream cheese. Labor is expensive. And the hourly rate Kliegman pays, starting around $16.75, is sort of out of his control. To lower that cost, Ricardo Marto, an economist at the St. Louis Fed, says Kliegman would have to ask his workers to take a pay cut.

Would you, dear listener, be willing to make less so New Yorkers can eat cheaper bagels? Most people would say no. I'd probably say no too, or find a job at another bagel shop. And if none of us want to take a pay cut, well... Some of these things will be reflected in the final price that consumers pay. Labor isn't just baked into the cost of making bagels. It's part of the cost of, say, getting a mixer repaired, an ingredient delivery, the ingredients themselves. Now, Julie Smith, an economist at Lafayette College, says the price of commodities, ingredients like flour and salt, those prices can fluctuate both up and down.

But those are such small parts of the input into making a bagel that it's just really hard for those costs to have a lot of effect on the total cost. Plus, the commodity prices fluctuate so often that it doesn't make sense for Kliegman to raise and lower his prices alongside them every month. And Kliegman thinks customers get it. They get that inflation has affected business owners too. But… I think there's still kind of an adjustment that's happening.

It's just easy to forget when you're standing at the counter deciding whether to get a $2 bagel with butter or spring for a $9.95 bacon, egg and cheese. In New York, I'm Kristen Schwalb for Marketplace. I don't know if David Brancaccio and the gang in the New York Bureau get bagels every day, but I do know they get out of bed real early in the morning to get you everything you need to know about the business and economic news of the day.

Check them out. Coming up. I don't see retirement in the any near future because I'm still having fun. Love what you do. You'll never work a day in your life, right? First though, let's do the numbers. Dow Industrial is down 184 today, 4 tenths percent closed at 42,011. The Nasdaq down 6 points, less than a tenth percent, 17,918. S&P 500 edged down 9 points, 2 tenths percent, 56 and 99.

A federal judge has ruled that the Biden administration's plan for student loan forgiveness can move forward after initially being blocked by a temporary restraining order. The legal challenges to that plan may slash will continue, but the administration can begin finalizing that rule, which would provide relief for an estimated $27.6 million of borrowers. Shares of Levi Strauss continue to drop today. That's after posting a less than thrilling fourth quarter forecast. The denim company teased the prospect of selling off its brand Dockers Levi Strauss dipped seven point seven percent today sales of Tesla EVs climbed almost six and a half percent last quarter That is slightly below expectations in other Tesla news today

The automaker issued recall notices for twenty seven thousand to cyber trucks a problem with the rear camera It seems Tesla decelerated three.3% on the day. Bond prices fell, the yield on the 10-year Treasury note thus went up 3.85% on the 10-year. You're listening to Marketplace. The 2024 election is just a few weeks away. Marketplace is a trusted source for millions of people across the country providing independent news about a top issue for voters, the economy. Our public service journalism is powered by you, our listeners.

So please give what you can right now during our fall fundraiser. Every single donation is an investment in the economic intelligence of you your community and our country So please go to marketplace org slash donate This is marketplace I'm Kai Rizdal We will of course be covering the September jobs report when it comes out tomorrow morning By way of refresher the economy added a hundred and forty two jobs in August. The unemployment rate was 4.2%, basically unchanged from July. The data is going to be sliced and diced a lot of different ways, but there is one specific indicator we wanted to highlight for you after we do some introductions.

My name is Martha Gimble. I'm the executive director of the Budget Lab at Yale. I am Celeste Carruthers, and I am a professor at the University of Tennessee. The indicator in question is one we've discussed before. If you'd like to play along at home, it's in the establishment data summary, table B down at the very bottom, it's titled the diffusion index of all private industries. It's a really good indicator

of how much job growth is going on. Even in an expanding economy, there's always going to be some firm that's laying people off. When people hear news about the jobs report and think to themselves, that doesn't really reflect the experience in my industry. Employment declines in their industry would at least be recognized in the diffusion index. The diffusion index measures the breadth of job hiring, literally job gains and losses across all industries in a given month. If it's over 50, five zero, more industries were hiring than

laying people off. If it's under, well, the opposite, right? More people getting laid off than are getting hired. We're coming back to it now because it has been pretty volatile over the past couple of years. In April of 2020, consider the timing, right as pandemic shutdowns started, the diffusion index was at four. Basically, nobody was hiring. And then slowly, it started to swing the other way. It reached a high of 84 in February 2022. So that's indicating that a very high percentage of industries were growing at that time.

And that's consistent with a lot of other indicators that we had an exceptionally tight job market. Stands to reason. Lots of hiring, especially in leisure and hospitality, as things opened back up. So today, it's back at 50. Given how many jobs we are currently adding per month, diffusion index is relatively low. And it speaks to the way that job growth has become really concentrated in a couple of

industries. Which are? You've seen a lot of job growth in education and health services. The other industry that's been adding a lot of jobs is government. And employment in government was really, really badly hit during the pandemic.

Last month, should you be curious, the diffusion index was 53. A lot of that hiring concentrated in construction and healthcare. We shall see, of course, what tomorrow brings. Thanks again to Martha Gimble at the Yale Budget Lab, Celeste Carruthers at the University of Tennessee. As long as we're digging deep into government data tables, as we were with the diffusion index, here is another one, the North American Industry

Classification System, NAICS, to those in the know. It's how government statisticians here, also in Canada and Mexico, hence North American, right? It's how they organize things by industry, as you can tell by the name, to better analyze what's happening in the business economy. Anyway, NAICS code 442299 is Picture Frame Shops custom. And that is where we find Eric Vaughn of Eric's I've Been Framed in Detroit, Michigan. Well, we just finished up the jazz festivals

that we were doing this past September. And we sold WJZZ, which was a radio station here, and we sold their merchandise. We had books, we had hats, we had all different types of t-shirts and hoodies. The weather is usually warm in the day and then kind of cool in the evening. So that's kind of the perfect storm for us because we can sell the t-shirts during the day and then the hoodies during the evening hours. So things were good that weekend. It was good turnout. We've had a little problem with the equipment. One of a major piece of equipment had failed, and I had to go search out and find another dry mount machine.

It's a machine that we use to mount the pitchers. It's usually running at about $20,000, and yeah, it's quite an expense. I'm 64 years old. I'm not trying to buy a new piece of equipment. So I was just happy to use one for about two grand. And it cost me about a thousand to get it from point A to here in Detroit. My electrician hooked it up and we're humming and mountain pitches again. I'm getting a little older, but I still love what I do. And I don't see retirement in any near future

because I'm still having fun. I enjoy the people that come in and we supply them with excellent service in custom picture framings. That's what I love to do. And I'm going to continue to do it as long as I can. I hear that Eric Vaughan framing pictures among other things at Eric's I've Been Marketplace is supported by Betterment, the automated investing platform that helps make

it easy to be invested. Learn more at betterment.com. Investing involves risk. And by Amazon Business, focused on offering smart business buying solutions, leaving time This final note on the way out. Today we will go back to where we started the port strike and offer a cautionary, let's not do this again gang, huh? Note, saw this on Bloomberg, that shoppers, I kid you not, are stocking up on toilet paper. Costco's website it seems shows Charmin is out of stock in a whole lot of Costco locations.

Other brands also paper towels. I got nothing. I got nothing. John Buckley, John Gordon, Noya Carr, Dyathe Parker, Amir Bibawe, and Stephanie Sieck are the marketplace editing staff. Amir Bibawe is the managing editor. I'm Kyle Rizal. We will see you tomorrow, everybody. This is APM. 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. 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.