Colleges Try to Head Off a Coming Enrollment Crisis

American workers are already spending a lot on health care. Next year, it's likely to be even more. Plus, Walmart reports its weakest sales growth in more than six years, sending its stock tumbling. And, the number of kids in America is shrinking. That's an existential threat to some colleges, but getting into Harvard may be harder than ever. It's sort of a flight to quality, as students have begun to doubt the ROI on the degree that we're trying to investment of a degree, folks want to get the biggest bang for the buck. It's Thursday, August 20th. I'm Alex O'Sulloth for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Think you're already paying a lot for health care? Well, it's only going to get worse. An estimate from benefits consulting firm Aeon shows that Americans who get health insurance through their employers are expected to spend an average of almost $5,300 this year on it. And, next year, U.S. employers expect their health care costs to go up by more than 11%. That's according to a separate survey from benefits consultant WTW. It would be the steepest rise in more than 20 years, and that's not some anomaly. It would be the fifth straight year of escalating increases. And companies pay more for insurance, so do workers, because employees' costs are rising roughly in tandem with their employer's costs. Plus, federal data shows that Americans are paying more out of pocket for health care, things like deductibles and copays, as well as expenses not covered by their health insurance. And in California, the AI boom has led to a record-breaking wave of investment. Data provider pitchbooks says companies based in the state have drawn around $366 billion hours of venture capital since the beginning of the year. That's more than triple the VC funding that has gone into the other 49 states combined. The flow of money into California is having some interesting effects. It's created a bunch of new millionaires, it's supercharged housing prices in San Francisco, and it's also helped improve the state's fiscal situation. All that funding is boosting income tax revenue well above forecasts. Walmart shares tumbled more than 9% today after the company reported its earnings. In the second quarter, it saw same-store sales growth of 2.6%, its smallest gain in more than six years. But as we reported on yesterday's show, another big-box retailer, Target, saw its same-store sales rise 3.8%, sending its stock soaring. I asked WSJ retail reporter Sarah Nassauer what drove the differences in the retailer's performance. She says Walmart is coming off a pretty strong period. They're comparable sales in the US. The growth was muted compared to what we've seen from them in recent quarters. And part of that is the sort of wonky effect of pharmacy pricing, the impact that had on sales. And part of it is the transitions that they're making to more income sales. And part of it is consumer behavior. And yeah, we saw higher percentage growth number from Target, but you have to remember Target is number one, a much smaller company. This is a smaller base. Target is also lapping at time when they had very weak sales for an extended period of time, where Walmart sales have been stronger. And so there's this difference. It's maybe not as extreme as it looks on the surface of it, but certainly we're seeing Walmart's stock react to an uncharacteristically low number from them. Some consumers are still watching their spending closely. Both Walmart and Target said they plan to lower prices to get people shopping. Sarah says they're doing that in part because they can afford to. They have the money to do it because they both received huge tariff refunds. Target was close to a billion dollars. Walmart's refund was 2.9 billion dollars. Both have said we're going to invest some of that back into prices because prices are still elevated and we want people to shop with us and not other places. So it means that the pricing environment is pretty competitive and that they're both trying to make sure that the prices are low enough to keep shoppers shopping. The sales growth Walmart did see came largely from its e-commerce sales, which rose 24%. That includes Walmart's increasingly prominent ad business, but it also includes items that are ordered online and picked up in store parking lots. But as Walmart's CFO, John David Rainey discussed on CNBC today, stores are still important for several reasons. Those are not just a place that people go to shop. They actually serve as delivery notes for us and we have 5,000 delivery notes in the United States that are located within 10 miles of 90% of America. The quarterly sales lift was enough for Walmart to raise its net sales estimates for the full year to a 4% to 5% gain. Heads up, we dropped a special bonus episode earlier today. In the latest What's news in earnings, Sarah talks about how the stagnant housing market is showing up on the results of home improvement retailers. On the bond market, Treasury Secretary Scott Bessent told CNBC today that the government's buybacks of longer-term bonds could be more than $4 billion per operation. The effects of his intervention in bond markets are proving short-lived. Today, yields are on the rise again. We believe that the yields don't reflect the underlying fundamentals. This Iran conflict, we will get on the other side of this. Bessent also tried to calm the bond market by saying that worries about the US budget deficit are overblown. He said the government is taking steps to address the deficit. We are in the administration. We are announcing a probably at the end of this week, beginning of next week, an increased focus on fiscal consolidation. It's the coming from President Trump, Russ Boat, and myself will be examining both on the revenue side and the cost side of what we can do. As we reported yesterday, swelling government deficits have led US debt to surpass $40 trillion. There's nothing magic about the $40 trillion number, and we can grow our way out of that. And in stocks, the Dow dropped 1.3 percent today, while Mark's big decline weighed on the index. Meanwhile, the NASDAQ and S&P both fell about 1 percent. Coming up, it may not necessarily be easier to get into a top college in the future, but at least for now, it is easier to win a prize at an arcade claw machine. More after the break. Higher education is hitting a demographic cliff. Why? And that means fewer kids will go to college. One higher education group predicts that in 15 years, college enrollment will be down 13 percent. In some parts of the country, the declines have already begun. For more on what this means for the colleges and for students, journal education reporter Doug Belkin joins me now. Doug, the big question I have, of course, will this make it easier to get into college? It will make it easier to get into a lot of colleges, but not the most elite or selective schools. So this sort of a flight to quality, as students have begun to doubt the ROI on the degree that we're trying to investment of a degree, folks want to get the biggest bang for the buck. So kids are applying to three, four times as many schools as they did 20 years ago. The result is that the best schools in the country have seen a huge uptake in applications, and so their admission rates are going down, down, down. The flip side of that is that there's going to be a lot more schools that are desperate for students. And these are going to be the less prestigious, less highly ranked schools, and they're going to be incentivized to give larger financial aid packages to make sure that their classes are filled up. So for the colleges that are receiving fewer applications overall, what are they trying to do to boost their numbers? They're marketing as much as they can to generate as many applications as they can. Some of the things they do in that sense is they buy the names of kids who are taking the SAT from the college board and then they market directly to those kids in the hopes that they'll apply. Ultimately, they hope that they apply, and some of them will get rejected, which will approve their status because they've rejected more students and they're hard to get into. But there's a number of pathways that schools are using to try to elevate their attractiveness. They try to build nice dorms. They're focusing on specific programs that are well aligned with the marketplace. They're hiring consultants to help them figure out what their strengths are into jettison their weaknesses to become more efficient. If there are literally fewer American students who can apply to these schools, will there be more outreach to international students? I know that's already quite an important pipeline for a lot of these universities. So the term administration has put a lot of pressure on international visas, and the result of that is that there was about a 17% decline in first year international students last year. Schools are chasing international students, but it's much tougher chase now because a lot of the kids are just nervous. So in some cases, they're opening new markets for a long-time China and India has been the primary markets, but recruiters are heading to different parts of the world in the hopes of finding new sources of kids from wealthy families. For some of these smaller, less well-known schools, I mean, they're doing all of these things to try to boost their application numbers, but already we're seeing some of them start to close. Should we expect to see more of that? The predictions from folks who follow the stuff carefully are around 450 schools will close or merge in the next 10 years, and the majority of those are smaller, private colleges, often in remote areas that draw from me. region that they're in, if that region happens to be the Northeast or the Midwest where the demography has been going south for a while, they're the most at risk. And if they have relatively small endowments and they can't sort of sustain and get through this period, then they're the ones who are fundraising like mad and trying to attract people, you know, that they have the most of the line to lose. Journal reporter Doug Belkin, thanks so much for joining us. Thanks very much. Doug's story has lots of illuminating charts that are worth a look. We'll leave a link to it in the show notes. And finally, remember claw machines? I remember them for my childhood as having a siren song of stuffed animals inside, but we're pretty much impossible to win, no matter how many quarters I fed the machines. But today's claw machines are totally different. For one thing, they're found in huge numbers at these claw cades that are popping up across the U.S. I went to one of these claw cades. It had rows and rows of claw machines. It was Tuesday at 3 p.m. and it was just packed with people. That's the journal's Lily Bell polling. She says that nowadays these games can get pretty fancy. They have stuffed animals, but also Hermes bags, fresh vegetables, and even sourdough starter. And she says another big difference today is that the creators of these new claw machines actually want you to win, at least some of the time. So I spent about $30, got to play about 15 times. I was able to win two stuffed animals, a chicken leg with a penguin face on it. And this purple teacup looking thing had a face on it. All very cutesy. And I think they know that the customer could maybe spend 15 on getting that team stuffed animal online. But what they're offering that Amazon can't is the experience of playing the game with your friends that you get in person at these unique arcades. And that's what's news for this Thursday afternoon. Today's show was produced by Anthony Bansi and Danny Lewis with supervising producer Tally Arbell. I'm Alex O'Salef for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.