Steep inflation, meet slow wage growth

On the program today, data and history doesn't get me better than that now, does it? From American public media, this is Market Flags. In Los Angeles, I'm Kai Rizadal. It is Wednesday. Today, this one is the 12th of August, good as it always is to have you along, everybody. We have arrived at the point in this week where we have some data to chew on. And in a lot of ways, the news from this morning was pretty good. Inflation, of course, is the data du jour. You're on your the headline consumer price index rose 3.4% core, that is less food and energy, as you know, up to and a half percent. Both, yes, higher than the Federal Reserve want them to be, but also both a slight slowdown from last month's reading, which is good. What is not good is that when you stack today's inflation report up against the most recent wage data we've got, you know, it is pretty quickly that prices have been going up faster than pay has been going up over the past year. Real wages is the phrase you're looking for, and as Marketplace's Kaley Wells reports to get us going, them not keeping up is not great. The reactions from analysts are kind of all over the place today. In one faction, things could be worse as Connell Thullen camp. He's an economics professor at Duke University. The economy seems like it's on kind of cruise control. Everything's kind of working, maybe not wonderfully, but it's still kind of chugging along. Unemployment isn't terrible. Energy prices are elevated, but stable. And he says a main driver of this cruise control economy is that people just keep spending. There's still enough people in the economy who are doing well enough who don't feel like they have to give up the habits that they've become accustomed to in terms of consumption. And there are enough of them to keep spending, to keep the prices marching up. Then there's the more pessimistic view. Inflation is still higher than wage growth. The cost of living is rising at a pace that feels genuinely uncomfortable. Justin Wolffers teaches economics and public policy at the University of Michigan. And he says the numbers today didn't reveal any major new problems, but that just means it's more of the same bad news. That's not the way things are meant to be. So, life's more expensive and people are still spending money, which is only possible. Because everybody's spending every dollar that they have. Gary Brode is founder of a research and advisory firm called Deep Knowledge Investing. Credit card debt is up, savings is down, which is why Brode says the vibe check from businesses, think the stock market setting records, and the one from consumers look totally different. Wall Street was celebrating, how great, you know, it's less likely that the Fed will raise rates, which technically is true. I think for an average person, this is a bad prince. Brode says life isn't going to feel any less expensive anytime soon. And more reports like this one are likely on the way. So the only way consumers can make the spending feel less bad is to do less of it. I'm Kayleigh Wells for Marketplace. Wall Street today, there is almost nothing traders like better than an understated consumer price index. Not, of course, because that means consumers won't be paying quite as much. But because, as you were heard, in that piece from the guy that Kayleigh talked to, it means Chairman Worsh and the gang can now safely not raise rates at their next meeting. All of that, the caveat, of course, is for now. We will have the details when we do the numbers. If you go to table two in this morning's CPI report and scroll on down to the line that says fresh vegetables, you will see those prices were down more than two and a half percent month on month up, though, more than 6% for the year. Now, the CPI is just one economic indicator among many. So today, and for the next couple of weeks, we're going to be looking at some others. One, you might not be so familiar with. For our first go, we're going to stick with the general theme of vegetables. The Department of Agriculture puts out something called the World Agricultural Supply and Demand Estimates. They do it every month, and just like it sounds, it's best guesses that supply and demand for a bunch of crops, wheat, rice, eggs, milk as well. The August report came out today, and we called up an interesting party. My name is Felipe Velayes. I am an assistant professor of agriculture economics at UC Davis. I use the Wazi report basically every week. I look for its data. I look for its updates every month. So Wazi stands for World Agricultural Supply and Demand Estimates. It's essentially a balance sheet for a bunch of different agricultural commodities. The report measures, for example, how large corn crop is going to be this year by measuring its acreage and its yields. It measures also its demand and where and how that product is going to be consumed. So people were really anxious to see the yield numbers that the USDA was going to put out for corn and soybeans. There was an expectation that these numbers would be revised down. That's a little bit of what happened. Especially corn numbers were revised down. It's been a tough wetter year in some parts of the Midwest, so that was kind of what the market was expecting. I love it. I'm a huge fan. I think the best thing about the Wazi is that first the data is super reliable and it's super good. My first internship ever, the interns were responsible for compiling Wazi information. So that's the how I first got introduced to it. We basically had to print it at the time and carry it around the company. And that's how basically I got introduced to this whole word of agricultural economics. I would say that 80% of my research uses some sort of Wazi data. So for example, right now I'm collecting data on corn and soybean oil markets. If I had to collect every single data point from all across the world, it would be a really painful job to do. So what the Wazi does, what the USDA provides us with this report is fantastic. There is data every or man, everywhere. Filibe Avalese. Once an intern now a professor of agricultural economics at the University of California Davis. Crude oil prices as we know are still elevated, even if they're off the reason to highs. It is distillates though. All that stuff downstream of the refinery that hit the global economy where it hurts. And some new analysis from S&P global energy says the supply squeeze right there is hitting hard marketplace of Elizabeth Trollball has more on that one. Even before attacks on Iran earlier this year, the world wasn't exactly overflowing with refining capacity. Dan Evans is with S&P global energy market was sort of structurally tight because what we've seen was that refinery's had shut down. They shut down in the US that in some closures in Europe as well. And yet demand was still growing. That tightness made the refined products market sensitive to disruptions. And we've had some big ones. The closure of the Strait of Hormuz. Ukrainian strikes on Russian refining infrastructure. Which has reduced rushes ability to export products and we've seen them ban exports of diesel. And also the constraints that China is placing on product exports as well. The crude oil market on the other hand is feeling less pressure. Gregory Brue with Razer Group says for one, there's a sense that the US is backed away from escalation in Iran. The other factor is the fact that Hormuz is not completely closed. Available data suggests that a reasonable amount of crude is getting out of the Strait. But most consumers, businesses and producers don't buy crude oil. They buy jet fuel, gasoline or diesel. Even if we see de-escalation in the Middle East and crude prices falling relative to that, product prices are probably going to remain high. Susan Bell, analyst with price tag energy, also believes higher prices are here for a while. Gasoline might weaken a little bit just because of seasonality, but we do expect all of those key products to be very strong into the fall. And those elevated prices are not great for strong GDP growth globally because of the inflationary pressures. And consumers will fill the pinch. They'll have to spend more money on the gasoline that they need to buy to get their kids to and from school and to get to and from work. Which means less money to spend on other stuff. I'm Elizabeth Trowwald from Marketplace. It is a well-established fact that this program believes history matters. So, And with that as the frame, I offer two apparently contradictory facts. Fact number one, the major American stock indices are at or near record highs. Fact number two, we are a war with Iran, and the Strait of Hormuz is still effectively closed. So happy markets amidst something of an economic crisis. Make that make sense, right? Well, that's exactly what a Bloomberg column last week by John authors did, comparing markets today with what happened after the Munich agreement of 1938, piece in our time, Neville Chamberlain, all of that. John authors, welcome to the program, it's good to have you on. It's great to be here. Thank you for having me. I will cut to the chase here, and then we'll get into the details, but we are at war. And somehow investors are happy. How does that happen? I think there's an element of a learned response, and there is also an element of markets hate uncertainty, but they can actually deal with bad news per se. So if you were in a situation where you weren't sure whether there was going to be a really major escalation, there was going to be military strikes across the Gulf, permanently removing refineries, reducing the total supply of oil for a matter of years, if people thought there was a serious chance of that, then we would be in a very different situation. The judgment that is being made on markets is that this isn't great, in fact, it's pretty bad, but it's dealable with, and now that we've got our arms around the scale of the problem, we can ignore it. I'm not saying that's right, but that's definitely what's happening. Yeah, there is a historical reference here that you make in this piece, which I mean, this column was right up my alley. I loved it. 1938 Munich, of course, and then the riff on that is not peace in our time, but oil in our time. I mean, that's where we are, right? Yes. And to some extent, it looks as though we're going to have some kind of a messy deal whereby people can use the straight-up or moves, but they are going to have to pay protection money is basically what it is, isn't it? They're going to have to pay some kind of a toll, and it will make the costs of doing business that much higher and make profits that much less, but basically life will go on. If you want to compare that to Munich, fascinating thing, if you look at the Dow, you would have thought Munich was one of the best things that ever happened, not because people would particularly really believe Neville Chamberlain that it was peace in our time, but it was peace for a while, no risk of a war right then and there. And uncertainly, he resolved, it wasn't great. Hitler got what he wanted, it wasn't great, but the worst scenarios were averted for the time being. Yet another indicator is if we needed it, that really markets only care about what's right in front of their face. Just go beyond the tip of your nose and they don't care. Yes. Precisely. There is a great flow chart, if you will, that you talk about in this piece and it's an analyst at Fordham Global Insider, name is Tina Fordham and she says this is the way it's going to go, right? Iran and Oman will agree on some kind of deal. Trump will object loudly, everybody else will comply quietly and then there will be periodic threats. It's a little bit like the old shampoo commercial, Lather rinse repeat. Yes, exactly and I think one other parallel that people don't talk about is Putin takes Crimea over a decade ago, then you get the very ugly ongoing war in Donbass, it just carries on grumbling away at a low level, no great risk of escalating and another geopolitical analyst, colleague of Tina Fordham's marker, Pappich said, what happens in Donbass stays in Donbass and that's likely where the market thinks we're heading with all moves. There's a great phrase in this piece that I hadn't heard honestly since I was in graduate school. The Iranians will likely try to salami tactic this thing until the midterms explain what that means. Would you? No, Bill, just keep slicing another little piece off the salami, getting another little age of advantage from somewhere, knowing that Donald Trump really doesn't want to escalate before the midterms, they know that they can see that so they can continue chipping away, they just need to avoid taking the entire sausage straight away, that might force some degree of response, sending in special forces or Marines to actually take car guidelines or something. And if that's not said steak, they can get away with taking another slice of salami. The price of enabling a dictatorial regime, you say, is steep but payable. And while on the face of it, and in this moment, that seems to be true, that can't really be the long run answer here, can it? Interesting question. Munich certainly gives you a huge argument against letting Hitler get away with taking part of Czechoslovakia and was merely a prelude to telling him that he could take the rest of it, and then he could try to take Poland. I guess the argument against that is the Cold War. The Iron Curtain went up and we had a way less than ideal situation in which, however many hundreds of millions of people lived under a fairly unpleasant version of communism for 45 years, but it was stable. Life went on. We've had Iran behaving the way it does for, when was it, '79, coming up for 50 years now. It's not great. It's particularly not great for the poor people who live in Iran, let's not forget them. But there's a kind of analogy between the way the US has lived with Iran for the last 50 years and the way the US lived with the Soviet Union for the first 50 years after the Second World War. It's not great, but it's livable with and capitalists can get on with being capitalists in the chunk of the world because that's them. I'm not saying it's good, but I'm not saying I particularly like it. I am telling you I can understand why markets are behaving the way they are. Right, right. John authors, he's a columnist at Bloomberg opinion. You should read him every single day. I learn something every time. John, thank you so much for your time. I really appreciate it. Thank you. Cheers. Coming up, people still do by CDs and cassettes that have books on them. Well, that's relief, huh? So, let's do the numbers. Down dust drills down, 21 points basically flat, 53,770, the NASDAQ increased to 143 points, more than 5/10 percent finished at 26,588 S&P 500 up to 20 points, 2/10 percent, 7/748. Other price changes in today's inflation report gas are more than 24 percent year on your clothing, up almost 4 percent new vehicles, up about a half percent, use cars and trucks though, down nearly 2 percent. Chevron, shares were flat, shell shares, say that 10 times fast, shell, shell, shell, shell, shell, see? Dipped almost 5/10 percent, half percent's another way to say that, you're listening to Marketplace. This is Marketplace. I'm Kai Rizdal. The trials and tribulations of would-be home buyers in this economy are well known. High prices, high rates, low supply. What if though there was a less daunting option than having to buy a whole house? Well, problem meets solution. There's a new breed of real estate start-up offering would-be buyers a way to get a foot in the proverbial door by buying a share of a property, fractional home ownership, it's called. As Marketplace see, we've got reports there are different models of that idea, and there are different trade-offs too. Eddie Hanline and his wife bought their first house in Durham, North Carolina in 2020, back when mortgage interest rates were super low. Then as the years passed, with their family growing, along with two small businesses they'd started, they realized they needed more space. But the Market had changed. With the increase in the interest rates and having such a good interest rate on our current house, it was a tough sell. That's when they found out about a company called Acre Homes that would buy a house on their behalf in cash. They found a bigger place and a suburb of Raleigh, Hanline put 5% down and makes a monthly payment to Acre, comparable to what he would have paid for a mortgage, but he saved about $100,000 in upfront costs. Money he could instead invest in advertising, staff and software for his business. You know, investing in all of those things would have taken a back seat to cost-flight for a mortgage. At the end of three years, they can buy Acre out, renew for another term, or walk away with 50% of any appreciation in the Homes value. Acre's co-founder and COO Pete Crawford says it's a way to build some wealth, if home values go up, without all the costs of Homo. ownership and less of the risk, if prices fall. They don't have any transaction costs. The major maintenance of the home is on us and they have this option to purchase the home later or to walk away in an other case they get to participate in that appreciation. So far, acre homes is just available in the Carolinas and Georgia, but it's one of a handful of startups offering a form of fractional home ownership. With Jubilee homes, customers can buy a house, but rent the underlying land. Founder and CEO Brian Elbowgan says the model is a new twist on an old idea. Land leases are common in Hawaii and Baltimore and in mobile home parks. And many people already pool their resources with others to buy a stake in the American dream. About 20% of people today, co-buy a property with someone that's not there, immediate spouse. It could be a family member, it could be a friend, it could be an investor. Jubilee homes started operating in California earlier this year and has since expanded to Colorado, Texas, Florida, and seven other states. Customers get a 99 year lease on the land. The rent goes up 3% a year after an agreed upon term. They have the option to buy Jubilee out at any time. And if they decide to sell instead, they share the appreciation or loss if the price falls based on the original split. If we buy 60% and you brought 40%, you would own 40% of the total appreciation. If it was 60% for the other way, you'd get 60% so that we are winning and losing together. Customers can paint the walls, build an addition, do whatever they want with the property. They also bear most of the cost, property taxes, insurance, maintenance, Jenny Schutz is a housing economist at Arnold Ventures, a national philanthropic organization. She says trade-offs like these are one reason fractional ownership hasn't really taken off. The versions of this that have been floating around for a long time, and I think part of the problem is when people buy a house, they want all of the upside. And while shared ownership can offer people otherwise locked out of the market, a way in, she says it's important for buyers to understand what they're giving up. Particularly for people who aren't financially sophisticated or who feel like this is really their only option. But for some, the trade-offs may be worth it. Two years into his arrangement with acre homes, with interest rates still high. Eddie Hanline says he's leaning towards renewing for another year or two. I'm Amy Scott, for Marketplace. We started with data, data is where we shall end back to table two of the CPI report. There's a line that says, "Recreational books." This is up just about 5% month-on-month down, though, more than 1% year-on-year. I'm Cervita Swan, I'm the Chief Operating Officer for the Association of American Publishers. And we issue StatShot Monthly, which is a revenue report that provides a snapshot of the U.S. publishing industry. What we do is, on a monthly basis, we send out the questionnaire. The publishers are given a deadline by which to return the questionnaire. And the data is aggregated into a report. The report goes over a few categories, digital audio, e-books, hardback audio, which people still do by CDs and cassettes that have books on them. And also special bindings, which is, basically, those children's books that we all had that were waterproof or had fur on them. History's and report was from May, 2026, and the report shows that revenue for U.S. publishing industry is up 2.6% as compared to May, 2025. My favorite part of the report is actually looking at the formats. There's always a lot of conversation in news about the formats, be it digital versus paper or printed formats. Over 50% of the industry is always printed regardless of what month it is. I think there's something to be said about having a physical book in your hand reading instead of reading through a screen when we spend so much time on screens anyway. I raised my daughter to be a printed book reader. She goes to the library, reads the book, then buys the book to put in her own personal library. And I think we all need more physical connection to things outside of being connected through technology all the time. Amen to that, Sarita Swan, CEO of the Association of American Publishers right there. The Sputtle note on the way out today, in which we turn to today's Treasury auction. The government sold more debt today as it does regularly since we regularly outspend our means. That is not the news. The news is that the yield on the sale of 10-year treasuries today, arguably the most important bond in the world. The yield, the interest rate, was 4.68%. That's the highest it's been at sale since 2007. And with apologies to the Federal Reserve, the bond market has very clear thoughts about where interest rates ought to be going. Our media production team includes Brian Allison, John Fokie, Montana Johnson, Drew Johnstint, Terry O'Keefe, and Charlton Thorpe. Alex Simpson is the manager of media production. I'm Kai Rizdole, we will see you tomorrow, everybody.