We're stocking up

Trade is the economic currency of the day from American public media. This is Marketplace. In Los Angeles, I'm Kai, Rizdal. It is Tuesday. Today, this one is the sixth of October. Good as it always is to have you along, everybody. The trade beat is where we are going to begin today, about which we got a couple of new interesting pieces of data. Item number one, the trade deficit, which got a whole lot bigger in August, thanks in part to us importing more goods and services that month than we did in July, 4.3% more. To be precise, that came from the Bureau of Economic Analysis this morning. Item number two, inventory levels rose in September. More quickly than they did in August, so says the logistics manager's index. Now, yes, trade data can be, I mean, I get it, at least we didn't start with the bond market again, right? But the reality is that any kind of pick up and imports or inventory levels can be a sign that demand in this economy is strong, but as Marketplace is just in a whole reports to get us going, who and what are fueling that demand? What matters too? One big category of goods where imports are rising is the kind of stuff that goes into building data centers. Ben Ayers is Senior Economist at Nationwide. There's a lot of extra materials, technology and other electronics that need to be imported, particularly semiconductor chips from abroad. That list also includes telecommunications gear, metals, machinery. But Ayers says it's not just AI that's fueling demand for imports. Beneath that, we are still seeing a solid level of consumer demand. The main message around consumer demand is resiliency. That resiliency is also one of the reasons why inventories rose in September, says Zach Rodgers. He's a professor of supply chain management at Colorado State University, and he puts together the logistics manager's index. Rodgers says this is happening despite the fact that interest rates and tariffs are making inventories more expensive. Costs are high, but demand is high too, and so high demand is allowing those high costs to continue. But Rodgers says he's also seeing signs that companies are uncomfortable making long-term bets on consumer demand. Warehousing and transportation capacity is not growing to keep up with inventory. In other words, companies aren't investing as much in new warehouses or buying new trucks because they're worried consumer demand might taper off. And so it doesn't really then make sense to put a big investment in something like warehousing if it might only just come online after the party is over. That said, Rodgers also surveys companies that sell to other businesses, think manufacturers and wholesalers. And he says many of them say they're planning to keep investing in inventories, likely because of strong data center demand. Megan Schoenberger, senior economist with KPMG, says AI investment is already starting to outshine consumer spending. GDP is increasingly driven by a narrow set of drivers. Data centers are a very small portion of GDP. Schoenberger says that's not necessarily a bad sign for the overall economy. It is good for the economy to see this large investment. The fact that it is a very narrow base for the economy is more of a risk. Because that investment could always slow down, I'm Justin Howe from Marketplace. Wall Street Day, there is a new ticker on the block out is WBD in is SKYD. That's SkyDance, David Ellison's company that has closed its purchase of Warner Brothers Discovery. There is still, it seems a little price discovery to be done on SkyDance. Stock shares down two and a half percent in the first day of trading. None of that, however, stopped traders from sending two of the major indices to fresh all time highs. What, me worry, we'll have the details when we do the numbers. I'm going to go out on a limb here and posit that, apart from oil, probably and possibly the most in demand commodity in the entire global economy right now, is the humble semiconductor. AI, if I have to say it. In fact, if you dig down into that trade data, we got this morning from the Commerce Department, you will see one of the top categories of US goods exports in August was indeed semiconductors, and those exports have been rising steadily all year. At the same time, we imported more semiconductors to both for the month and year to date. Some marketplaces Stephanie Hughes spent her day digging into how this key tech commodity moves around the planet. Semiconductors are the guts of pretty much any electronic device. They're used in the grid, data centers, of course, your car. When you press the button to roll up your window, there's a semiconductor that tells it not to pinch your finger. United Turner is an analyst with IDC, which estimates about 10 percent of the world semiconductors are manufactured in the US. That includes specialty chips used in cars and communications, along with certain types of memory chips. Those in particular have gotten more expensive in the past year. The US has also made exporting chips a priority. Jason Oxman leads the Information Technology Industry Council, a trade group. Semiconductor companies have announced literally billions of dollars' worth of investments in the last few years in manufacturing capability in the United States, and the spark for that really was the Chips and Science Act. That's the 2022 law that poured tens of billions of dollars into chip manufacturing. To be clear, we still import a whole lot more semiconductors than we export, but even many of those have their roots in the US. If you only look at who manufactures a chip in which country that chip comes from, you miss all of the complexity in the value chain. Tufts Professor Chris Miller is author of the book, Chip War. He also advises semiconductor startups. You often miss the answer is to who makes the most money per chip. He says almost all of the world's leading chip designers are here in the US. And. Often the majority of the profit accrues to the design firm rather than to the companies that actually do the manufacturing of that chip. And for chips made overseas, that profit comes from an exported service. I'm Stephanie Hughes from Rocketplace. We're going to go back in time here for a second. Not far just to last Friday in the September jobs report. The unemployment rate, you might remember, moved up just a bit, a tenth of one percent. But headline figures rarely tell the whole story and the details can make things look quite different. Specifically, I'm talking about the black unemployment rate in September, which rose a full percentage point to seven percent. And it turns out that that can tell us a whole lot about where the labor market might be going. Labor reserves moves on interest rates start to make their way through this economy in that long and variably lagging way that they do. EJUMA is an associate professor of economics at Miami University where he studies, among other things, monetary policy and racial disparities. Professor Rumi, thanks for coming on the program. Thanks for having me. So, that unemployment report that we got last Friday that I mentioned just a second ago, what did you make of it? What do you think? Yeah. Well, the notable thing to stuck out to me, again, unemployment overall was 4.1 to 4.2 percent, but the black unemployment rate increased from 6 percent to 7 percent to 4 percentage point. Well, we know what researchers have shown is that black work experience, what we call the last-hard first-fire dynamics. I mean, they're the last to be employed and they're the first to be let go. So, if it is a case, they were starting to see a slow down or things are starting to change in the labor market. We would expect to see that uptick in the black unemployment rate before we see it in the overall unemployment rate. Right. Now, to the reason we got you on the program, which is related to that black unemployment rate and what the Federal Reserve does with interest rates. As I said up in the introduction, Milton Friedman, the long and variable lag, what does monetary policy do to black Americans in this economy, generally speaking, and then we'll dig in a little bit? Yeah. So, we think about the Fed. I mean, their job is to manage employment, you know, achieve maximum employment and also price stability. So, when rates are elevated, they decide to raise rates, typically at least to a contraction in the economy, financial conditions tighten, so people are let go, and again, you know, the incidence of unemployment doesn't fall equally across race. But in addition to that, when you're tightening those financial conditions, that also means that getting access to credit becomes more difficult for a subset of people. And so, monetary tightening or tightening financial conditions, again, could have some desperate impact. Right. So, let's talk about black Americans then. And what I hear you saying, just to be clear, is that when the Fed tightens, black Americans feel it first, and that can tell us something about what's going on in this economy when the Fed moves interest rates. Yeah. That's exactly what I'm saying. I think that's an additional source. of information that gives us a clear indication of the true strength of the labor market, right? So if I were to interpret that employment data that we recently saw that uptick in the black unemployment rate, I would say, again, that's an indicator, right? That's indicating to us that the degree of slack in the labor market may be different than what we were anticipating or what we were expecting just in one prior. All right. So look, let's say Chairman Worsh puts you on one of his task forces about the unemployment rate and what monetary policy does to it. How do you convince him to pay more attention to black unemployment, sort of as a bell weather? Yeah. I would point to some of the historical lessons that we've learned not too long ago. If we go back to, after the financial crisis, we had interest rates really, really low. And if we look at the difference between the black and white unemployment gap after the financial crisis, we see a really wide gap. But at the decade, after the subsequent decade, we see a reduction in that. The white unemployment rate goes to 3.2, the black unemployment goes down to 5.5. And the takeaway from that was that this tight labor market conditions disproportionately benefit minorities in terms of employment gains. These are the individuals who are gaining from an employment standpoint, the people at the lower end of the income distribution, minorities, et cetera, regaining because of this. Do you suppose it's worth letting the economy run a little bit hot to sort of narrow the racial unemployment gap and see what happens or is that just not something that you really like to do? Well, I think that would be a great idea. And maybe that would be something that I would try to convince the benefit of doing something like that. I'm sure I'll call you after it's people. The benefit of doing something like that because, you know, there are benefits of that, right? We can run the economy a little hot. And again, when we do that, employment gains go to those who are, you know, lower income or just, you know, disadvantaged, right, disadvantaged groups. And I think for that reason, if nothing else, we should, you know, consider that, especially if inflation is in check. Let me just on the way out here, Professor, touch on black women for a second because we've done work over the years and there's research that shows the black women are the bell weather in this labor force. They're the binding economic force in their families. They have a lot of the service sector jobs and this is, of course, a service sector economy. That really is where the Fed ought to be looking, no? I would agree. If we wanted to take a step further, you know, going beyond just looking at the black white unemployment gap or black unemployment, look at the intersectional burden of monetary policy. What impact does it have on black females? Because we know that they face different constraints that say other demographic groups where they're kind of hit with a double whammy being black, right, that adverse labor market conditions and then also being female. And like you said, there are stuck a lot of black women are in service sectors or employment sectors that are really sensitive to downturns. And so when the economy turns for the worst, well, those sectors are likely to get hit, which is to say that the adverse consequences from tighter monetary policy is likely to disproportionately affect black women. E.J. Umeh at Miami University, Professor, thanks for your time. So I appreciate it. Thank you. There was a report out from Gallup a couple of months ago that found one in four adult workers in this economy. That's about 23 million people are staying in jobs. They don't want because they're afraid of losing their health insurance. That's an 8% bump from just 2021. And it's also a setup for this next installment of our series, Clocked Out. My name is Sarah Wallace. I live in Rally, North Carolina. I am taking a break from a career in finance and I am 50 years old. So I left my job in April of 2026. It was my choice, it was, I mean, really, probably a two-year journey to sort of get to that point where I was not feeling as energized by the work as I had used to and you sort of struggled with, this is a good job. Until I really just realized that I had grown and changed and it just wasn't for me. I decided to take some time and just figure out more about what I am actually interested in. The one piece that felt a little more uncertain was the insurance and my husband hasn't always had a job that provides insurance and he started a job last year, a very good job where he does get insurance and even as we thought about the timing, I said, "I'm going to need you to keep this job, to keep the insurance while I take my time." And he's like, "Well, give me a few more months to make sure it's a really good fit and I'm very stable there at the job." And we found that, you know, with the unexpected cancer diagnosis for my husband, you know, if we didn't have his insurance, you know, it could be a devastating financial impact. One of the aspects of quitting my job that had sort of held me back was not wanting to appear weak or that I had given up and when I changed my perspective on that to, it's actually a real sign of strength to be able to say, "I'm done with this chapter, I'm ready to move on to another one and I know I don't have it figured out but I am confident that I will." It was a decision that I solely made for myself and it felt good. As I think about 2027 and potentially returning to work, you know, I think about my new definition of success, which is not tied to job titles and is not tied to an income level. I don't really know what that looks like. I don't have a timeline and I don't have a specific goal targeted yet. I like not knowing what's next. It seems a little scary, man. I don't know. Sarah Walla, she's in a rally in North Carolina. If you have a story about finding what is next for you, a new job or something else entirely, we'd love it if you'd tell us about it. Marketplace.org/Clockdown. At the same time, we really didn't know what we were doing. I mean, who does, you know? So, let's do the numbers. That one dust rolls up to 53 today, about a half percent, 51,521. The NASDAQ gained 122 points, 4 tenths percent, 27,599, S&P 500 picked up 44 points, about 6 tenths percent, 78 and 18, 16 years ago this very day, this is going to make you feel old, Instagram hit the Apple Store, the app ushered in the air of sharing pictures and now videos of lunches and pets and kids and everything in between, just two years later. Facebook, now Meta, bought Instagram for $1 billion, Meta today, down 4 tenths percent, Apple crept up 2 tenths of 1 percent, bonds up, yield on the 10 year, Tino down, 5.28 percent you're listening to Marketplace. This is Marketplace, I'm Kai Rizzo. One euro can be had today for about a buck 13. That's the weakest, the single currency's been in about a year and a half. There is of course always a whole lot of moving parts in the foreign exchange markets, but the approximate cause at the moment comes to us from the streets of France, where protests across the country have put the French economy between those mass protests and the bond market. France, as you might have heard, has a generous social safety net, a generous and not cheap social safety net. And as Marketplace's Samantha Fields reports, the borrowing math now just isn't mathing. For more than a decade, from the great recession through the pandemic, interest rates were historically low. Leading economists, people on Wall Street, at Central Banks, all thought interest rates would stay low forever. Kenneth Rogoff, a professor at Harvard and former Chief Economist at the International Monetary Fund, says governments thought so too, so they borrowed a lot. Not only that. They said, "Oh, and don't bother borrowing long-term." In other words, taking out a 30-year mortgage instead of a flexible rate mortgage, the flexible rate borrowing is cheaper, due short-term borrowing. Some countries did that more than others. He says, "Prance was one of them." Paul Christopher at Wells Fargo Investment Institute says, "Now it's coming time for France to refinance a lot of that debt, and interest rates are much higher." Imagine yourself at a mortgage situation you borrowed a 2.5%, but now you want to move and now the mortgage rate is 7%. Well, that's going to make a huge difference in your monthly payment. That's exactly what's happening in France and in other countries. And in France, it's happening at a time of political instability. Vejone du G, at George Mason University's Mercato Center, says, "Ahead of presidential elections next year." One guy is talking about erasing the debt and basically defaulting. And the other one wants to reverse the retirement age reform, to basically allow French people to retire at 60, which was a source of the financial problem of the country. All of this is making it better. investors nervous, she says, and less inclined to buy French bonds. It's not just that people aren't buying, they're selling off French government bonds. And they're selling euros, too, spooked by the turmoil. I'm Samantha Fields from Marketplace. Our series 'Clocked Out' is all about career changes, forced or otherwise, and retirement and life beyond work. All of that is tough for everybody. For professional athletes, that life after work thing can come real fast and often not by choice. One way or another though, they all find it way forward after that final whistle is blown. Jordan DeSalva is a former professional soccer player and now a co-founder of Neighborhood Sports Club in Oakland, California. Jordan, thanks for coming on the program. Thank you. I'm so excited. Well, me too. Well, look, I'm a soccer guy, but that's a whole different interview. Tell me about Neighborhood Sports Club. Easy. So, it really originated from not having a space or community after we were done with our careers, it's me, Dylan, my husband, and Max, our best friend, and we all played professionally. Me personally, I've had seven major knee surgeries and couldn't always play, but that didn't mean that I didn't want to or didn't want to be involved. And so, it was a way for us to create community ourselves. It was a way for us to get into design, get into apparel and everything that really encompasses the sport, but you might not always see or have access to when you're playing the sport. Right. So, tell me about the brick and mortar space and what it was like during the World Cup. Oh, yeah. That was crazy. I mean, since day one, which was May 2022, our goal was to be open for the World Cup, especially happening in the United States, and it was a struggle. It really was a hard, long process. We were young, of course, when we got into it, which was helpful because we were kind of naive and thought, oh, how hard is it to find a space where we can put a small side of soccer fields, a cafe, and a little retail space in one. Okay. You know what? It was going to be hard. You know. Should have called me because I could have told you that. I know exactly. And so, we really wanted it to be in Oakland specifically. The Oakland roots was so successful when being in Oakland, Dylan and Max both played for them. So, Oakland was really like this spot. And so, we leaned on a lot of our support systems. Like Flee were able to open May, 2026, and it was just nonstop for the past three months due to the World Cup, which was amazing. What's it like there on a game day, classically, right? I mean, what's the crowd like? So, during the World Cup specifically, it was chaos in the best way. A lot of people mentioned how it felt like they were watching it at their neighbor's house. They didn't want to give the classic sport bar vibe. I mean, the World Cup final, we had 500 people there. Everyone's sitting on the grass watching it on this big LED screen. It was very much so a community hub for Oakland and Bay Area residents that we had envisioned. And so, it was so fun to just see everyone get to experience it. 2027. Women's World Cup, yes? Yes. So excited. I, obviously, personally, am very excited about this. I think the NWSL and just Women's Soccer in general has really taken off the past year. And with the World Cup that just happened, I think all that excitement can just carry over to this next summer. And I think for our space too, we already have a Women's Only League. We already have a Women's Only Pickup that we get over 40 women out too. And so, being able to offer even more to them, just making sure it's accessible as possible at our space. I'm just really excited for them to experience and have that chance to see that community as well. Yeah, for sure. Jordan Salva, neighborhood sports club in Oakland. Jordan, thanks a lot. I appreciate you telling. Thank you so much. This final note on the way out today, which given where the markets are may or may not be a surprise and may or may not be welcome news to the broader public, the New York State Controller says he figures financial sector bonuses tied, of course, to bank profits are going to set a new record this year. On that note, next week we start getting third quarter earnings reports from those same big Wall Street banks. Jordan, Mangies, O'Neal, Maharaj, Janet Winne, Olga, Oxman, and Virginia K Smith are the digital team. I'm Kai, Rizdole, we will see you tomorrow, everybody. This is APM.