Nike's not just doing it

Marketplace

This episode of Marketplace examines a complex U.S. economic landscape marked by sluggish job growth, persistent inflation, and shifting consumer

Key takeaways

• U.S. job growth slowed to 29,000 new positions with unemployment at 4.2%, prompting executives to prioritize AI-driven productivity over hiring.
• Core PCE inflation remains sticky at 3%, with real wages failing to keep pace as consumers increasingly trade down to cheaper store brands like those from Procter & Gamble.

Main topics

• U.S. labor market and wage stagnation
• Inflation and Federal Reserve policy

Notable quotes

The shift of balance has really shifted to employers.

Conclusion

Listeners gain a clear picture of an economy in transition, where traditional growth

Transcript preview

Speaker 2 (0:01) All right, you know what? This week, we got a pretty good picture of where this economy stands. From American Public Media, this is Marketplace. Speaker 2 (0:19) In Los Angeles, I'm Kyle Rizdahl. It is Friday, Friday, Friday. Today, this one is the second of October, as it always is, to have you along, everybody. All right, we got jobs, we got inflation, we got GDP, and we got six and one half minutes to make it all make sense. And the people who have to do it are Jordan Holman at New York Times and Sajid Bredy at MSNOW. Hey, you two. Hey, Kai. Hey, Kai. Jordan, I'm going to give you three numbers. You get to pick which one you want to talk about. Jobs today, 29,000 new jobs, unemployment rate at 4.2%. We got PCE this week at 3%. That's inflation at the core level. And we got gross domestic product at 2.2 % in the second quarter. Which of those would you like to tackle first? Speaker 4 (1:01) The jobs number, because I feel like you cannot look away from that number coming in so low. So I spend my time talking to executives and it's almost been a bit frustrating when I'll lay out data points and say there is. a frustration among workers or Americans about the economy and the point to all the other things. But I feel like with these numbers, it kind of speaks to the fact that, sure, maybe we're not seeing mass layoffs, but there is something happening where a lot of companies are just not hiring. And then also that. It impacts the way people are thinking about staying in their roles, promotions, all of that. So what's really clear from this number is something that's been happening for a while is that the shift of balance has really shifted to employers. And at the same time, going to some of the other numbers you threw out, wages aren't growing. Speaker 2 (1:51) So Speaker 4 (1:52) people are facing higher prices and it just makes for a very difficult economic picture. Speaker 2 (1:57) Absolutely. So, Sudeep, higher prices, you get to tackle that inflation number, PCE, at 3%. Not terrible, but not going the right way, you know? Yeah, Speaker 5 (2:07) look, on all of this stuff, the GDP numbers, we're not booming. Job growth. Not great, but it's been not disastrous for a while. Unemployment rates basically been relatively stable for years at this point. But it's always inflation, inflation, inflation. It is the thing that has everyone feeling so crummy. It is the thing that is on all of our minds. Obviously, the gas pump and what's happening with the war is driving a lot of that concern. But there are other factors as well. And just under all of this is just... Speaker 5 (2:44) displeasure and worry about what's happening with AI, what are the forces that are going to drag down the power of labor and the power to actually bid up your wages. And that is the reason why everyone's so unsettled in this moment. Speaker 2 (3:00) Yeah. Jordan, say more about what we have now come to call the low hire, low fire job market. And when you talk to CEOs and you You sort of bring that up in the labor market and wages. What do they say? I mean, do they get it? Do they understand why consumers are so cranky? Speaker 4 (3:16) Yeah, I mean, I think at any level, a leader has to say that they understand that in that kind of dynamic, it's not fun. But with the low hire, low fire, like it's clear that a lot of companies, they might say they overhired or they just have enough people from the pandemic. And then like Sadiq was saying, we have AI, which clearly is taking a rate task that people are doing. So the calculation that executives are making is. we can get as much productivity as we can, maybe more, and not have to hire more people to get that productivity at a time when they're also facing higher costs. And so they're just trying to find margin. So that's the scenario that's happening right now. So it's not that they're saying we're going to do mass layoffs, even though you have seen some from the tech world, that's really still in the tech world. But overall, a lot of companies are saying, Leave the workers we have, but we're definitely going to be using AI and getting that in their hands so we can make more money. I Speaker 2 (4:20) was down in New Orleans in the last week doing some events, and every single event I did, AI came up as a big, big deal. Sadiq, let us transfer our attention now to one Kevin Warsh and the gang at the Federal Open Market Committee. Today's jobs numbers do nothing to change sort of the rate hike expectations, right? Speaker 5 (4:40) There will still be that continued expectation of a hike again this year. The big question now is whether the Fed actually needs to go through with this at the end of the month, days before the election. There are some other Fed officials in the top of the Fed who have suggested, well, maybe we don't need to do it right now. And the weak jobs numbers just shows that there's not going to be pressure from the labor market. A tightening labor market would actually. would create that problem for the Fed. So now they all recognize that they've got a problem. They've been way off on inflation and meeting the Fed's 2 % target for many years now. And they obviously need to get ahead of this problem, but they can keep. the expectations in place that there will be another hike by the end of the year without going crazy right now and ramping it up, which is probably a more comfortable place to be than they thought a few weeks ago. There's still, of course, in almost two weeks, another inflation report that could force their hand if it gets bad. Speaker 2 (5:49) Right. Could change things. Jordan, can we get back to wages for one second? Because you properly brought them up, but we did kind of blow by it. Real wages are not keeping up with inflation, full stop. Speaker 4 (6:01) Yeah, prices. Yes, and prices have been