GDP grows more slowly than expected

This episode explores the slower than expected growth of the U.S. GDP in the first quarter, highlighting the economic elements influencing this trend.

1. U.S. GDP growth slowed to 1.6%, underperforming expectations.
2. Consumer spending continues to be strong, particularly in services, bolstering economic growth.
3. Business investment declined due to increased caution and economic uncertainty.
4. A significant trade deficit and persistent inflation present ongoing challenges.
5. Upcoming Federal Reserve meetings will be critical in addressing inflation concerns.

1: Introduction

Kimberly Adams sets the stage by introducing the slower GDP growth and its implications. Kimberly Adams: "GDP expanded at an inflation-adjusted rate of 1.6% in the first quarter."

2: Consumer Spending and Economic Outlook

Discussion on how consumer behavior is supporting the economy, with insights from economist Jennifer Lee. Jennifer Lee: "Strong wage growth is helping us keep up with inflation."

3: Business Investment and Sentiment

Insight into business leaders' reduced confidence and its impact on economic investments. John Lear: "Inflation proved stickier than we hoped early this year."

4: Trade and Inflation Challenges

Analysis of the trade deficit and inflation, with comments from economist Jason Furman. Jason Furman: "What depressed the GDP number was volatile categories that I don't expect to see continued."

5: Supply Chain Disruptions

Coverage of the effects of the Baltimore bridge collapse on shipping and supply chains. Captain Prasia Pranksien: "It's good because we stay here too long."

1. Diversify investments to mitigate risks associated with economic slowdowns.
2. Monitor inflation trends to adjust budgeting and spending.
3. Evaluate the stability of supply chains if your business depends on timely deliveries.
4. Keep abreast of Federal Reserve decisions to anticipate changes in interest rates.
5. Explore opportunities in sectors showing resilience, such as services.

Gross domestic product grew by 1.6% in the first quarter, slower than expected after the six-quarter steak of 2% growth or more. How will the Federal Reserve respond to this data when making its next interest rate decision? Also in this episode: The new deep-water channel helping cargo ships leave the Port of Baltimore, protecting trade secrets with noncompete agreements, and the struggling pneumatic tube business gets a boost from the cannabis industry.

People

Kimberly Adams, Jennifer Lee, John Lear, Jason Furman, Captain Prasia Pranksien

Companies

BMO Capital Markets, Morning Consult, Harvard

Books

None

Guest Name(s):

None

Content Warnings:

None

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If you believe your business can go anywhere, Puerto Rico is the place. Find out more@investpr.org. Marketplace. Again, that address is investpr.org marketplace. Growth is slowing.

Kimberly Adams
Ships are moving. Birds are migrating. So let's get going ourselves. From American Public media, this is Marketplace in Washington, DC. Im Kimberly Adams, in for Kai Rysdal.

Its Thursday, April 25 good to have you along. GDP gross domestic product is a measure of all the goods and services produced in the economy, and its generally used as a shorthand for sizing up economic growth. According to the Department of Commerce today, the US economy continued to grow between January and March, but at a slow clip than expected. GDP expanded at an inflation adjusted rate of 1.6% in the first quarter, snapping a six quarter streak of 2% growth or more. Marketplaces Savannah Marr explains, let's start with the good news.

Savannah Marr
Consumer spending, the force that's been buoying economic growth for months, still looked solid in this report. I don't everyone's getting tired of that r word, but, you know, I'd rather use resilience as the r word than recession. Economist Jennifer Lee with BMO Capital Markets says strong wage growth is helping us keep up with inflation. And while we bought a little less stuff in the first quarter, spending on services more than made up for it. People are still going out for dinner.

People are still staying at hotels. Now the bad news? Business leaders aren't feeling quite as confident. I think we have had a tumultuous quarter. John Lear with Morning Consult says inflation proved stickier than we hoped early this year, sending interest rate forecasts all over the place.

That creates some divergent expectations for businesses. And in turn, in business investment inventories. Shrunk in the first quarter, sometimes a sign of caution or uncertainty. The report also looked at trade. The country imported far more than it exported.

Savannah Marr
But Jason Fuhrman, an economist at Harvard, says those drags won't necessarily endure. What depressed the GDP number was volatile, categories that I don't expect to see continued. In other words, things like inventory and trade tend to jump around a lot. Consumer spending is more steady. But he does see one serious red flag in this report.

Core pce the Fed's favorite measure of inflation clocked in at 3.7% growth in the first quarter, higher than expected. And so that was a bad surprise here. That's the biggest news for the Fed. And a data point they'll be weighing ahead of next week's meeting. I'm Savannah Marr for marketplace.

Kimberly Adams
One thing that tends to help GDP is smooth supply chains, some of which have been disrupted due to the Baltimore bridge collapse last month. There have been eight cargo ships stuck in the port of Baltimore for more than four weeks now. They've been unable to move beyond the wreckage of the collapsed Francis Scott key bridge. Today, that finally changed. Salvage crews cleared a new channel through the waterway.

It's 35ft deep, which will allow several of those ships to move through it. Marketplaces Stephanie Hughes has more on what that means for the business of shipping and the crews of those ships, too. The shipment of aluminum that the cargo ship the Fatra Neri brought to Baltimore was unloaded weeks ago. The ship has a tie crew, and Captain Prasia Pranksien says they learned yesterday that they're finally scheduled to sail through the channel today. It's good because we stay here too long.

Savannah Marr
The crew's shore passes expired about a week ago. Since then, they've been confined to the ship, which they've spent a lot of time maintaining. Pranksyan says that the container ship Dali's collision with the bridge made him hyper aware of all the things that could go wrong. We have to know our ship and we have to emergency guess what to do. He doesn't know where the ship will go next.

He says the plan is to get through the channel safely, drop anchor and await instructions. But just getting these cargo ships moving is good for business. The fact that they're finally leaving, right, there's a large opportunity cost to having sat there the entire time. Christina di Pasquale is a professor at Johns Hopkins Business School. She says it's hard to know the total cost of the economy of the ships being stuck, but estimates it's at least $10 million for each one in terms of lost time, extended wages that are being paid, but also not being able to deliver those products or use that ship, other things that they had it planned for.

The ships leaving today is a big step for the port as well. Dipeshquale says. There's an emotional value in seeing this happen, of having a checklist. And as you continue to make progress, that's obviously going to keep, you know, keep spirits up on the fatera neri. Captain Prasad Prankstan says his bosses are ready for the ship to get moving.

He has a couple months left in his contract, then he plans to return to his home in Bangkok and take his family on vacation. Their favorite destination? The sea. But for sea, man, we used to the sea, yeah, but no problem. He says he doesn't plan to bring them to Baltimore, at least not anytime soon.

In Baltimore, I'm Stephanie Hughes for Marketplace Wall street. Today, traders didn't like that GDP report. We'll have the details when we do the numbers.

Kimberly Adams
Well, that was fast. Within a day of the Federal Trade Commission issuing its ban on non compete agreements, the US Chamber of Commerce and other business groups sued to block it. About one in five workers in the US are bound by a non compete clause, which typically means they can't work for an employer in the same industry or start their own competing business for a period of time. Now, companies often argue that they need these non competes to protect their trade secrets. But do they marketplaces Megan McCarty Corino.

Megan McCarty Corino
Reports what does a world without non competes look like? California, the state basically banned them back in the 18 hundreds, says Mark Laemley, a law professor at Stanford. You know, banning non competes doesn't mean people are free to do whatever they want. For instance, an engineer who worked on self driving cars at Google was found to have violated trade secret law by taking documents to found a competing company that was then bought by Uber. California law says we can't stop you from going to work for Uber, but we can absolutely stop you from taking the secrets with you.

All states have some form of trade secret protection, and there's been a federal law on the book since 2016. But in order to qualify as a trade secret, the information has to be actually valuable and secret, like the closely guarded blend of eleven herbs and spices in KFCS fried chicken, says Doug Braley, an employment attorney in Boston. Its not even something that every single employee has access to, right? Its probably in some vault somewhere or its behind a bunch of passwords. For less tasty ip, Braley says, companies can turn to the other nons, non disclosure and non solicitation agreements, which bar employees from taking confidential information, clients or staff when they leave.

There's still a lot of arrows in the quiver for employers that want to protect the real important things about their business. Tory Summie, an employment attorney in Charlotte, North Carolina, says he's already advising clients to move away from non compete agreements and towards policies that more directly address what employees can and can't do with company secrets. That means more onboarding sessions, bigger employee handbooks and tighter cyber and physical security. I'm Megan McCarty, Corino for marketplace.

Kimberly Adams
Over the past few decades, ATM's and online accounts have just about killed the drive thru window at the bank. And that's been bad for the companies that sell pneumatic tubes. You know, with the canisters, you put your check and deposit slip in, and then they get whisked away by air pressure. But there is a new market for pneumatic tubes, and it's green, as in cannabis. Matthew Algio has the story.

There's a scene in Elf where Buddy discovers the wonders of the mailroom's pneumatic tube and gets his head sucked onto it. That is marvelous how that. Oh, it's very sucky. It's very sucky. Elf might be a fairy tale, but once upon a time, pneumatic tubes really were a big deal.

Savannah Marr
The golden age of pneumatic tubes was the late 19th into the early 20th century. Holly Cruz is a communications professor at Rogers State University in Oklahoma, and she studies obsolete technologies. Back then, she says, major cities like New York, Philadelphia, and Washington, DC had miles of underground pneumatic tubes. Pneumatic tube infrastructure was a way to quickly transport messages, both the mail and telegraph messages, in urban areas, bypassing the slow traffic on the streets. In 1900, Postmaster General Charles Emory Smith said it wouldn't be surprising to see, quote, the extension of the pneumatic tube system to every house.

Alas, modern improvements like the telephone and highways killed that idea. But the tubes are still used in hospitals for moving medications and specimens. And in recent years, another industry has led to a bump in sales. Cannabis dispensaries business changes, but a lot stays the same. You know, there's always some sort of physical product that needs to be transported, and that's what pneumatic tubes does.

Matthew Kelly is a sales rep for his family's company, Kelly Systems, which has been in the pneumatic tube business since 1904. He says the systems are becoming common in cannabis dispensaries. To move the product from their vault to the retail floor is a very controlled and policed system in the dispensaries. And, you know, you can either have somebody doing that or, you know, a system like this where it can't be interrupted or tampered with. Also, pneumatic tubes are just kind of fun.

And then we'll recall the canister super fast. I love it. In Riverside, New Jersey, Scott Rutter demonstrates the pneumatic tube system at his Cannabis dispensary township green. It's in an old bank and customers can pick up their pot without getting out of the car. They order ahead online, pull up to the drive thru, and send their id through the tube.

Once we, we get their stuff, we get their order together, we then send it back in.

There's a cool factor. Totally cool. It's totally cool. And that's what it is. It's a cool factor.

Particularly those of us who are old enough to really enjoy pneumatic tubes. Like that whole experience. Our entire lives, it's only been cash and checks from sitting in the backseat of your mom's car, and then you're doing it as an adult, and then all of a sudden it's weed. Now. Rutter says it's not how he expected to be using pneumatic tubes in 2024.

So is this the beginning of their second golden age? Probably not. But in many cities, the tubes are still underground, so you never know. Take note. However, in Washington, DC, the exact location of the pneumatic tube network is classified.

I'm Matthew Algeo for marketplace.

Kimberly Adams
Coming up, there aren't a lot of. Places to try binoculars before you buy them. Bird watching problems. But first, let's do the numbers. Yeah, saw that one coming.

The Dow Jones industrial average shed 375 points, almost 1%, to land at 38,085. The Nasdaq shed 100 points, two thirds percent to close at 15,611. And the S and P 500 lost 23 points to end at 50 48. Meta dropped more than 10% on concerns over its rising costs. The company plans to spend up to $10 billion on AI infrastructure, which it says may take some time to generate revenue.

Amazon dipped one and two thirds percent. Alphabet slid 2%. Microsoft was off 2.5%. Construction equipment maker Caterpillar fell 7% after posting first quarter revenue that fell short of analysts expectations and issuing disappointing second quarter guidance. John Deere was off a 10th of a percent.

Bonds fell. The yield on the ten year t note rose to 4.70%. You are listening to marketplace.

With access to so much information, it's hard to feel like an informed, discerning citizen. That's why on make me smart, which is a podcast from Marketplace, we make it easy for you to stay in the know. Hi, I'm Kai Risdahl. Every weekday, Kimberly Adams and I unpack the latest from Washington, DC, the Senate. Minority leader has announced that he will step down as the republican leader.

What's happening in AI? I mean, don't buy at the top, but holy cow, artificial intelligence and all the companies related to it are the hot new thing, and we do the numbers. So as a refresher, inflation is the rate of increase in the prices of things. It's not just sort of things getting more expensive, it's a speed at which things get more expensive, because in a. World that's constantly changing, we all need to stay smart.

Listen to make me smart wherever you get your podcasts.

Kimberly Adams
This is Marketplace. I'm Kimberly Adams. In their earnings report out this week, General Motors reported a significant increase in profits for the first three months of the year, citing robust sales of gas powered cars as a main reason for the bump. But it's not all good news for GM these days. The New York Times broke a story last month about how GM was collecting data on drivers behaviors, mostly unbeknownst to the drivers themselves.

Kashmir Hill was the reporter on the story and recently found out she was among the car owners being tracked. Kashmir was last with us a few months ago to talk about facial recognition software and tracking. Welcome back to the program. I wish I could say it's good to be back, but it's not really because of what I'm here to talk about. Yeah.

So back in March, you broke the story of GM sharing consumers driving habits with insurance companies. So can you give us some background on what you found back then? Yes. So I found that automakers were collecting information from people's cars about how they drove, including, you know, how many miles they were driving when they were braking too hard, accelerating rapidly, and they were sharing it with risk profiling companies, including LexisNexis, who were then sharing it with insurance companies. And it was affecting what people were paying for insurance.

And is GM the only company doing this? Other companies were doing it, but essentially, I discovered the story because I saw people on online car forums who had cars made by GM, and their insurance rates went up. They asked their insurers why, and their insurers said, check your LexisNexis report. And when they did, they would find hundreds of pages of records of every trip that they had taken in their cars, and they just had no idea that that data was being collected by GM. And only recently, you found out that you were among the drivers being tracked yourself.

How did you get caught up in this? Yeah. So while I was reporting the story, I was very aware of the fact that I had a Car made by GM. And so I had checked to see if this was happening to us. I had requested my LexisNexis Report.

Savannah Marr
It did not have driving Data on it. But then after the Story came out, my husband requested his Lexis NeXus report. And when it came, it had all of our driving Data. All of the data was just going on to his Report BeCause the dealership listed him as the primary Owner of the Car. And you definitely don't recall consenting to share this Data?

No. And I was shocked. But at the same time, this is what drivers of GM vehicles have been telling me. They said, I don't know how I signed up for this. I don't understand why it's happening to me.

And so this was a Unique opportunity for me to report out my own consumer experience and find out, you know, when had we signed up for this? How had we signed up for this? And so that's what I did. It started with a phone call to our salesman asking him about this. And when you spoke to the salesman and then later GM, the company itself, what did they have to say about how this happened?

So what I found out is that there was a screen that car buyers are supposed to be shown at the dealership. It's part of enrolling for OnStar, which is the connected services for GM cars. My husband and I do not recall seeing the screen. And my salesman told me, you know, I just sign people up for OnStar myself, and I always hit yes on that screen. He didn't realize it was going to sign us up for all of our driving data being shared with data brokers.

I went to the dealership and asked about that. A more senior salesman said, hey, we always show these screens to customers, and they're the ones who say yes. And this is what GM said should happen as well. But even if you had seen this screen, it just didn't say anything about risk profiling companies or this being shared with insurance companies. It just was not disclosed.

GM has, as of last month, stopped sharing this data with the data brokers. And they told me right before I published this story, actually, that they're getting rid of the smart driver program entirely and unenrolling the many millions of people who are currently part of it. So then what lessons do you think people should take from this experience about connected cars in general? I mean, one reason I've been doing these stories, I do want people to understand that their cars are connected. I don't think a lot of people realize how many sensors are in their car.

You know, increasingly, cameras. There's a sensor in the seats that detects how much you weigh. There's just so many data collectors in the car now, and that is being sent back to automakers. And then, you know, I think this is a conversation that we need to have as a society. You know, what should the automakers be allowed to do with that data?

There are really good reasons for them to have it. They can see when there's something going wrong with the vehicle. They can send you a recall notice, for example. But they're also exploring selling this data. And this can be quite personal.

This is when you drive your car, where you drive your car. One of the advocates I talked to said, you know, that should be your data. It shouldn't belong to the automakers, and they shouldn't be allowed to sell it. Kashmir Hill is a tech reporter at the New York Times and the owner of a mildly creepy car, it seems. Thanks so much.

Thank you.

Kimberly Adams
And now birds. A third of all migratory birds destined for the US move through the state of Texas each spring, making the state a hotspot for bird watchers from all over the US and beyond. When migration is in full swing during April, many birds stop along the Texas Gulf coast, where enthusiasts can identify species of migrating warblers and nesting waterfowl. As bird watching grows in the US, so does spending. And local hotels, restaurants, and gas stations stand to benefit marketplaces.

Elizabeth Troval has this one on the economic impact of birders.

Savannah Marr
About 80 miles southeast of Houston, in the small unincorporated community of High island along the Bolivar peninsula, local birder Winnie Burkett takes me on a tour of the Boy Scout woods sanctuary. You hear it? It's a blue headed vireo. It's probably just come in. We haven't had any reported this morning.

This is about the time of day birds start to come in. It's midday at this Audubon owned bird sanctuary, one of four in High island. Birds come to rest and eat here after they fly across the Gulf of Mexico from the Yucatan Peninsula. And that's why birdwatchers come, because this can be a place that you can see all the eastern warblers, and you can see painted buntings and indigo buntings, and you can see tanagers and orioles. Today was slow at the Boy Scout woods sanctuary because of wind conditions.

Still, by noon, some 120 odd people bought day passes. She reads where some people traveled from in the guestbook. College Station, California. South Carolina. Los Angeles.

Olympia. The US Fish and Wildlife Service estimates some 43 million people traveled to birdwatch in 2022, up from 18 million in 2011. In that same time, spending on wildlife watching, which is a lot of birding, nearly quintupled to $250 billion. And that spending plays out in communities across the country from the middle of the march, I see birders around. I reach Priya Fernandez at the High island mart gas station.

She says. Hungry birders help pick up business before summer high season, buying chips and sandwiches. She can spot the birders by their distinctive markings. You know how they dress, right? They're mostly like in the khaki pants and tops and their hats on, and they come mostly by the bug sprays.

And birders don't just need snacks, beer and bug spray, they also need gear. There aren't a lot of places to try binoculars before you buy them. I catch up with Chris Heisinger at the Smith Oaks Bird Sanctuary, also in High island. He sells binoculars here during spring migration. As part of his Houston based business, land, sea and sky, he scoped out birders as a target market when he bought the business.

We really went after a lot of the bird festivals. So whereas in 2017 or 2016 we were only going to one festival each year in Texas, now we go to, I think, seven festivals in Texas. He says birding gear went from roughly 10% of his business to 50%. Also at this sanctuary is birder Judy Dobler. She especially loves the rookery where all the big birds, the egrets, the spoonbills, cormorants, everything big is nesting there.

Savannah Marr
So you can see them all easily and see the birds turning their eggs and the egrets hatching. It's just cool. She's traveled to High island in her rv and is from Spokane, Washington. I came here as a tourist last year, and this year I'm here for the month of April as a volunteer. For some, birding is not simply a hobby, but a way of life.

In High Island, Texas, I'm Elizabeth Trovall for Marketplace.

Kimberly Adams
Final note on the way out today, Southwest released its quarterly earnings this morning with worse than expected losses and a cut to its growth forecast. But perhaps in a bigger move for the company, CEO Bob Jordan said in an interview today with CNBC that the company is considering moving away from its famous open seating policy, saying Southwest is looking into new initiatives in the way it seats and boards its planes. One thing Jordan says the airline is not considering is starting to charge for those first two checked bags. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher and Stephanie Siek are the marketplace editing staff. Amir Babawi is the managing editor.

And I'm Kimberly Adams. We'll see you tomorrow, everybody.

This is APM. With access to so much information, it's hard to feel like an informed, discerning citizen. That's why on make me smart, which is a podcast from Marketplace. We make it easy for you to stay in the know. Hi, I'm Kai Risdahl.

Every weekday, Kimberly Adams and I unpack the latest from Washington, DC. The Senate minority leader has announced that he will step down as the republican leader. What's happening in AI? I mean, don't buy at the top, but holy cow. Artificial intelligence and all the companies related to it are the hot new thing.

And we do the numbers so as a refresher. Inflation is the rate of increase in the prices of things. It's not just sort of things getting more expensive, speed at which things get more expensive, because in a world that's. Constantly changing, we all need to stay smart. Listen to make me smart.

Wherever you get your podcasts.