Playing an economic guessing game

This episode of "Marketplace" focuses on current economic trends and consumer behavior, particularly in the context of retail spending and the challenges facing sectors like the electric vehicle industry.

1. Consumer spending is a major driver of the U.S. economy, influencing various sectors.
2. The shift towards online shopping is accelerating, affecting traditional retail stores.
3. The electric vehicle market is facing challenges such as high prices and inadequate public charging infrastructure.
4. Economic factors play a significant role in political strategies and election forecasting.
5. The current economic landscape is complex, with high interest rates impacting multiple areas of consumer behavior.

1: Introduction to Economic Trends

Kyle Rizdal emphasizes the critical role of consumer spending in the economy, noting recent increases in retail sales. Kyle Rizdal: "Spending by or on behalf of consumers is responsible for something near 70% of everything that happens in this economy."

2: Shifts in Consumer Spending Patterns

Discussion on how consumer preferences are shifting towards online shopping, with insights from industry experts on spending trends. Samantha Fields: "Spending at non-store retailers think Amazon rose 2.7% more than any other category."

3: Challenges in the Electric Vehicle Market

Exploration of Tesla's current struggles, including workforce cuts and competitive pressures in the electric vehicle sector. Sabri Benoshore: "Tesla's the company said this morning it's cutting 10% of its global workforce in the face of softer demand and more intense competition."

4: Economic Impacts on Political Forecasting

Analysis of how economic conditions influence political strategies and the challenges of election forecasting in a polarized climate. Kimberly Adams: "But over time, instead of, you know, growth of the economy, GDP, unemployment, things like that being highly predictive, the main predictor became polarization."

• Monitor economic indicators like consumer spending and retail sales to make informed investment decisions.
• Consider the increasing significance of e-commerce and adapt business strategies accordingly.
• Evaluate the potential of hybrid vehicles as a transitional technology towards full electrification.
• Stay informed on political and economic trends that could impact business and personal finance.
• Leverage technology to optimize business operations, such as predictive scheduling to improve employee satisfaction and retention.

The economy has historically been a major factor in election forecasting. But right now, the economy is kinda all over the place. In this episode, how some experts are adjusting their models to account for increased polarization and others are throwing in the towel. Plus, more guessing games: Will BYD crush Tesla? Should firms make big deals before inflation cools? And wait — when am I scheduled to work?

People

Kyle Rizdal, Samantha Fields, Sabri Benoshore, Kimberly Adams

Companies

Tesla, Amazon, National Retail Federation, Mercatus Center at George Mason University

Books

None

Guest Name(s):

None

Content Warnings:

None

Kyle Rizdal
Hey, marketplace listeners. You know, around here we like to think you're never too young to learn about the economy and financial basics. That's why we're bringing the million bazillion live tour to schools to teach important lessons about budgeting, investing, saving and more. It's all the fun of the podcast, but now live, immersive and interactive. Special thanks to our tour partner, Greenlight, the debit card and money app for kids and teens.

Learn more about greenlight@greenlight.com. Million. That is greenlight.com million on the program today. You a certain electric car that shall not be named and it's the economy, stupid, or is it? From american public media, this is marketplace in Los Angeles.

I'm Kyle Rizdal. It is Monday today, the 15 April. Good as always to have you along, everybody. I think it's probably been a while since I've said this, and it's especially relevant today. So here goes.

Spending by or on behalf of consumers is responsible for something near 70% of everything that happens in this economy, and one disregards it at one's peril. So we won't. And in fact, we'll begin today with the most recent data point in the macroeconomic constellation, retail sales. They were up in March from February, 7 tenths of 1%, much higher than had been expected. And actually February's numbers were revised upward as well.

So well done out there, everybody. All of that spending is happening, we should say, despite still elevated prices. But it does look a little bit different now than it has the past couple of years. Marketplace's Samantha Fields gets us going. A lot of people bought stuff on the Internet last month.

Samantha Fields
Spending at non store retailers think Amazon rose 2.7% more than any other category. People are spending less in department stores and more online. Christine McDaniel at the Mercadus center at George Mason University says while that's not exactly a new trend, the increase is notable. It just shows you how much Americans rely on e commerce in addition to. All that online shopping.

Gregory dacko at EY says people did go out and spend money in person last month. They were also spending freely at restaurants and bars and in general merchandise stores. They were also spending a little bit more at gasoline stations, though, he says. Part of that was gas prices were higher. At the same time, they were exercising a little bit more caution when it comes to spending on electronics, clothing and sporting goods.

Spending in all three of those categories dropped in March. Jack Kleinhens at the National Retail Federation says people also spent less on stuff for their homes, another trend that's persisting. For many months, almost a couple years now, we haven't seen any strength in furniture and home furnishings. There's been mixed data on electronics and appliance stores and even, to a certain extent, building material and garden supplies. Some of that is because people bought a lot of furniture and appliances early in the pandemic.

And he says some of it is because interest rates and mortgage rates are high. These high interest rates have really prohibited people from buying homes and things that go in them. But Kleinhen says even though people have pulled back in some places, overall consumer spending remains strong. I'm Samantha Fields for Marketplace. You know what people aren't buying as much of as they used to that certain electric car.

Kyle Rizdal
Tesla's the company said this morning it's cutting 10% of its global workforce in the face of softer demand and more intense competition. Marketplace Sabri Benoshore has that one. Last year, Tesla had to resort to steep price cuts to stimulate sales. It hasn't quite worked. These are some dark days for Tesla.

Sabri Benoshore
Dan Ives is managing director at Wedbush securities. Growth has slowed globally for Tesla, its deliveries declined eight and a half percent in the first quarter, the first decline in four years. This has gone from a Cinderella ride to a bit of a horror show in the near term. There are a few things behind it. Too many electric cars and not enough buyers.

Mike Ramsey is a VP analyst at Gartner Electric. Vehicle sales are still growing in the US, but they are slowing down. The availability of public charging in the US is still not really what it needs to be to give most people confidence to switch over to EV's. People are buying more hybrids. Sales increased 50% this year.

Interest rates are high, and EV's are still more expensive than regular cars here in the US. And Tesla has a price problem globally, says Seth Goldstein, an equity strategist at Morningstar Research Services. Tesla does not sell any affordable vehicles. Competitors in China do. Lots of them.

Dan Ives
Competitors who do are still seeing faster growth rates largely in the affordable vehicle market, whereas Tesla is somewhat limited to the luxury market, which is growing slower because it's more saturated. Tesla can still salvage the budget electric vehicle niche in the US and Europe, Goldstein says. There's still generally a lack of a lot of affordable vehicle options that also have the adequate range. So I think they are not late in those markets. But Tesla's competitors in China are eyeing those markets, too.

Sabri Benoshore
In New York, I'm Sabri Ben ashore for marketplace. Tesla shares off six and a half percent today, down 34% year to date, widening our field of view just a bit. The three major indices down as well. Geopolitics. If you're looking for a one word answer, we'll have the details.

Kyle Rizdal
When we do the numbers.

Nobody, repeat, nobody should feel sorry for the big Wall street banks. They are still making billions of dollars at a pop. See also quarterly profit reports late last week and this morning from Goldman Sachs, JP Morgan and others. That said, they are dealing with persistently higher interest rates and a bewildering economic outlook. They are feeling some stress as a result of consumer and business stresses as well, riskier loans, for instance.

But they do. Those big banks have other lines of business that have been doing pretty well, including as marketplaces. Justin Ho reports. Good old fashioned investment banking. If a corporation wants to raise a bunch of money by selling stock or issuing bonds, it might call up someone like Drew Pascarella.

Dan Ives
I spent ten years as an investment banker at Citi covering the technology, media and telecom sector. Pascarella now teaches finance at Cornell University. He says investment bankers help companies find buyers for those stocks and bonds. They also help companies purchase other companies or get purchased. So there's lots of different flavors.

But an investment bank would help a company think through those merger and acquisition transactions and help them actually affect those transactions in the market. And they charge their clients fees for doing all that. But up until the end of last year, investment bankers phones were pretty quiet. Steve Baker, a bank analyst at Argus Research, says last year, corporations were kind of nervous about doing deals because when the economy is uncertain, you pull back. And you say, I don't want to do any expansions.

Sabri Benoshore
Maybe now is not the time. I want to see how this, you know, everything shakes out in the economy and, you know, do we're going to get the soft landing and so forth. Companies are also facing higher interest rates and greater regulatory scrutiny. But Christina Sauder, a law professor at Southern Methodist University, says by now companies have gotten used to those challenges, and. Since they're getting used to it, they're more inclined to do deals when they feel like they should or must do deals.

Mike Ramsey
This morning, Goldman Sachs reported that investment banking revenue was up 32% last quarter compared to the same time a year ago. Gerard Cassidy, a bank analyst at RBC Capital Market, says it helps that the economy this year is a lot more certain than it was in 2023. So corporate deal makers and investment bankers are likely to stay busy. More companies are in the pipeline to go public. More mergers and acquisitions are likely to take place this year, which also will drive investment banking fees put another way.

If investment bankers are getting a lot of calls, Cassidy says, the economy is probably looking pretty good. I'm Justin Ho for marketplace.

Kyle Rizdal
Political consultants, polling strategists of all persuasions, and candidates themselves spend untold amounts of time and energy wondering how to shape voters perceptions of the economy. Actually, the amount is told hundreds of millions of dollars get spent every cycle on economic messaging. There is a reason it's the economy. Stupid is an enduring political slogan. But the reality is that how much the economy really matters in any given election isn't as clear as it used to be.

Marketplace Kimberly Adams has that one. There are basically two main ways to try to predict the outcome of an election before any votes are cast, says Michael Lewis Beck, who teaches political science at the University of Iowa. One is using the polls, a vote intention that's the most popular one that's in the media all the time. New CNN polling out this morning with. A fresh look at what voters are.

Thinking in a new national NBC News poll. New national polling finds President Joe Biden and Donald Trump tied in November. The other one is models, which are statistical models which heavily emphasize the economy. Over his career, Lewis Beck has written hundreds of books and articles on election forecasting, and with his colleagues developed a forecasting model that's been right 15 out of the last 18 presidential elections. There's a lot of math, but suffice it to say the model uses a mix of data, including how fast the economy is growing and how popular the incumbent president is.

Seth Goldstein
And there are plenty of other ways of building models, most of which include polling. Sabato's crystal ball at the University of Virginia center for Politics. According to Moody's election model, a new. Analysis from the Cook Political Report takes a look. Getting harder for polls to accurately capture a picture of public opinion?

Answer your phone's people. Many experts in the field say forecasting has been getting a lot harder as well, but for different reasons. Prior to the age of polarization, if you map out the incumbent party's vote share with performance indicators of the economy, you get a very reliable forecast model. Rachel Biddecofer is a political scientist and democratic political strategist. But over time, instead of, you know, growth of the economy, GDP, unemployment, things like that being highly predictive, the main predictor became polarization.

People's opinions of the economy have always depended to some extent on whether their party is in power. And as people entrench deeper into their. Party affiliation, these sorts of forecasting models that incorporate measures of economic conditions are just not working very well anymore. Alan Abramowicz is a professor emeritus of political science at Emory University and says there's another reason forecasting is harder these days. These detailed mathematical models can be good at predicting national popular vote, but what.

Dan Ives
Ultimately matters, of course, is the electoral vote. And the electoral vote hinges on the outcomes in a handful of closely contested states. Well, that's very difficult to predict. And since that math is not really mathing when it comes to the electoral college this cycle, for the first time in his decades long career, Abramowicz isn't even going to bother trying to put together a forecasting model. I know that the enterprise continues.

People will continue to do this, but I'd rather leave it to others to try to figure out how to do this. And I think a lot of us who've been in this game for a long time probably feel the same way right now. Others still have hope for predictive models. Michael Lewis Beck at the University of Iowa says you can build them to control for increasing polarization. He also says right now it's too early.

Seth Goldstein
Most people won't start thinking about the economy or how it plays into the presidential race for a few months. At the end of the day, the elections in this millennium, after party identification, the most important thing for voters is how they perceive the economy. That has happened every time. So he says we shouldn't write off the role of the economy just yet. We'll only know for sure come November.

In Washington, I'm Kimberly Adams for marketplace.

Kimberly Adams
Coming up, when you go in person, it's definitely more about the thrill of the hunt. I mean, who doesn't like a good thrift store find, am I right? First, though, let's do the numbers. Dow industrials down 248 today. Six tenths percent 37,735 gets worse from their gang.

Kyle Rizdal
The Nasdaq down 290 points, one and eight tenths percent, 15,000 to 885. The S and P 500 fell 61 points. That is one in 210 percent. 5061 we heard from Samantha fields about retail spending and what it looks like these days, chunk of it online, she said. So in related stocks, Alibaba Group holding lost nine tenths percent.

Amazon down 1.3%, Etsy down about a half percent or so. Heard from Sabri about Tesla. So some other EV stocks rivian sputtered 8% today. I don't think EV's sputter actually. Lucid Group down two and four tenths of 1% today.

Peloton removed an unlimited free membership tier on its app less than a year after introducing it. Too much fanfare the plane was apparently not convincing new users to turn into paid subscribers. Peloton Interactive slumped seven and three tenths percent today. Trump Media and Technology group announced 21.5 million additional shares for sale, a full 15% more stock than was already available. That's called dilution or devaluation.

Shares of the company traded as DJT, which is not, repeat, not. The Dow Jones transports down 18.3% today. You're listening to Marketplace.

Samantha Fields
Hey there. I'm Bridget, co host of million Bazillion Marketplaces podcast for kids about money. I want to tell you about our email newsletter course, million Bazillion Academy. In this new and improved course, we'll help your kids learn about crypto, credit cards and inflation in just six weeks. Each lesson comes with a podcast episode, a fun cartoon, discussion, questions and an activity that lets kids apply what theyre learning in the real world.

Kimberly Adams
You can start at any time and work at your own pace. Sign up today@marketplace.org. Academy.

Kyle Rizdal
This is Marketplace. Im Kai Rysdal. There is something to be said. Theres a lot to be said, actually, about predictability in this economy. We want it in our supply chains, we want it in our regulations and policies, and we want it in our jobs.

If you've ever done hourly shift work, as is the case in much of the service sector, you know that companies often set work schedules without giving much advance notice. How's tomorrow that good for you? That kind of thing. But there are changes happening where businesses are moving to what's called predictive scheduling because they are legally required to get schedules out earlier or because they have realized it would be good for business marketplaces. Stephanie Hughes has that one.

Christine McDaniel
When Adam Orman was bartending, he used to find out from his boss on Sunday if hed be working on Monday. Yeah, its the worst. I did not have kids, but I wanted to have a life. Now Ormans the boss, he owns two restaurants in Austin. He does have kids and tries to get schedules out a month in advance.

Gregory dacko
Predictive scheduling is one of the things that I think is probably most appreciated by the team and doesn't cost us a penny. At one of Orman's restaurants, an italian spot called Locadoro, manager Mallory Valentine is getting ready for the dinner rush. Awesome. Thank you so much. That might be her.

Christine McDaniel
Valentine says knowing when she's working helps her plan her custody schedule for her kids. It also helps her be mentally prepared. For work so that I can be there for my staff, so that I can be there for my coworkers, so that I can not, you know, bring a chaotic energy into the workplace with me. But it can be hard to stay on top of this kind of scheduling. It's been busy here.

Locadoro just opened a sister restaurant, and the schedule for the kitchen staff slid to coming out just two weeks in advance. Still, that's better than average for the. Service industry, so it's really the norm to provide shorter notice. Kristen Harknett is co director of the Shift Project, which collects data on hourly workers. Her research on hourly employees, including those at large fast food and restaurant chains in the US, finds that two thirds of them get less than two weeks notice, and a majority say their schedules often change at the last minute.

Kimberly Adams
Your shift might be canceled or you might be asked to stay late. So things do shift around a lot. Harknett points out that one state, Oregon, and a handful of cities now have laws requiring some employers hand out their schedules at least two weeks in advance. She studied the effects of this in Seattle and found workers there reported improvements in sleep, economic security, and overall level of happiness. And that means employees are more loyal.

They're less likely to say that they're looking for a new job, and turnover is very costly for businesses. So if it helps the bottom line, why do so many employers in the service sector keep their workers in suspense? It's a bad habit. You know, it's a business culture where there's been this single minded focus on minimizing labor costs. Harknett says one possible solution is technology.

Christine McDaniel
John Waldman leads home base, a payroll and scheduling app. He found one challenge was restaurants were creating the schedule from scratch each time. So his company provided different templates, even. For weeks that were different templates helped a lot. Instead of being like, oh, I'm building a new schedule every week, it's like, well, we really have like three variables, variations of the schedule.

So they can pop in the Valentine's days, on a Tuesday schedule, or the it's Memorial Day and everybody will be out of town schedule. Back at Locadoro in Austin, Ida Mormon says it's also a matter of prioritizing these kinds of administrative tasks. It is an easy thing to let fall through the cracks. Paperwork inventory is a really important part of the job, but it doesn't seem as important as cooking. But Orman has seen the payoff of doing this paperwork.

He says turnover for his staff is about 40%. That's way better than the rest of the hospitality industry, where it was about 76% last year. And Orman wants his workers to stick. Around we wanted to make sure that. It'S a thing that grown ups can do, that people can be at the restaurant for a long time so that our customers recognize their servers and that our servers recognize them.

Gregory dacko
We want it to be a place for regulars. Orman says. If the restaurant industry wants to be taken seriously, then it has to grow up too. And that means not leaving things like scheduling to the very last minute. I'm Stephanie Hughes for Marketplace.

Kyle Rizdal
Sam Fields was talking up top about how our spending habits have changed, what we're buying and where we're buying it from. Here's another slice of the retail economy, thrifting. It has kind of blown up, especially with Gen Z. And while thrifting used to mean digging through racks of clothes and hoping to find something amazing, there has been a rise in more curated and vintage stores. And that is changing how the whole thrifting game works.

Kelsey Vlamis wrote about it for Business Insider the other day. Kelsey, thanks for joining us. Thanks for having me. All right, so the basic outline of thrifting, I gave up on top. Here's my question, though.

It has changed a lot. Yeah, it has. It's really changed a lot. A lot of people, myself included, as a millennial, think of as thrifting is you go to a goodwill or a Salvation army, basically a donation center, and you have to sort through racks to find something you like. But now there's also many other avenues to buy used clothing, either online and physical boutiques on Instagram.

Kimberly Adams
There's just a lot of different ways to buy secondhand. So here's a $64,000 question. Why and how did that happen? Basically, there's just been more avenues for people to get rid of their, the clothes they no longer want. The growth has largely been driven by Gen Z, which is really interested in individuality and trying to find pieces that nobody else has.

I mean, with the growth of sites like Depop and the realreal and poshmark and the combination of Gen Z wanting new and unique things, it's just really taken off. It's interesting because you mentioned the real real and all the rest of those, I think. And look, this is definitely a generational thing. I was about to say maybe it's a generational thing, but it's definitely a generational thing. There are people out there, some of them younger people, actually, like my kids.

Kyle Rizdal
They will go to goodwill and Salvation army and do their thrifting there as opposed to online. Definitely. And when you go in person, it's definitely more about the thrill of the hunt, you really don't know if you're gonna find anything, but there is some really good feeling about sifting through a ton of racks and just stumbling across something perfect. Whereas when you're online or on these curated shops, it's not, doesn't have quite the same level of excitement when you just stumble across a treasure at a thrift store. Yeah.

It also has turned goodwill and Salvation army into actual retailers, too. Right? I mean, they've got, like, retail centers. Yeah, absolutely. And, I mean, goodwill has specific shops where they've curated secondhand things and also online.

Kimberly Adams
I mean, you can look through tons of secondhand things, like, people have donated and they've recognized this is something people want. We can curate this into an online shop. People will seek it out, and they'll pay a little bit more for it. One of the things you mentioned in this piece that struck me was the role, I guess, of fast fashion in this change in the thrift environment. Definitely.

I mean, fast fashion obviously is growing, and you can just, I mean, you go on TikTok, you can see hauls from fast fashion shops where TikTokers are just sorting through dozens of things they bought from a fast fashion shop online. And the things are very cheap. And so if they don't like it or it doesn't fit, instead of going through the effort to return it, a lot of people will just donate it. What's the price equation? Right?

Kyle Rizdal
I mean, there's all this volume out there now has the price equation. That is to say, generally speaking, secondhand goods are cheaper, right? Is that still the case? And if so, are people being priced out? You know, yeah, secondhand goods are still cheaper, but even those traditional donation type thrift stores are seeing an increase in prices.

Kimberly Adams
And then part of that, I think, is just, you know, regular price increases and also just knowing that people will pay a little bit more because there is more popularity in thrifting. So the problem is, a lot of times with secondhand shoppers, there's need based shoppers, and then there's trend based shoppers. And need based shoppers are increasingly getting priced out, and it's getting harder to find those, like, special pieces at an affordable price. Right. Back to the thrill of the hunt thing.

Kyle Rizdal
Are you a practitioner? Do you go out there and, you know, try to find those goodies? Yeah, I am. I mean, I will say as I've gotten older, I definitely stick more to more curated shops. Honestly, I wrote this story because I did go to a traditional donation center thrift store, and I just couldn't find anything on the racks that felt like, you know, really quality clothing, which is, you know, not my experience of thrifting when I did it when I was younger.

Kimberly Adams
So I am a practitioner. There's definitely still a thrill of a hunt. It still feels great. But I did notice personally it was getting a little harder to find the good stuff. Kelsey Vlamis at Business Insider.

Kyle Rizdal
Kelsey, thanks a lot. I appreciate your time. Thanks for having me.

This final note on the way out today, with caveat that depending on where you, when you hear this, rather you'll either have mere hours to file or if you're a next morning walking your dog kind of podcast listener, well, it's gonna be too late. Saw this on the Associated Press that according to the latest statistics from the Internal Revenue Service, the average refund so far this year, $3,011. That is up $123 from a year ago. Two out of three taxpayers figure they will get money back. Here's hoping you are one of them.

Our daily production team includes Andy Corbin, Lisa Hassen, Maria Hollenhorst, Sarah Leeson, Sean McHenry, and Sofia Terenzio. I'm Kai Rizdahl. We will see you tomorrow, everybody.

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