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It's been a while since we've started the show with a pop quiz, so why don't we? Which one of these is not like the other on the program today? From American Public Media, this is Marketplace.
In Los Angeles, I'm Kyle Risdell. It is Thursday today, the 6th of June. Good as always to have you along, everybody. Okay, here we go. Which one of these is not like the other? The Federal Reserve Bank of the United States, the European Central Bank, and the Bank of Canada.
Unless you're a monetary policy aficionado, this one might get away from you. The Federal Reserve, as we all know, has yet to cut interest rates. The Bank of Canada yesterday, and most particularly the European Central Bank today, have lowered their benchmark rates. The ECB cut its rates for the first time in five years, despite the fact that inflation was worse in Europe than it was here. And the ECB was later to the game in fighting it than the Fed was.
So here's another quiz. What gives? Marketplace's Sabri Beneshour gets us going. Two years ago to the month, inflation peaked here in the U.S. at around 9%. In Europe, it would get worse, nearly 11%. But European inflation was different. In Europe, it was very much driven by the energy price shock following Russia's invasion in Ukraine.
Nick Rees is an FX analyst at Monex, based in London. In some countries, the Ukraine war raised the cost of electricity by 70% or more. But as Europe found new supplies, prices came back down. In the US, higher prices turned into higher wages, which turned into higher prices, which turned into higher wages. In Europe, not as much. In Europe, labor markets are a bit more rigid. Those pay adjustments happen a bit slower.
Europe's economy also did not enjoy a massive stimulus like the U.S. did, so it didn't overheat in the same way. In fact, high energy prices dragged Europe's economy down, kind of like how interest rate hikes do.
The European economy has barely grown since mid-2022. Diego Escarro is head of the European Economic Team at S&P Global in London. If you look at the underperformance of Europe, it actually came even earlier than the start of the war in Ukraine. But just as growth and inflation worked a little differently in Europe, so did Europe's central bank. Van Hesser is chief strategist at KBRA.
Monetary policy transmits harder in Europe because there's a lot more interest-sensitive debt.
From mortgages to loans, European debt is more sensitive to its central bank. So for all of these reasons, the European Central Bank didn't want or need to push as hard to fight inflation. And it's letting up on the brakes a little faster than the Fed. In New York, I'm Sabri Benishor for Marketplace. OK, with that as prologue, it is fair then to wonder what lies ahead here as the Federal Reserve gears up for its interest rate meetings next week.
Marketplace's Elizabeth Troval is on that one. Let's start by making one thing clear. The European Central Bank cutting interest rates has zero implications on what the Fed does next week, says Jay Bryson with Wells Fargo. They're very much focused on domestic conditions here in the United States. European interest rates won't impact U.S. job growth or prices.
Our ties, economic ties with the eurozone as a percent of our overall economy are relatively small. We'll know more about how we're doing after tomorrow's jobs report and when the consumer price index is out next week.
Even so, nobody expects them to be cutting interest rates at the June 12th meeting. He says if those reports show sluggishness, cuts may be on the table, but not until September and even further out if the economy shows more strength. And, you know, monetary policy really is about the long game. Logan Kelly is with University of Wisconsin River Falls.
So if you think of the U.S. economy, I always like to think of a great big gigantic ship with a little itty bitty tiny rudder. And that tiny rudder is monetary policy. And so it takes a long time to turn that ship.
The U.S. ship and the European ship have been gliding across the sea at different paces. U.S. economy is a little bit stronger. And Vivi Chari with the University of Minnesota says while there are some signs of softening... Nothing widespread enough to raise significant concerns that the U.S. economy is going to enter a recession in the near term. Here in the U.S., we're still in the bringing down inflation phase.
I'm Elizabeth Troval for Marketplace. On Wall Street today, just some low-level bouncing around. TBH will have the details when we do the numbers. The May jobs report comes out tomorrow. No guesses here as to what the actual numbers are going to be. But come the first Friday of every month, the Employment Situation Summary, as it's officially known,
gets a whole lot of attention. The Federal Reserve, investors, business owners, consumers are all going to be watching closely for reasons that regular listeners to this program will be well aware of. But did you ever wonder why we have a jobs report in the first place? Marketplace's Mitchell Hartman did.
We call it the monthly jobs report, but it's actually two reports based on two different surveys. One, a sample of employers done by the Bureau of Labor Statistics, and the other, a sample of households done by the Census Bureau. They get mashed together, giving us the number of non-farm payroll jobs added to the economy each month and the unemployment rate among American households.
Erica Groschen was BLS commissioner in the Obama administration. If you want how many jobs there are out there, what kind of hours, what wages are being paid, geographic and industry detail, then the payroll survey is the place you want to go. But, she says, you can't find out who's unemployed by talking to businesses. So,
So if you want to know how many people are looking for work, who's not looking for work and why and who is and why, then you need a household survey. So how do we get these two different data sets? Well, let's go back 140 years to 1884.
People are moving from farms to factory towns. Unions are organizing the new industrial workers. Labor unrest is rampant. And Congress's response? Establish a new Bureau of Labor Statistics. Notre Dame economic historian Tom Stapleford says at first, BLS produced one-off reports.
About urbanization, growth of unions, rise of factory work, waves of immigration, and what today we might call business cycles. So fluctuations with major depressions and then booms in the economy and then collapses again. It took one of those boom-bust cycles, the recession of 1913-1914, to kick the BLS into gear doing monthly surveys of employers.
Stapleford says the first report, published in early 1916, looked at one industry. By the way, that's the industry my ancestors would have fallen under. They had a small pants factory in Philadelphia.
By mid-1916, BLS was surveying employers in several industries. Iron and steel, automobile manufacturing and repair, and the last one is the weird one, cigar manufacturing. Between 1916 when they started and 1919, employment in cigar manufacturing had declined by about 60%. So this wasn't a growth industry. So now the BLS was gathering hard data on employment, but still only guessing about unemployment.
And in 1929, the stock market crashed. The initiation of the Great Depression really changed things. Harvard labor economist Larry Katz. There was a profound sense that we knew something very big was happening in the economy, that there were lots of people out of work, but we didn't really have a good way of measuring how serious it was.
So the government turned to another statistical survey. Questions were added to the census of population in 1930 to try to measure unemployment, to learn about whether people were working, whether they were looking for work. More than 90 years later, the payroll survey now includes nearly 120,000 companies and government agencies covering more than 600,000 work sites. The household survey taps 60,000 individuals and families.
There are now multiple categories of unemployed, from I don't have a job and I've looked for work in the last four weeks to involuntary part-time workers who can't find full-time work and... Anyone who's out of work and tried to look, say, in the last year, often called discouraged workers. When work patterns changed in the pandemic, BLS responded. We now have very good data on remote work and how that differs across workers.
And what's next for BLS? Katz says the top priority is to figure out how Americans' work lives and income are being affected by the growing gig economy. I'm Mitchell Hartman for Marketplace. Should you wish to drive into the Central Business District of Manhattan at peak hours today and for the foreseeable future, that's below 60th Street for those familiar, you're going to have to drive into the Central Business District of Manhattan at peak hours today and for the foreseeable future.
Well, feel free. No $15 fee necessary since New York Governor Kathy Hochul put the kibosh on a long-awaited congestion pricing plan earlier this week. Hochul cited the city's still-slow recovery from the pandemic and inflation to boot as reasons not to burden drivers with an extra cost right now. But as Marketplace's Daniel Ackerman explains, the cost of all that traffic itself can be quite high, and not just for the people sitting in it.
Catherine Wild isn't afraid of traffic. A little bit is a good thing. It shows you have a healthy local economy. Wild is president of the business group Partnership for New York City. But she says when roads get really backed up, that... Ends up costing a lot. A
A study her group commissioned in 2018 found that New York's notorious gridlock was a $20 billion drag on the region's economy through wasted time and fuel. And this is thousands of dollars per individual commuter who's sitting in traffic. Far more expensive than the congestion pricing toll. London, Stockholm, and Singapore all adopted congestion pricing years ago. In each case, gridlock eased and climate warming emissions fell.
John Gruber, chair of economics at MIT, says the benefits extended into the healthcare sector, too. Studies have shown that when you put in congestion pricing, it actually saves lives by reducing pollution and reducing deaths from asthma. Congestion pricing can have costs, including the risk of lost business. Some drivers might stay home instead of spending on a meal or a show in the city.
Bruce Schaller, former deputy commissioner at the New York City Department of Transportation, says as for that $15 toll for drivers... The fact is that the vast majority of people who go in and out and who move around Manhattan are doing so by bus and the subway, walking and biking. He says under congestion pricing, they wouldn't pay a dime. I'm Daniel Ackerman for Marketplace. Coming up... The saying goes, you fall in the Rio Grande, you just get up and dust yourself off.
Think about that for a second. River, dust yourself off. Cannot be good. But first, let's do the numbers. Dow Industrials up 78 points today, 0.2%, 38,886 worth of blue chips. The Nasdaq down 14 points, about 0.1%, 17,173. The S&P 500 basically flat 53 and 52.
Discount retailer 5 Below went 10 below, 10.6% technically, after posting worse than expected first quarter revenue and issuing downbeat guidance for the year. Big loss tumbled more than 18%. The company posted a bigger than expected quarterly loss as consumers avoided costlier items.
went the other way, up 4.8%. First quarter sales and profit beat estimates. The athletic wear maker also raised its guidance for the year. Under Armour firmed up about 9-10% today. Bond prices went up. When that happens, the yield goes down 4.28 on the 10-year. You're listening to Marketplace. Doors take us to summers away or winter adventures and afternoon getaways.
Your dedicated Fidelity advisor can help you open those doors by working with you on a comprehensive plan to help you reach your wealth's full potential. Because doors were meant to be opened. Visit fidelity.com slash wealth. Investment Minimum Supply. Fidelity Brokerage Services LLC. Member NYSE SIPC.
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This is Marketplace. I'm Kai Risdahl. American capitalism is kind of an interesting beast. A little bit of free market, a dose of government regulation, individual entrepreneurial ambition, and some corporate influence that's evolved over the past 240-some-odd years. And while it's worked well enough for some,
It obviously has not worked well enough for all. That's the general theme of a new book by Ruchir Sharma. He is the chairman of Rockefeller International. The book is called What Went Wrong with Capitalism. Mr. Sharma, welcome back to the program. Good to have you on. Thanks, Guy. Great to be back. Let's go with the title of the book. What did go wrong with capitalism? Well, capitalism, as I say, did not fail. It was ruined.
The short answer is what went wrong with capitalism is just a role of government and what the government has done progressively over the last few decades to make this a system which feels unfair and almost rigged to many young Americans. Am I taking it too far if I say that what you want is the government out of this economy and let the animal spirits rage? Yeah.
That would be going back to this 19th century laissez-faire type of capitalism. That's not what I say. I think we need a welfare state. I think we need government spending to take place. But what I show is that the suite of habits that the government has adopted has come to corrupt the economic system.
Take this culture of bailouts. Until the mid-1980s, there was no real culture of bailing out any private sector company that got into trouble. Then in 1984, there was the first big bailout of a bank in America that was Continental Illinois. And after that,
we have reached a situation where now almost every company that gets into trouble in America sort of thinks that they deserve a bailout. That's what we had last year as well with the Silicon Valley Bank. The entire fear is that if we allow SVB or something to fail, the whole system will come crumbling down. And so I think that that's what's leading to so many problems in America, which is that people feeling that the system is rigged
or in favor of a few people who are able to gain the system. You know, if I remember right, Sir, Silicon Valley Bank was rescued, was bailed out by first citizens, right? So there's that. But let me also ask you this. I did an interview with Tim Geithner a number of years ago. Yes. Former Secretary of the Treasury. At the time of the financial crisis, he was the head of the New York Fed. And I was doing an interview with him and Ben Bernanke and Hank Paulson.
And I asked Secretary Geithner exactly that question. Everybody wants a bailout. And that's what we did in the financial crisis. And do you understand, Mr. Secretary, the outrage that people feel? And he said, you know, the temptation is to let it burn, to let the system crash. But you can't do that.
Because if you punish the big banks, if you punish the system, then it's the people who are trying to pay their mortgages, who are trying to build a life for themselves, who are working two jobs and working on car payments. They're the ones who suffer.
What do you say to that? That is exactly the problem with the thinking. This is the modern form of trickle-down economics, that if you do not bail out a company, then the whole system is going to come under. Fine. If that is the argument, where do you stop? That in the 1970s, when if you were to say that I'm going to bail out a private sector company, there'd be a massive protest everywhere.
in Washington amongst the policymakers say that we don't do that. This is not us. This is not America. I wonder, though, if, look, the 70s were a long time ago. They were 50 years ago. And this economy, the global economy has changed so drastically. And I wonder if it's possible that the system is just different now.
that we are so interconnected, that the domino pieces are so connected, that if one falls out, whether it's a big company or a struggling nation with third-party indebtedness, that the risks are so disproportionate to failure that letting them fail really isn't an option. So if you never allow a company to fail or we never allow people to go bankrupt, the number of bankruptcies today, like in America, by the way, is close to a record low.
So then it really means that you're not going to really allow new people to rise or new companies to come. And that's one of the consequences that we have today, that there's been a decline in economic mobility in America. There's been a decline in economic productivity. And that's a real paradox. Why in the midst of this incredible tech boom has productivity broadly been declining? By keeping inefficient companies alive, by destroying this
The creative, destructive fiber of this economy is leading to a decline in productivity, which is obviously not good because that's so key to economic growth. So I'm going to poke you in the eye for a minute on the way out here, and it goes like this. I'm sure you appreciate the irony of a guy who was at Morgan Stanley for 20 or 25 years, was chief global strategist there, is now the chairman of Rockefeller International, a guy who by virtually any measure is doing extremely, extremely well. I'm sure you appreciate the irony of
of a book basically saying we have to let more things fail. Yeah, I think I'll explain that pretty easily, which is that I come from a socialist country, which is India. I came here as an immigrant. I prospered, but I've also seen the inner workings of what's happening in the capitalist system. The easiest thing for me to do is to say, hey, I'm doing really well. I'm like prospering in the system. So let me,
There'll be more of this. No, I'm concerned that a lot of people are losing faith in the current economic system. And I'm just trying to shine light and show what we have today is not what can be termed even as capitalism. It's a very distorted form of capitalism. It is pretty much socialism for the rich or in general, socialized risk for everyone.
What is the answer? What's the solution? What do you want to see happen that's going to fix this? That's going to fix capitalism, I guess. Yeah. So I think that, you know, like it's about restoring the balance. Unfortunately, my fear is that until we get a crisis, because today the approach is that if it ain't broke, don't fix it. At least that's the approach of the policymakers. And I think a lot of people in America aren't happy with that. And I'm trying to sort of speak from
the inside, you know, and show to the outside world that what is rotten within the system and why has capitalism seen to have been a failure. The book is called What Went Wrong with Capitalism by Ruchir Sharma. Mr. Sharma, thanks for your time, sir. I appreciate it. Thanks, Kyle.
The Rio Grande River runs a thousand miles or more along the U.S.-Mexico border. And in far west Texas, it's been a draw for tourists who come to canoe or rafts. But for the second year in a row now, the Rio Grande in the Big Bend has gone dry. And as river adventure becomes less available, the tourism industry there has had to adapt to a new reality in which parts of the river may disappear entirely.
Marfa Public Radio's Zoe Kurland has that story. It's a hot, dusty day on the border in far west Texas, and the Rio Grande River, which separates the state from Mexico, is barely trickling along over a bed of exposed stones. It's low enough to cross on foot. You could do it without even getting your feet wet. Just hopscotch from rock to rock.
That's Charlie Angel, the owner of Angel Expeditions, which specializes in river trips. Angel has been a guide for 16 years, and this is the second time he's seen the Rio Grande in the Big Bend go dry.
That doesn't mean there isn't any water, but the river has turned into a path of low, disconnected puddles. It's been terrible for business, obviously. I've also had clients that really wanted to do a trip, and when it came close, I said, look, we can't do the section you wanted. It's just dry riverbed.
He says right here there needs to be 25 times more water to float a boat. Angel's day trips on the Rio Grande are down by 60 percent this year. He feels like the river is dying. You can't look at it and say, oh, it'll get better. I don't think it will. Now, the Rio Grande has never been a predictable body of water. The saying goes, you fall in the Rio Grande, you just get up and dust yourself off. That's David Dean, a hydrologist with the U.S. Geological Survey.
Dean says that the river out here has always ebbed, flowed, and even flooded due to an array of water sources and weather patterns. But the current low flow is because of water management. So what you have to understand about the Rio Grande is because it's a binational river, it's managed jointly between the U.S. and Mexico. Most of the water in the Rio Grande and the Big Bend comes from Mexico.
Climate change is part of the problem here, but Mexico is also just releasing less water across the border, even though it's supposed to, by treaty.
For the tourism industry in Big Bend, the Bone Dry River is a marketing problem. We're not actually promoting the river at the moment. Robert Alvarez directs a tourism office in Brewster County. Tourism, without a shadow of a doubt, is the economic driver for far west Texas. In Brewster County, you won't find any big box stores or major corporations. The oil and gas industry is a couple hundred miles north.
In the absence of those kinds of economic players, tourism is huge here. And when visitors can't get on the river, they're bummed. So Alvarez and the tourism office have shifted the pitch. There are still some pictures of the river in promotional materials, but you won't see any people on boats on the water. We're changing it to where we're showing them ziplining or hiking.
And local outfitters are leaning into these kinds of alternatives, too, like Charlie Angel. I feel like in my lifetime, the Rio Grande in this area will no longer be viable for river trips. His company now offers hikes, bike tours and birding. He's preparing for a time when an experience on the water just won't be a part of his business. I'm just going to get old and cranky as time goes on and just do driving tours and wax poetic about how the river used to be.
Angels watch the river change over two decades. And to him, it seems like the river will never be what it was. In Brewster County, Texas, I'm Zoe Curland for Marketplace. This final note on the way out today, Coke is going away the number one selling soda in this economy, almost 20% of the market.
As of last year, though, says Beverage Digest, Dr. Pepper is technically number two. It's on a technicality. Squeezed Pepsi out of its longtime hold on the runner-up spot to 8.3% of the market for each of them. Dr. Pepper, I don't know. I just don't know. Anyway, John Buckley, John Gordon, Noya Carr, don't at me. Diantha Parker, Amanda Petrie, and Stephanie Segar, the marketplace editing staff. Amir Babawi is the managing editor. And I'm Kai Risdell. We will see you tomorrow, everybody. This is APM.
Hello, I'm Simon Jack. And I'm Zing Zing. And together we host Good Bad Billionaire, the podcast exploring the minds, the motives and the money of some of the world's richest individuals. Every episode we pick a billionaire and we find out how they made their money. And then we judge them. Are they good, bad or just another billionaire? Good Bad Billionaire from the BBC World Service. Listen now wherever you get your BBC podcasts.