What's the consumer debt tipping point?
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On the program today, some corporate news and economic data, of course. We will go for a bike ride and then another day in Utah for our series, The Age of Work, from American Public Media. This is Marketplace.

In Los Angeles, I'm Kyle Rizdal. It is Monday today, 9 June. Good as always to have you along, everybody. We will begin today with a cavalcade of acronyms familiar, I would guess, to most of you. CNN, HBO, TNT, just some of the businesses caught up in the big corporate story of the day. Warner Brothers Discovery, WBD in the shorthand. Also, by the way, it's ticker symbol.

is the latest big company to split itself into smaller parts. There are going to be two publicly traded entities, we're told. One that it's calling, for now, I suppose, streaming and studios, which is going to include HBO Max, DC Studios, and the Warner Brothers movie Empire. The other one is going to be called global networks. CNN, TNT Sports, and Discovery are going to live there. The cable brands, basically.

The deal is expected to be done by mid next year, which is give or take. And as it happens, just about four years after WBD came together in the first place. Marketplace's Stephanie Hughes explains what's going on here. You could think of the two new companies as new media versus old media. Bloomberg intelligence analyst Gita Ranganathan says the streaming side, the new media, is a growth investment.

Then there's the old media. With old media kind of being the TV assets, which there's really not much growth left there.

The two companies will attract different kinds of investors. Neil Zuckerman at the Boston Consulting Group says some investors are just looking for a stable investment with a decent return. He says that's what the cable company could be. They used to call it orphans and widows funds. You know what? If I can get 5% dividend or whatever it may be without any expectation of that going away, that's pretty good for me. But other investors want their money to grow.

Zuckerman says that's what the streaming and studios company could deliver.

There's a different kind of investor that says, I like growth. I want more growth from my companies, and I'm willing to pay a premium for that. This move by Warner Brothers Discovery is similar to one Comcast made last fall when it announced it was spinning off a number of its cable networks. Bloomberg's Geeta Ranganathan says we could see some of these new legacy media companies merge together in pursuit of cost savings. That is kind of, I think, the ultimate goal.

end game. It's going to take us a little bit of time, I think, to get there. But, you know, I think this is obviously the first step. What Warner Brothers Discovery and Comcast are doing is almost the opposite of what they were doing five to 10 years ago. Which was own the content and own the pipes for the distribution mechanism, all in one. Tim Hanlon leads the Vertere Group, a media and tech consulting firm. He

He says media companies are now shedding the traditional mechanisms of distribution and the divisions that provide content for them. But he says it's hard to know if this new strategy will pan out. I don't know. If we have this conversation in four or five years, let's see what happens to these entities. I'm not sure that half of what I've said will actually hold up. Because, he says, the media industry, it just changes super rapidly.

I'm Stephanie Hughes for Marketplace. Shares of WBD had a nice little pop at the open this morning. Then traders apparently thought better of it. WBD down 3% by the closing bell. Elsewhere in equities, a split decision for the major indices. We will have the details when we do the number. Trade negotiators from the United States and China met in London today. More talks, we are told, are scheduled for tomorrow as the two sides try to find a way through the trade war.

That started with President Trump's tariffs. Both sides, it should be said, are under some pressure. For the Chinese, they're seeing a collapse in exports in the United States, down more than 30 percent in May from a year earlier. We learned that this morning. The Americans are waiting for federal appeals court to decide whether most of the president's tariffs are, in fact, legal.

Among those keeping a close eye, the bicycle industry, for which the tariffs are just the latest pothole. Early in the pandemic, you might remember this, there was a huge surge of demand for bikes. But once we had all bought our fill, demand slumped. Stores had too much inventory, which led to markdowns and over time, a slump. And now, of course, tariffs. Marketplace's Justin Ho reports.

Revel Bikes is based in Carbondale, Colorado. Like a lot of other companies in the sector, it saw that huge surge in demand early in the pandemic, followed by that downturn a couple years later. Then it had to confront another challenge.

Right at the peak of the demand cycle, money went from basically free to 7 or 8 percent. Rebel's former CEO Ben Coates says just before that peak, the company borrowed money to buy new inventory. So when demand cooled off, those bikes and those interest payments started piling up. Those few things paired together really caused for a cash crunch.

The company sold off much of that inventory, but Coates says higher interest rates and all of the markdowns happening throughout the industry since the pandemic boom made life tough for Revel. And then when all of the uncertainty around tariffs added yet another headwind, the company basically closed its doors.

I mean, it's the main contributor to the fall of Revel. It's the capital required to run it was not injected because the uncertainty in the macro market and the bicycle market. All of that uncertainty has a lot of companies in the bicycle market trying to pivot. Jeff Kaley runs Worldwide Cyclery, a retailer in Southern California that sells high-end mountain bikes and parts. The company also owns an outdoor menswear brand called Kettle Mountain Apparel.

We're not a retailer there. We actually design and manufacture and do the whole thing much more vertically. So we have a lot more control over our destiny in that sense

Cayley says the company's been redirecting more time and resources into Kettle Mountain. And year-to-date, the brand's sales have surpassed those at Worldwide Cyclery. That was a big milestone for us and something that we kind of anticipated would happen because making outdoor menswear is a lot larger total addressable market than just focusing on really high-end niche mountain bike retail with Worldwide Cyclery. Now,

Navigating that tariff-induced uncertainty has prompted a bike manufacturer near Santa Barbara, California, to expand. We're basically cutting a seat tube to a bottom bracket, so doing a 90-degree cut. That's Aaron Stenner, the CEO of Stenner Framework. It makes road, gravel, and mountain bike frames out of steel and titanium. The company used to focus on building custom, made-to-order frames.

But when the whole industry lost steam and demand plummeted, Stinner decided to start making mass-produced frames on a larger scale. And business took off. 2022, we made 250 bikes. In 2023, we made 1,000 bikes. In 2024, we did 2,700 bikes. And we're on track to exceed 3,000 frames this year.

Stinner says he's been investing in robotic welders, automatic wheel-building machines, and new employees. The strategy is to boost production, achieve economies of scale, and bring down the cost of every frame the company makes so that Stinner's products are competitively priced against stuff made in Asia. We're about 20% to 30% higher than a premium Taiwan.

manufacturer. And we think that as we continue to grow, we're only going to get closer to being on par with those international costs.

In Carbondale, Colorado, Revel Bikes has risen from the ashes. Since it shut its doors this past April, its founder, Adam Miller, has resurrected it. I felt pretty confident that we could restart Revel Bikes in kind of a new modern era, a new age of the bike industry with a few changes.

Miller says the company is aiming to adapt to the new reality of the cycling industry by bypassing retailers and selling directly to consumers. It's also going to ship bikes to its international customers directly from its warehouse in Taiwan. It's kind of the best hedge against all these changing tariffs to make sure customers are confident buying one of our bikes.

Miller says the bike industry's COVID-era boom attracted a wave of new customers. His hope is by keeping prices under control, those customers will keep buying new bikes. I'm Justin Ho for Marketplace. There is a certain cyclicality to some things economic. Consumer debt, for instance, how much we owe on our credit cards and car loans and student loans.

Historically, consumer debt has decreased at the beginning of the year as we pay down what we charge for the holidays and as tax refunds flow in. Then in the spring, spending on credit tends to pick up again. This spring, though, there is an extra factor that's gone into the data from the Federal Reserve that shows consumer credit was up in April 4.3% on an annualized basis. That is the biggest monthly jump this year.

As Marketplace's Mitchell Hartman reports, consumers were spending and charging more on credit cards ahead of expected tariff price hikes.

You might think, with all the consumer angst about high prices and a brewing trade war, that Americans would avoid racking up a lot of debt they'll have to pay back at high interest later. But no, says Bankrate financial analyst Greg McBride. Even though household budgets are tight and there's a lot of concern about inflation, unemployment is still very low. So the fact that there's a steady paycheck coming in does support a continued level of spending.

Charges on credit cards soared in April, which is not necessarily a problem, says banking analyst Alexander Yochum at CFRA Research. As long as people are paying it back, credit card companies are actually pretty happy right now. If they were concerned about the consumer, about credit quality, you might see competition falling, but marketing budgets have been high.

Loan delinquencies have now risen above historic averages, which Yochum says isn't a big problem right now. One reason why these companies aren't struggling is they're charging more on credit card loans so they can actually afford to take more losses because they're getting more in interest.

There is growing distress at the lower end of the market, says Bankrate's Greg McBride. Consumers with weaker credit histories, lower income. That's where you're seeing a much higher level of delinquencies on credit cards, particularly on auto loans, $700 or $800 a month payments. You miss more than one or two, it's not going to be sitting in the driveway in the morning.

Meanwhile, as more tariffs kick in, inflation will start rising again, says RSM economist Joe Bursuelas. That's a real problem in working class households. People are doing buy now, pay later for groceries. When I was a child in the 1970s, my parents had to use those layaway programs to buy groceries and holiday gifts online.

So I understand this in a very intuitive way. Higher inflation will also deter the Fed from cutting interest rates, meaning 20% plus interest on credit cards is likely to stick around for a while. I'm Mitchell Hartman for Marketplace.

Coming up. That's how I built my clientele so fast because people are tired of driving. The business of home businesses in Utah County, Utah. But first, let's do the numbers. ♪

Dow Industrial is basically flat today, 42,761. The Nasdaq up 61 points, 0.3%, 19,591. The S&P 500 added 5 points, about 0.1%, 6,005. Apple's Worldwide Developers Conference met today. It's big product rollout.

Apple down 1.2% today. Microsoft increased about a half percent. Warner Brothers Discovery, I talked about. Competitor Netflix down 1.4%. Today, Disney went the other way, up 1.5%. Bonds up. Yield on the 10-year T-note down 4.47%. You're listening to Marketplace.

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This is Marketplace. I'm Kai Risdahl. We don't usually play audio on the program that you've heard before, but I wanted to get this bit back in your mind because it's something ADP chief economist Neil Richardson and I were thinking about as we were reporting in Utah County, Utah last month. By way of reminder, it is one of the youngest counties in the United States. What does this county tell us about the American economy and eventually the global economy that we're going to do in the rest of this series?

Utah County, as I said, is unique and not every county can replicate every facet of Utah County. But what we're going to try to see is what aspects of the county that we can replicate. Last week on the show, we talked to a bunch of entrepreneurs in Utah County and to businesses that work because the population and the workforce here are so young. This week, as we wrap up our coverage, we're going to look at the obstacles that come with being in a place that is growing so fast.

All right, here we are in suburbia. We drove about an hour northwest of Provo, past a bunch of the Silicon Slopes tech companies here, Adobe and the like. We passed a bunch of open land and then suddenly saw a ton of residential construction, new neighborhoods being built from the ground up, going on for miles until we got to where we were going, a place called Eagle Mountain of seemingly endless communities with names like Sage Valley and Meadow Ranch.

Well, I'm not going up there first, you guys. Absolutely not. Neil and I are standing in front of a light blue two-story house on an otherwise nondescript suburban street because unlike that startup incubator we went to last week in Provo, houses like this are where you find Eagle Mountains entrepreneurs. Hi. I completely forgot. It's all good. How are you guys? Good. How are you? Hi, I'm Kai.

We walked into Kat Benesch's living room where we were immediately greeted by Kat's tabby cat, which proceeded to follow us through the whole interview. What a playful cat. Ferocious is more like it. Just looking at Google Maps, you might not realize you're going to Kat's actual house. The address is marked Kat's Cuts, capital K in both words. It's the hair salon she runs out of her basement.

Through the living room and the kitchen we went, down the stairs. It's tight, but we've got lots of people. It's all good. Where there was actually a client in for a hair coloring that day. That way you can check on the processing. Yeah, no worries. Her color's just sitting, so we're good. This basement is a business. There are wood floors and fresh white paint on the walls. Shelves full of products, a salon chair, and a hair washing basin.

Kat's been doing hair for 14 years. She used to work at a salon until she decided to go solo about a year ago.

Is it unusual to have a hair salon in a basement around here? Not out here. I would say there's only a couple of like brick and mortar salons and then the rest are at home and in their basements and such. You know, it's funny because when you drive out here from Provo, all you see is a bunch of new housing just springing up in what used to be farmland. You don't see many businesses, but maybe that's because businesses are actually inside the houses themselves.

Utah was the fastest growing state in the nation during the last U.S. Census period, 2010 to 2020. And Eagle Mountain is a telltale sign of that. It became a city just 30 years ago when most of it was undeveloped open land. Back then, the population was 250 people. Today, it's 60,000.

And with all that population growth and the housing development that comes with it, commercial space for traditional brick-and-mortar businesses just hasn't been built fast enough to keep up. It's been growing so fast. Like, in a year, it'll be completely different again. But it's mainly a suburban commuter town or you're working from home or an at-home business.

We saw just one commercial stretch the day we were there, a grocery store at Chipotle and another fast casual restaurant. But besides that strip mall, not too many businesses that aren't inside people's homes.

And you grew up here, is that right? I did, yes. Yeah, so I grew up out here and my parents lived down the street. I always said I'd never move back to Eagle Mountain, but here we are. When Kat and her husband were looking to buy a house, they realized they could get a lot more space for their money out here compared to other places they were looking at closer to Provo. And that's the story for a lot of families in Eagle Mountain.

It's far away from town. It's kind of a hike. Is that an issue for you or is your client all local? Clients love it here because they're used to driving for everything else. People would rather it be here. It made sense to stay out here and do it out of my basement and be like, look, I have stairs, I have a cat, but...

You know, I'm willing to work with it if you're willing to work with it. And we can make it here that neither of us have to drive an hour to get to our hair appointment. Was that what was common before you? Yeah, that's how I built my clientele so fast because people are tired of driving. They had great stylists, great people in like all surrounding cities, but we're tired of driving an hour, spending three hours at a salon and then driving an hour back.

Kat's making more money working from her basement than she did at the hair salon. Last year, more than $100,000 in sales, and it was only open for eight months. And here's the thing, a haircut here costs $41, less than it would be at the salon. Kat's been the breadwinner in her household for the past couple of years. While our husband finished school, he's looking for a teaching job now.

We bought the house on my income. We're able to stay afloat and stay ahead. I mean, we're lucky. We're very fortunate. Staying afloat, staying ahead. What about growing? Do you see yourself like growing out of the space and getting a bigger space and maybe a couple of employees and doing that whole bigger, more kind of route? So I definitely have a dream of that. It's tricky because to get into a brick and mortar out here is really expensive and the overhead is so high of a cost.

That for me to make a profit, you plan to not make profits for a couple of years. So we're not quite there yet. We'll wait till my husband has a job. I mean, driving out here, there's not a whole lot of commercial. Yeah. So we'd have to build a commercial space and that's pretty expensive initially. That's the reality of running a home based business in Eagle Mountain. You can be a savvy entrepreneur and fill a local need and have lots of customers. But there is a ceiling.

There are tons of other home-based businesses in Kat's neighborhood. Okay, you guys have a good day, okay? Within just a couple of blocks, there's a contractor, a photographer, a spa, and more than one dog groomer. Ooh, the Pink Doodle Salon. Poodle, not doodle. Poodles are very funny.

Could have been a D. We rang the bell on the side door of a house about two minutes from Kat's place. Tell us who you are and where we are. So my name is Jessica Howell. I own the Pink Poodle Salon. We do dog boarding, dog grooming, and we have a self-serve dog wash.

We've been out here for eight years. Why did you set up a dog grooming service in your garage? My mom has been a dog groomer for 40 years, and she got me into it when I was 16. It was just supposed to get me through college. And here we are. Yes, five kids later, it's just easier. How many hours a day do you spend on dog grooming?

Oh, God, my mom will kill me. I start at about 7 a.m. and I usually finish about 7 p.m. Oh, that's a lot. So anywhere from 12 to 14. 12-hour day. 12 to 14 hours a day. There's a big grooming shortage. There's not very many of us. With all the young families here surrounded by lots of land, it's kind of made for having a dog. So like Cat's Hair Salon, there's lots of local demand. So you have some pricing power? I do, and that's why I'm the highest in the industry. I'm the highest price point in my area.

And you say that so proudly. I do. You have real power if you can just say it. Well, groomers, it took me a long time to get to that point. A lot of groomers feel bad raising their prices. You know, the economy sucks. Everyone's hurting. But my belief is owning a pet is a privilege. The price for a full dog grooming depends on size, breed, how much fur they have. But it starts at $90. Do you make your kids work with you now? Yes, two of them are on the payroll.

She says proudly. Mama has to pay for college somehow, and I'm not going to do it. So we flat out tell our kids, like, we have five kids. You know, my husband works with me. He used to be a plumber. I was making more money than him, and he was working more hours. Say that again. You were making more money than a plumber. Yep. I made more money than my husband. The husband's been working for Pink Poodle for five years now.

The biggest challenge for Jessica's business and others run by friends in the neighborhood is something Kat said, too. Even though the Pink Poodle Salon is successful, it can't really grow much beyond the home because the commercial space just isn't here. Tell me about the local economy. How are you feeling about things? Are you feeling the agita that's out there? I think the economy is. Oh, there's another one. Yeah, this is my doodle.

She just has to get her face done. She's almost done. She's so precious. Isn't she cute? Um...

I think it's hard for people to make rent. We're a big church community out here, and I know we do a lot of service for those people that can't afford things. You know, I think it's harder this year. You're feeling it. Yeah, I think it's harder this year for everyone. Even, like, my inquiries I get, I've gotten a lot more inquiries and a lot more I can't afford it this year than I've ever had before. Are you at all affected other than the clientele and...

there may be some struggles economically speaking. Are you affected by anything that's going on currently? I haven't yet. I think just as people stress, people tend to push their dog grooming because it is lower on the priority. I mean, keeping your house in order is more important than getting your dog groomed. So I think we'll feel the push eventually. But as of right now, no.

The macroeconomic outlook here is on everybody's mind, even in Utah County, with all the ways it's different from the U.S. economy as a whole. And the very local issues here don't help either. The opportunities, but also the obstacles that come with living in a place that is growing so fast. Commercial space just doesn't really exist here. Demand for services is only going up. And also, the kids. Building more schools is a priority.

So tomorrow, we're going back to high school.

This final note on the way out today in which the hard data we've been looking for on what President Trump's tariffs are going to mean for this economy have started to roll in. Today's entries from the car industry saw this in automotive news that maritime automobile imports to the United States were down more than 72 percent in May from a year ago. Not just completed vehicles, either 15 percent fewer imports of parts and accessories as well.

Our daily production team on this program includes Andy Corbin, Nicholas Guillaume, Maria Hollenhorst, Eru Ekpenobi, Sarah Leeson, Sean McHenry, and Sophia Terenzio. And I'm Kyle Rizdal. We will see you tomorrow, everybody. This is APM. Personal finance isn't just about spreadsheets and investing. It's emotional. Talking to your partner about money, negotiating a raise. Even the smallest decisions, like splitting a bill, can bring up feelings of shame or anxiety.

I'm Rima Grace, host of This is Uncomfortable, a podcast from Marketplace about life and how money messes with it. In this season, we get into topics like workplace drama, tough financial trade-offs, and the quiet tension that builds when love and finances collide. Listen to This is Uncomfortable wherever you get your podcasts.