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I know it's been a while, but what do you say we play a round of What Is Jay Powell Thinking? From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Tuesday, today's 6th May. Good as always to have you along, everybody.
One front runs the Federal Reserve at one's peril. But I'm going to go out on a limb here and say that what we're going to hear from Chair Powell tomorrow is going to be some version of we're OK with our policy response right now. No, the president can't fire me and we need to see more data. Not boring, exactly predictable, though.
But come on, you know they are saying things behind closed doors that are more interesting. So we've gotten Bloomberg's David Gurra on the phone to spitball a little bit. Hey, David. Hey, Kai. So what do you think? I'm right. It's going to be predictable tomorrow?
Yes, everyone with whom I've spoken says this is going to be an incredibly boring meeting in the context of Fed Reserve meetings, which the bar is low there. But you're getting at something crucial here, and that is we have seen over the course of the last few months a Fed chair who has gotten increasingly irritated, I think, with
the comments from the president, suggestions that he could, if he wanted to, remove the Fed chair from that position. So that's all simmering beneath the surface. No doubt he'll be asked questions from reporters about the tenuousness of his position as Fed chair. But as you've indicated, I think his responses are going to be kind of in line with what we've heard before. In that meeting that they're having today and tomorrow in the Federal Reserve Building there on Constitution Avenue,
They are surely saying, God, tariffs, what are we going to do about this? Yes. I mean, he won't he won't actually say tomorrow. We're really worried about it, but they got to be worried about it. Just like as is the situation in every economic shop on Wall Street across this country. There is so much uncertainty about what's happening here. And that is not that's obviously going to be the case in the Federal Reserve Building as well. So we have heard from the Fed chair, from Fed governors saying,
uh, fed policymakers and acknowledgement of the fact that what they can do in this moment is only wait and see what the impact of all of this is going to be. But, um, they have a lot of data. They're going through it. They're looking at their famous dashboard of, of economic indicators. They're trying to piece together what's going to happen here, but they're at this very awkward moment where the hard data that they have is, is backward looking. The soft data, the sentiment data is indicating that bad things are on the horizon and,
They're in this kind of middle position where they, again, just have to sort of wait and see how all of this is going to shake out. But it makes for a very tricky situation for the Federal Reserve, as it is for economic forecasters everywhere.
Powell and his colleagues like to say that they're trying to look through the short term tariff implications, that they want to see what it's going to do in the long term. I may or may not have made a small wager with the executive producer of this program about whether or not Powell would use the word transitory talking about inflation at the previous meeting. Do we think he's going to say, actually, you know, prices could raise a little bit, but then go back down?
He used that word last time, and I think it took a lot of us by surprise when he did because of just the history of that word in the context of inflation after the COVID-19 pandemic. But yeah, I think that he's in a position where, you know, the Fed is content to stay where it is and wait for all of this to happen. Look, I think that's kind of a best case scenario here that by waiting, things could equilibrate somewhat. Of course, there were plenty of other forecasts that indicate that things would be a whole lot worse. I
Again, going back to kind of the boringness of this meeting, the boringness of the Fed's decision making at this point, there really is no motivating factor for them at this juncture to do more than the bare minimum is they just sort of wait to see what the impact is going to be. And one does want an economy that is kind of boring sometimes. Right. I mean, super quick, David, what do you think? Yeah.
We lust, we yearn for boringness. I think this is a time when we don't have a whole lot of it in economics, in politics and all manner of things. So I think that we can say that at the Fed, at least the outward presentation is one where things are as boring as they have been before. But but as we've been talking about, I think inside things might be a little bit more a little more full of anxiety and excitement. David Gurra, Bloomberg. Good as always to talk to you, David.
You too. Thanks, Guy. Wall Street on this day that ends in a Y. Well, terra fories, right? Details, numbers. Y'all know the drill.
The president of the United States believes, as we know, that trade deficits are national emergencies. That is, in fact, his stated legal rationale for the April 2nd tariffs. So he surely was not pleased to learn today that the trade gap in March jumped 14 percent to a new record high. We bought nearly one hundred and forty one billion dollars more stuff from overseas than we sold abroad in the last month of the first quarter. The irony here is that the
is that it's the president's tariffs that drove the increase. Businesses and consumers stockpiling, trying to get ahead of his import taxes. The question now has to be, of course, where things go from here. Marketplace of Sabri Benishor is on that one. Everyone and their mother has been stockpiling. But in March, one industry went so much harder than all the rest. We saw a $20.9 billion surge in pharmaceutical product imports.
Bradley Saunders is a North America economist with Capital Economics. Meds were the vast majority of the import surge, and almost all of them came from Ireland. The U.S. actually ran a larger bilateral trade deficit with Ireland than it did with China. Another big import in March? Gold. Big financial institutions bought a lot of it.
Literally flying bricks of gold from London. Brett Ryan is the senior U.S. economist at Deutsche Bank. But of course, it's not just gold and pills. Companies have been stockpiling everything from electronics to clothes for months now ahead of tariffs. And now that all that stuff is here, importers are kind of done for a while. Imports will go down in the second and third quarter. Carl Weinberg is chief economist at High Frequency Economics. Well,
There'll be payback for this as a lot of transactions have already occurred that would have occurred normally in the second or third quarter. They won't happen a second time. Imports are going to be depressed for a while, and that's going to bring that record high trade deficit right on down. What's going to happen to exports is a lot trickier. Again, Brett Ryan with Deutsche Bank.
I mean, the thing about U.S. exports is we often export intermediate materials that come back to us.
We sometimes export stuff that gets made into other stuff that we then import. So if we're not going to import so much, we might not be exporting so much either. And then the other thing, you know, is retaliation. Bob Murphy is professor of economics at Boston College. Europe is reportedly considering slapping tariffs on $114 billion worth of U.S. goods, for example. That would cut down U.S. exports. But there are still so many unknowns.
The bigger question going forward is whether the tariffs ultimately stick or not. Very hard to know anything about trade policy one hour to the next, let alone one quarter to the next. In New York, I'm Sabree Beneshour for Marketplace. If you are or have in your life a person who's
Shall we say of a certain age, President Trump's trade war is of way more than passing interest. Every whiff of a presidential change of mood brings stock market volatility that people in or near retirement just don't want to see.
That brings us to the next story in our series, Lived Economies. Marketplace's Kristen Schwab is following a handful of people all over the country trying to get a better understanding of how they're feeling about this economy right now. Here's Kristen. Gail and David Rames live just a few steps from a hiking trail in Hookset, New Hampshire. So this is one lookout. It's beautiful. And then all this is our neighborhood. Whew!
Gail whistles to round up their lab, Hallie, who they endearingly call Hallie Berry. We're gazing down at the New England town along the Merrimack River. The Rames love the access to the outdoors here. Their favorite things are fireflies.
our fresh snow, and a quiet mountain. Is that part of what you two found attraction for each other? The adventure, yeah. Outside, learning new things, yeah. If you're one of these skiers, you say, I wish I could ski like that. These two are black diamond skiers. We used to do double diamonds. Yeah.
Skiing doesn't come quite as easy as it used to. David is 67 and Gail is 64. And they're both entering a new stage of life. He retired last summer. She hopes to retire next year. They're looking forward to spending more time with their two sons, who are both in their 30s. They bought a camper trailer so they could adventure around the U.S. David lost 70 pounds. Thankfully, I'm in good shape. I'm healthy.
I can finish off my golden years, if you will. David worked at a company that made specialized ultrasonic machinery for airplanes, and he was ready to retire. Gail, though, she's a little apprehensive about leaving her job as a college administrator because retirement requires a mind shift to be comfortable spending what they've saved. So you can enjoy being at home and doing the things you want to do.
We're at Gail and David's home now, a cozy three-bedroom with a brick chimney and comfy leather furniture. Halle Berry is snoozing between them on the couch. Yes, she does snore. Gail and David are adjusting to living off less. Together, they used to earn about $145,000 a year. They haven't started drawing from David's 401k yet, so they're living off Gail's salary of $60k and his Social Security.
They'll be fine covering their monthly expenses, about $6,000, but it'll require a little more budgeting, which David has taken over. Gail has always been in control, really, of the spending, and now I'm seeing all of these things, and I've been...
This is a familiar theme in a lot of households. One spouse oversees the budget and does the shopping. The other maybe can't rattle off the price of a gallon of milk.
In retirement, David is figuring out what life costs at a time when life costs a lot more than it used to. Every month on groceries, we're spending about $1,300. No, you said $11. $11. Well, okay. I'm the penny pincher, so when I heard $11, he's the manager, so his numbers float. They took stock of their fridge the other day and found 21 different types of cheese.
And we buy this $3 or $4 item that we might use once. It seems like everything is more expensive these days. Electricity, heating oil, even lift tickets at their local mountain. Then there's their home. It's doubled in value since they bought it less than a decade ago, which is great, except it means they're paying way more in property taxes. And with David's fixed income, he's nervous. It's going to be harder for me to absorb these things.
So it's scary. Some context about how David's feeling. I'm visiting the Reims in April, the very week of President Trump's so-called Liberation Day, the big tariff announcement that tanked the stock market. The Reims have been loyal Trump voters. Their priorities are the economy and inflation. I ask how they think the president is doing. He is a little rushed, unfortunately.
Maybe that was his plan. I think he should have gone or should go a little bit slower and not get people so excited. Nervous. People are nervous. Gail says she has decidedly not checked their retirement accounts. I ask how much the economy could affect their plans. A lot. I mean, if it goes really bad, who knows what's going to happen next? It's not like we're 30 and we can recoup. So...
It would impact the retirement. I'd have to feel secure before I make that decision to stop work. These two have been planning and plotting and waiting for this transition. They'll celebrate their 40th anniversary in November. It's almost like a second marriage for us, a second honeymoon. Yeah. We do everything together. Buddies, partners in crime. Adventurers in crime, really.
In Hookset, New Hampshire, I'm Kristen Schwab for Marketplace. Coming up. We really don't view ourselves as a diamond company. We are an end-of-life company. Sometimes you gotta reinvent the brand, you know? First, though, let's do the numbers. ♪
Now, industrial is off 389 points today, 1% 40,829. The Nasdaq slid 154 points, 9 tenths percent, 17,689. The S&P 500 down 43, 8 tenths percent, 56 and 6.
Sabri was talking about pharmaceutical imports. Well, Eli Lilly subtracted 5.6% today. Johnson & Johnson dwindled about 3.0%. Ford Motor accelerated 2.6% today. That's after it ditched its most recent forecast due to... Wait for it. Wait for it. Wait for it. Yes, tariffs. Yes, that's it. Bond prices up. Yield on the 10-year T-note down 4.30%. You're listening to Marketplace.
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most of the attention, especially since, you know, April 2nd. But how about a moment here for bonds, corporate bonds to be specific?
While treasuries, that is government bonds, have had their challenges, which we have discussed, investors have been especially nervous about putting their money into corporate bonds, which has its consequences. Lower demand means lower prices. And with bonds, lower prices mean higher yields, higher interest rates, that is, that a company's got to pay on the money it's borrowing by selling the bond.
That's why this time a month ago, the corporate bond market had all but shut down. Since then, though, a handful of big companies have dipped their toes back in. Apple, Alphabet, Procter & Gamble, GM as well. Marketplace's Justin Ho has more on that.
One reason companies have been issuing new bonds recently is that investors think they're a good buy right now. Guy Lebas, chief fixed income strategist at Janie Montgomery Scott, says over the last month. There was a lot of bond market volatility. Corporate bond prices fell and they fell to a point where buyers were happy to step in.
Labas says investors also think some companies can weather tariffs better than others. You know, larger companies are generally ones with more pricing power, right? So they can pass on costs more easily than can others. Big companies are issuing bonds to pay for big projects.
and to refinance existing debt. Maureen O'Connor is global head of high-grade debt syndicate with Wells Fargo. If you think back five years ago, you know, rates were exceptionally low and five-year notes that were issued back then are now coming due.
But many companies are still reluctant to issue new debt. Matteo Arena, a finance professor at Marquette University, says that includes companies that are more likely to default if the economy takes a turn for the worse. If I had to pick a couple of industries that are more exposed to this would be, you know, biotech companies and small, young software companies.
Many of these companies are known as high-yield bond issuers. They're riskier, so they have to shell out more interest on top of today's elevated interest rates. Chuck Tomes at Manulife Investment Management says they'd rather not. Unless they're being forced or under extreme need to refinance, they're going to be a little bit more patient.
And while they're waiting, they're less likely to invest or expand. Tom says if they eventually have to take on more debt in order to pay the interest, they might have to make cuts. Whether it be, you know, potential employees or cut existing employees to try to continue to keep their underlying business solvent. Tom says that's going to depend on where interest rates go in the near future. I'm Justin Ho for Marketplace.
Do you ever wake up in the morning and say, man, I wonder what's going on in business, in the economy? Well, we've got just the answer for you. David Brancaccio and the gang at the Marketplace Morning Report get out of bed real, real early to get you up to speed. Check it out. If you want to get ahead in this economy, you got to innovate. Making something faster, cheaper and easier is the very DNA of capitalism.
That innovation, though, can be hard on the companies and workers and markets that have grown up around the old model, or in some cases, the really old model. Diamonds have been among the most valuable substances on Earth for thousands of years. Plato speculated about why they were so valuable. Kings and queens and celebrities wear them. Four million diamond engagement rings alone are sold in this country every year. After all, diamonds are forever, aren't they?
Well, maybe not for much longer, as our special correspondent Stacey Vanek-Smith explains.
I'm standing in front of a machine that has changed everything for the diamond industry. These are our high-pressure, high-temperature diamond machines. Adele Archer is the CEO of Eterniba. It grows diamonds in this lab in Kerrville, Texas. They look a little bit like a waffle iron. Yeah, totally. A waffle iron tucked into a giant humming refrigerator. Close the door, and then we will start the machine. This is Petrus Boffma. He developed these machines.
We have high temperature from the heaters between two steel plates. And then we use hydraulics to apply pressure to the growth cell. This is like the tectonic plates. Yeah, this is how we mimic the pressure that's on the Earth. This is like millions and millions of years of like pressure and heat inside the Earth's crust, except in a machine. Right. And then, you know, we can grow it in days.
and grow it to almost any size or color. And that's scaring the hell out of the diamond industry. Idan Golan is a diamond industry analyst based in Israel. Did you ever see a kid riding a bicycle and then all of a sudden the front wheel starts wobbling?
That's kind of what happened to the natural diamond industry. Lab-grown diamonds have been around since the 1950s. But for a long time, they were kind of taboo. Most jewelers wouldn't even sell them. Enter the pandemic. Jewelers like Brilliant Earth and Blue Nile flooded social media with sleek ads for lab-grown diamonds. Consumers had some extra cash and wanted something flashy for their Zoom call, says Golan. Something like a pair of diamond earrings.
Stud earrings was the real breakthrough for lab-grown. The growth was astronomical. People realized they could buy lab-grown diamonds that were visually and molecularly identical to mined diamonds. Best of all, the price. A pair of one-carat diamond earrings, that's about the size of a pencil eraser, costs more than $3,000. But
But a lab-grown version only costs about $800. Consumer demand skyrocketed. Diamond lab startups began cropping up all over the world, flooding the market with stones. Inventories just jumped. We had this massive growth and demand.
That led to a massive decrease in prices. Right now, the price of lab-grown diamonds is more than 80% lower than it was in 2019. That's barely above the cost of production. And many of those shiny startups have gone bankrupt.
Meanwhile, traditional diamonds have fared a little better. Prices are only down by about a quarter since 2019. But a lot of that's because companies like De Beers have the financial cushion to hold prices high, even if it means fewer sales. At least for now. This is kind of an infliction point for the diamond industry. Diamond mines are costly to run. And Golan points out, mined diamonds can't really compete with lab-grown on size, clarity, or price. So,
So if big diamond companies like De Beers are going to stay in business, they need to make mined diamonds a luxury. And that is exactly what they're trying to do with ads like these. Three billion years ago, elements of stars combined to form natural diamonds so pure and so real that to hold one is to touch one.
the essence of time. Golan says this is the Rolexification of the diamond industry. Natural diamonds are real, rare, responsible. As in, a Rolex is a status symbol. A Casio calculator watch is not, even though they both essentially do the same thing. Golan says mined diamonds need to become the Rolex.
Meanwhile, the diamond industry is evolving with its new reality. That is what is happening at Eterniva's Diamond Lab in Kerrville, Texas. The diamonds it grows are not being sold as a luxury item or a display of wealth, says CEO Adele Archer.
We really don't view ourselves as a diamond company. We are an end-of-life company, a celebration-of-life company. Eternava grows its diamonds from carbon extracted from the ashes of people's loved ones or pets, and then sets those diamonds into custom necklaces, rings, or even golf clubs. In fact, Eternava's headquarters do not have any images of diamonds or jewelry anywhere.
Instead, the walls are lined with photos of people and pets. Archer points to a Polaroid of a woman named Karen. She had breast cancer, so she got really involved with the Susan G. Komen Foundation. You can probably guess what color we did for Karen. Pink. Pink, yes, exactly.
And so now in her honor, her husband walks in every Susan G. Komen walk with her pink diamond. Eternatus sells more than 1,000 diamonds a year. Prices start at around $3,000, but most customers actually spend a lot more for bigger stones or particular colors or shapes. Longhorn orange is a popular request from Texans.
So are heart shapes. And Eternova keeps on pushing the limits of what its diamonds can be. We are working on technology right now where you'll be able to scan your diamonds and have it pull up a repository of memories, like videos and voice memos, you know, so you can be like, yeah, this is my dad's diamond and let me show you who my dad is. Well, like the information would be stored in the diamond. Yeah, totally. Coming soon, diamonds as computer chips.
In Kerrville, Texas, I'm Stacey Bannock-Smith for Marketplace. This final note on the way out today, just because it's my job to keep all y'all economically up to speed on what's happening. You know how for a good couple of weeks now, the word from the president and his advisors has been that there are trade deals literally by the hundreds just about to be signed?
Turns out not so much. The president said today, and this is a quote, we don't have to sign deals. They have to sign deals with us. They want a piece of our market. We don't want a piece of their market. American exporters would probably beg to differ. Our digital and on-demand team includes Jordan Mangy, Dylan Mietten and Janet Nguyen, Olga Oxman, Virginia K. Smith and Tony Wagner. Francesca Levy is the executive director of digital and on-demand. I'm Kyle Risdell. We will see you tomorrow, everybody. This is APM.
Hannah Sanborn was a single mom with newborn twins struggling to find affordable childcare. Her best friend Briar Rossi was burned out at work and looking for a way out.
So they came up with a plan. I was like, look, your leave's coming up like two weeks. Like, I'll put in my two weeks. Wow. And like, we'll just start it. We'll just do it. I was just like, let's do it. We're getting you out of this situation. We're getting me out of this situation. You tell me how much your rate is and I will pay it every week.
I'm Rima Grace, and this week on This Is Uncomfortable, how Hannah and Briar went from colleagues to best friends to lifelines. Listen to This Is Uncomfortable wherever you get your podcasts.