Reading the labor market tea leaves
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Upgrade today by visiting dell.com slash deals. Jobs, the dollar, and beer in that order. From American Public Media, this is Market Class. In Los Angeles, I'm Kyle Risdell. It is Wednesday today, the second day of July. Good as always to have you along, everybody.

One of the very first things they teach you in Business and Economic Reporting 101 is that there is very rarely just a single cause of anything that happens out there. I mention that because I was thinking this morning about something the Wall Street Journal's Greg Ip said to me on the program on Friday, that how the slowdown in consumer spending we're starting to see is already starting to hold back economic growth.

Spending by or on behalf of consumers, in case I haven't mentioned it in a while, amounts to give or take 70% of this entire economy. Now, some of that slowdown in spending is because of tariffs, the effect those import taxes are having on the price of goods, of course. But most of the spending we do in this economy is on services. And the cost of services doesn't have nearly as much to do with tariffs as it does with the cost of labor. Marketplace's Justin Ho gets us going with that.

When people buy fewer goods because tariffs make those goods more expensive, the job market feels the pinch, says Laura Veldkamp, an economics professor at Columbia. There are jobs like salespeople, there are jobs like delivery people, there are jobs like the janitor at the store who cleans it, and all of these will face less demand as well. Veldkamp says in a slower economy, employers don't need as many workers. The

If they don't want to hire new workers and there's less labor demand, they don't have to offer as high wages to their existing workers in order to keep them. Slower wage growth has an outsized impact on the cost of services, says Menzi Chen, an economics professor at the University of Wisconsin. Because services are provided, you know, the main input is going to be labor. But

But Chin says there are factors that could actually lead to higher wages in the service sector. For instance, employees might ask for higher wages to help them cover the cost of tariffs. Meanwhile, demand for labor is improving, says George Perks, macro strategist at Bespoke Investment Group. Initial jobless claims, for instance, are not showing any sort of rapid drop-off in labor demand. And other, more slower-moving data is showing a, if anything, improving backdrop.

The labor market is also dealing with the issue of dwindling labor supply. Perk says we have an aging workforce and an administration that's deporting workers and discouraging immigration. So when you combine these, labor demand bottoming and maybe starting to accelerate and labor supply continuing to shrink, what you actually get is what should be a pretty positive backdrop for wage growth.

But that means more upward pressure on prices. Again, the University of Wisconsin's Menzi Chen. There's going to be a big increase in labor costs, for instance, in fresh fruits and vegetables. Those things are going to rise in price because you've just essentially taken out the labor force for a lot of that produce.

And Chen says a similar dynamic could play out in the manufacturing sector, too. I'm Justin Ho for Marketplace. I'm going to say something right now that purists might take issue with, but I'm going to need somebody out there to prove me wrong. The U.S. dollar since January has been a depreciating asset. There was a bump in the greenback right after the election. But since January, as the trade war has heated up and deficits look to be higher by the trillions, the

The U.S. dollar index, it measures the currency against a basket of six other major currencies. It's down about 10 percent again since January, and it just keeps on edging lower. Marketplace's Mitchell Hartman explains what's going on and why it matters.

At the beginning of the year, the dollar started sliding, says Jonas Golterman at Capital Economics. This is the worst start to the year for the dollar since 1973, the year that Nixon took the U.S. off gold. It does feel like a turning point and that the dollar is now probably in a downward trend on a multi-year horizon. And this downward move is somewhat counterintuitive. Financial conditions right now would actually tend to support a higher dollar.

Typically, a country's currency rises when its interest rates are higher than its competitors, meaning its economy is running hotter. Investors plow into those assets to get a higher return and more growth potential. Well, the U.S. has high interest rates, and our economy is doing better than most others. But, says Joseph Gagneau at the Peterson Institute for International Economics...

Correlation between strong U.S. economy, high U.S. interest rates and strong dollar seems to have broken. Instead, he says, U.S. tariff and trade policy is canceling out those traditional factors. If you have policies that foreigners think don't make sense and you're actually having an out-of-control fiscal deficit, downgrading of U.S. credit rating and just blaming foreigners as a foreign investor, why would you want more money in the U.S.?

And going forward, investors see a lot of unknowns, including, says Jennifer Lee at BMO Capital Markets, what the Fed will do, or may be pressured to do, about interest rates. Threats against Fed Chair Powell and the independence of the Fed, that's weighing on the U.S. dollar as well. Add it all up and the dollar just doesn't look so attractive to investors outside the U.S., says Scott Ladner at Horizon Investments. Interest rates are going up.

International holders of U.S. financial assets, $30 trillion worth of U.S. stocks, treasuries and corporate bonds. We do believe that they've started hedging that exposure. Selling off dollar denominated holdings, shying away from new ones in spite of the U.S. still offering investors high interest rates and decent prospects for growth. I'm Mitchell Hartman for Marketplace. Wall Street midweek actually is past midweek because things are closed on Friday. Traders

Well, they were a bit split. We'll have the details when we do the numbers. There are times in this job when you go out on a story and you just don't know what's going to happen. You'll hear what I mean in a minute, but there is a little setup that's required here. Regular listeners to this program will know that I like beer. They will also know that one of the things we like to do around here is talk to entrepreneurs about how they do what they do.

Back in early 2020, we came across and subsequently went out and talked to the co-founders of one of the few, very few, Black-owned breweries in this country. And this past Monday morning, we went out for a follow-up. He likes to boast about the economy because he loves it the most. Kai walking in the building.

This is the most unusual interview beginning that I've ever had. Hi. Hi, walking in the building. How you been? What's going on, man? Good to see you. Likewise. You look good, man. It's been like five years since we did that first one out in Englewood. Almost six now, right? Five. And one, we don't have masks this time. I know. I know. I know. Remember that? That was weird. It was strange. The whole thing was weird. That was the first field interview we did.

As the pandemic was getting going. Wow. It was bizarre. That's an honor. Thank you. Before we get going, actually now that we're already going, remind us who you are and where we are. I am Benny Ashburn, co-founder of Crowns and Hops Brewing Company, marketing guru, community expert, believer in craft beer.

We're an MTL Hunter, head of brewing operations, content curation, head janitor.

Jack of all trades, doer of all things. All the things that you are when you're an entrepreneur. How's business? Let's get that one out of the way. Yes. Wait, where are we? All right. Where are we? I forgot that part. Put the gun in charge. We are at Crowns at Creature, our new taproom residency in downtown LA. An amazing partnership that we formed with Creature Comforts Brewing Company West. Okay, now how's business?

It's tough. It is. It's tough. We are located in the fashion district of downtown L.A. And I think it's safe to say that perception about this region in general is tough. And people don't understand that there are still entrepreneurs like us that are creating space for the community to be patronized.

We've got to talk about since you mentioned where we are, we've got to talk about the timing of this interview. We were going to come talk to you all two-ish, two-and-a-half-ish weeks ago, which, depending on when this airs, I don't even know, was right when the protests were happening, ICE was happening, National Guard was happening, you know, deployed to Los Angeles. They're all still here. There is a—I mean, the city's fine, and everybody needs to know that, but I guess I wonder how that affected—

what it is that you all do, because we decided maybe it wasn't a great time to come and chat. Yeah, we agreed. It's,

Being specifically in the area where a lot of that is taking place, I think it's difficult. You have to really balance the understanding of supporting the important initiatives and what's going on in the cultural and economic environment. But then you also have to also run a business. But you want people to be safe. You don't want people to necessarily come outside to celebrate because this wasn't a celebratory moment. Right.

We knew we had to gut check with our team and our staff to make sure everyone did feel safe and that this environment would be a place where people can come and gather. Talk to me about the gut check. Keep going. What'd they say? I think what's special about this particular place in downtown LA, it is like a little oasis. So when I say gut check, we had to ask ourselves, is it safe to be down here? And

Yeah, we thought it was a good place to still be able to patronize. And even more than safety, our neighbors are impacted, period. We are a black-owned business. Yeah. And we are in a brown state. And we have seen our neighbors disappear.

we have seen our neighbors not show up for their businesses that ultimately support their families that support their neighborhoods. And, you know, to Benny's point, we didn't want to sound tone deaf by just saying, you know, nothing's happening. Um, but what we continue to do was be open any time we could to project that we were here. We are here for the people that occupy live and work in this community. And our community was impacted period. Um, so it, it,

It was heavy for us to, again, be entrepreneurs, project our business, but also make sure that we didn't sound like we were tone deaf to those that have been impacted. You guys wanted, when we first spoke out in Inglewood, you were like, I thought, like this close to getting your own taproom. And that fell through for a whole lot of reasons.

How big is it now for you to have this opportunity to do this pop-up here? It's huge. I think what you are seeing is the community within the community, the beer industry, is

partnering in order to not just survive, but to thrive together. And in my opinion, what that does is it instills a consumer confidence that a lot of people are wondering if it's even still there. I need to understand, though, why you made, we, the three of us, made such a big deal out of Inglewood that first time we spoke. And if you all, a black-owned business in a vastly majority white industry, right, and

Couldn't get yourself set up in a place in Inglewood. What happened? Why not?

Like you said, I think there were a lot of reasons, particularly post-COVID, while that property didn't necessarily work. But I think what's so beautiful about the Crowns and Hops brand is, honestly, we could take space anywhere and the community still exists and it still follows because we're bigger than just our location. We are a brand that is built for the community. You all have talked about being a case study for...

DEI is a loaded phrase, but for that concept in this industry, how's it going? I think what you see in this partnership, the residency, is exactly what we've always talked about. Racial equity is a tie that lifts all ships. There is now the compounding

of revenue in this particular building that is happening because our two brands, an established brand based out of Athens, Georgia, that may not have had as much velocity coming to this particular location, and a black-owned brewery based out of Inglewood that now has a place to point its community to that is now bolstering the overall revenue for this space. That is a win-win in our opinion.

It's been nine years now, right? 2016-ish. Wow, look at you knowing stuff. I mean, come on. You can't walk in empty-minded, you know? It has. Yeah, wow. Going on a decade. Are you tired? Honestly, yes. But when you are so passionate and you love something so much, being tired isn't enough to stop. And every day that we do this,

especially now having a physical space where people are physically coming here and saying to us, I have been waiting for years for you two to open up your own taproom space that I can now come and that I can bring my friends. And it's in those moments where you sit here and you just look around and you see all these people that have been supporting you for so many years. It makes you care even more. And I think this pivoting for the brand, this reinvention of having this space

It's kind of like that jolt of passion and energy and to really understand why we started this in 2016. Let's say this is an amazing success, this pop-up. Yeah. Then what? I think, again, we have always been focused on creating space like this in neighborhoods that have never experienced it. That's still our goal.

We have made a commitment not to get in or not to get over our skis on anything right now and being responsible not only to ourselves, our families and our and our investors. But but that is still the goal. We had a Father's Day event to where we invited fathers.

young and old to bring their families and to take a professional portrait and benny and i stood in this courtyard in in straight tears because we were just blown away to see the connection to see all those narratives that are thrown out there about us that are so destructive and toxic just fall away not in this space and that's the space that we're always focused on creating

This is so interesting. You're the poetry and you're the practicality, right? Right? That's what it is. I mean, yeah. Dope and dank. Yeah, I think, yeah, that's pretty accurate. Is the cash register open? Yes, it can. All right. I need a four-pack of that hazy, please, if we can make that happen. Whoa, whoa, wait, wait. What hazy? What do you mean, what hazy? You got to say it. Oh, the dopest hazy IPA? Yeah. All right. Y'all go right, Kai.

Doggone right. Benny Ashburn and T.O. Hunter. Crowns and Hops is their brewery. If you happen to be in L.A., the pop-up's at Crowns at Creature in DTLA through the end of September. Coming up... You think you know where we're at one day and then there's an announcement the next. Checking in with a hog farmer we know. But first, let's do the numbers.

Dow Industrials gave back 10 points today. We'll call that flat percentage-wise, 44,484. The Nasdaq picked up 190 points. That's more than nine-tenths percent. Closed at 20,393. The S&P 500 up 29 points, about a half percent, 62.27 there.

Oops, there goes another piece of annual guidance pulled by the company that issued it. In this case, it's health insurer Centene that withdrew its projections for how it's expected to fare this fiscal year because revenue from its marketplace insurance plans is likely to fall. Shares also fell more than 44.0% today. That also spooked investors and a couple other insurers. UnitedHealth dropped 5.7% to Elevance Health.

declined 11.5% today. Bonds down, yielding on the 10-year T-note 4.28%. You're listening to Marketplace.

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Applications are open now through July 6th. Visit marketplace.org slash board to learn more. Thanks for your consideration and thanks for listening. This is Marketplace. I'm Kai Risdahl. Justin Ho is telling us up at the top of the program how the labor market might react to all the trade policy agita that we've got going on right now.

And there was another data point to throw into the model this morning. The payroll processing company ADP says the private sector lost 33,000 jobs in June. Job losses that were concentrated in the service sector, which, if you remember Justin's piece, is the far, far greater slice of this economy. That is not a great sign, especially when I tell you that there's some slack in hiring across the country as well. Marketplace's Elizabeth Troval takes it from there.

Even the economists are having a hard time reading the signals of the labor market. So I asked a few to look at today's ADP data with a sort of glass half full, glass half empty take.

Nick Tremper with Gusto says for new grads, it's definitely looking half empty. If you're out there looking for a job, it's taking longer than you would like. And Yale's Martha Gimbel says while we knew the hot labor market had to slow... There have been some signs of weakness in the labor market this year.

Tariffs that we've had in place have increased uncertainty. And when Brian Colton with Fitch Ratings looks at the expected decrease in labor supply due to immigration restrictions and demographics. The more complicated picture is glass half empty, but it's just growth in the population of the working age and the growth in the labor force is clearly slowing down.

But let's not forget about the underlying indicators that point to a glass-half-full labor market, which is still robust, says Rice University's John Diamond. The tariffs have not shown up, at least to this point, in a widespread weakening of the labor market. He emphasized the market is working for job-havers more than job-seekers.

Plus, Brian Colton with Fitch Ratings says the unemployment rate is... Still very low by historical standards, right? And that backdrop for wage growth that Justin's story mentioned is a thing for people with jobs. He says wages for those folks are still growing. Companies want to hang on to workers. They're prepared to pay them, you know, four and a quarter percent more than they paid them last year. And so overall, he says, the labor market is still holding up. In other words, glass half full.

I'm Elizabeth Troval for Marketplace. Being a farmer is tough even in calm economic times. There is, of course, the weather to deal with, market forces well outside your concern, and all the rest of the hazards that come with getting your livestock or produce to market.

Now you throw in the distinctly not calm economic times in which we find ourselves, and it is even tougher out there. So we got Brian Duncan on the phone earlier today. He is the president of the Illinois Farm Bureau. He's a working farmer himself, too. Hey, Mr. Duncan, it's Kai. How are you, sir? Good, Kai. How are you? I'm well, thank you. I'm well. Let me just get right to it, because I know you've got a whole farm and a business and a farm bureau to run. Yeah.

How are things? This is a true story. I was looking at Lean Hog Futures before I came into the studio. They've had quite a run since the beginning of the year. Yeah, you know your markets. They have. I think we've been the beneficiary of some pretty high beef prices.

I think we've had some really good export demand. We want to maintain that, right? You know, Mexico is our number one destination. Canada, Japan, China, all of those destinations are important. But I think pork has been the beneficiary of some pretty expensive beef. So let me ask you, actually, since you brought up your export markets, talk to me about trade policy right now. How are you feeling? Very mixed on it.

There's a lot of uncertainty here. Let me, let's, let's talk about what we know. Trade is hugely important to agriculture and consistency is important to agriculture. You know, there are some, there's some low hanging fruit that needs to be addressed in these negotiations. And we need some signed agreements that, that provide some certainty and some security. And so,

We appreciate the administration's effort in these areas, but it has been very disruptive. And we know if there are reciprocal tariffs, we're going to be number one on everybody's target list. I imagine you have July the 8th and 9th, the day of the expiration of the 90-day pause. You got that circled on your calendar, yeah?

I sure do. And again, we're hoping, we're hoping, you know, there's there, it's been such a moving target, Kai. You think, you think, you know, where we're at one day and then there's an announcement the next. And so, uh,

I think that you've seen some of that reflected in the marketplace, just some uncertainty as we go forward. A couple of other things I want to check in with you about, sir. The tax bill that is currently, I guess it's in the House now. Sorry, speaking of things that are hard to keep track of, it's in the House. There are some provisions in there that would sort of make up for the absence of a farm bill, which you guys haven't had since 2018-ish. Are you satisfied that this bill takes care of the farmers out there?

This does not. Okay, so you ask a long question that I could take up your whole show with the answer. Okay. So yes, we are supportive of the agricultural and the tax provisions.

But this does not replace a full five-year farm bill. Some of the pay-fors, you know, are controversial. So we've got to see what survives the house here as we go forward. So look, listeners may or may not know, you and I have never met. We've only spoken on the phone probably half a dozen, maybe a dozen times now over the years. But my sense of you is that you are a generally optimistic person and you sound now as

As frustrated as I think I've heard you sound in the whole time that we've been talking. And I what what's going on with that?

Well, so if people wonder if I'm an optimistic person, first of all, I'm a farmer. And second of all, I'm a Cubs fan. So I think those are two, those give you two descriptions. It is. So some of the frustration is just not knowing here. There's been a lot of negotiations that have gone on behind the scenes on this budget bill. And again, frustration on, we've been asking for a farm bill for two years and they can kept getting kicked down the road. So I have members who,

that are dealing with

20, 25 expenses with a 2018 economic backstop. And that's caused great frustration. And we're in our third year of farm income decline. If it wasn't for some government payments that came out and we'd much rather get our money Kai from the marketplace than from the government. That's why we have every farmer. I talked to says that they want the markets. They want, they want the trade. They don't want the help in the handouts. Every farmer I talked to let's,

Let's be realistic. Farmers have spent a lot of their own money building these markets through what's called the checkoff program. And so that's that may be the sense of frustration. But part of it is this is a lot of this is going on and and and the negotiations have been.

hard to get a read on. How's that for a polite way of putting it? It's been a hard to get a read on a lot of this from trade policy to the negotiations going forward. I hear that. Brian Duncan, he runs the Illinois Farm Bureau, also farms for himself, hog and soybeans and corn as well. But Duncan, thank you, sir. It's really always good to talk to you. Thank you, Kai. It's a privilege and a pleasure. Thank you.

This final note on the way out today, by a strict reading of the dictionary, schadenfreude is the joy you might feel at another's pain.

By the somewhat less strict rules of market forces and America in the year 2025, schadenfreude is Tesla sales. The company reported vehicle sales today down 14% from the same quarter a year ago. That, of course, was before CEO Elon Musk and his operatives started disassembling the federal workforce. Capitalism being capitalism, though, Tesla shares up just shy of 5% today because that sales drop...

It was right about where everybody had been thinking it would be. Our media production team includes Brian Allison, Jake Cherry, Justin Duhler, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Torado, and Becca Weinman. Jeff Peters is the manager of media production. And I'm Kai Risdahl. We will see you tomorrow, everybody. This is APM.

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