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Chapter 1: How is AI expected to influence inflation in the coming year?
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Five days in this economy, seven minutes to sort it all out. Let's see how we do, huh? From American Public Media, this is Marketplace.
Chapter 2: What recent price increases have Microsoft and Apple announced?
In Los Angeles, I'm Kyle Rizdahl. It is Friday today. Finally, this one is the 26th of June. Good as always to have you along, everybody. The economy this week... was a little bit data and a little bit vibes. So we're going to do both, and we're going to do it with Catherine Rempel from MSNOW, also Greg Ip at The Wall Street Journal. Hey, you two.
Hey, Kai. Hey, Kai.
Greg Ip, you get to go first, and we're going to start with data. The big ones, of course, this week, PCE came in at 4.1%, not great. GDP came in at 2.1%, acceptable. You get the first whack at making sense of it. Go.
Chapter 3: How can AI potentially make products cheaper in the future?
Okay, let's start with that inflation number. Now, that 4.1% inflation number looks pretty bad, but we know that it was somewhat inflated by the price of gasoline. But we also know that the price of gasoline has come down in the last few weeks. So it's probable that inflation will be lower in coming months, but not that much lower. It's still running around 3% based on this particular measure.
which is a little too high for the Federal Reserve. So you have a new Fed chairman, Kevin Warsh. He's had one meeting where they kept rates steady. And now there's a lot of chitchat that, hey, they may actually have to raise rates, which would be quite ironic since President Trump appointed Warsh hoping he would cut rates.
That would be one word for it.
Yeah. Ironic. Yes. I think Trump might have a different word for it. That said, I think it's everybody needs to sort of like take a deep breath. We have a few more months, I think, before we have a real picture of what the underlying inflation trend is. I think some of the tariff effects are fading. Some of the stuff going on in inflation looks a little weird.
Maybe it's related to the demand for memory chips and computers. So I don't think there's any rush to raise rates. And at the same time, as you say, with the economy growing around 2% a year, which is quite decent, and no sign that the job market is collapsing, I don't see a great need to cut rates either.
Catherine Rempel, I would like to introduce you to a little friend of mine called Core Inflation. It is still well above where the Federal Reserve wants it to be. Austin Goolsbee said on this program, the president of the Chicago Fed said on this program on Monday that, you know, inflation is trickling into and becoming sticky in services. So it's not just oil and gas, right?
Yeah, it's not just oil and gas.
Oil and gas are the biggest drivers of the headline numbers. But yes, core inflation is when you strip out energy and food. And even with those things excluded, the core, the rest of the index, essentially, the core inflation rate is still above the Fed's target, has been above the Fed's target for what, like five years now, something like that? And before that, it was below it.
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Chapter 4: What strategies did a union use to negotiate lower healthcare costs?
So, you know, I mean, come on. Yeah. Well, before that, the Fed suggested that, you know, that they were not so worried about it being consistently below it and they wanted to work their way through greater expectations, I should say, I guess.
I guess, for full employment, you know, that they could be willing to go easy in terms of monetary policy for longer because they were much less worried about where inflation was going. We're in a different state of the world now. And I think it is increasingly likely that Kevin Warsh is going to have to preside over incoming new higher interest rates. Markets seem to think so.
And Donald Trump, clearly not happy about it earlier this week. He sort of torpedoed a bipartisan housing bill and said in his comments, who needs a housing bill when what really matters for getting housing prices down is lower rates? Why doesn't the Fed cut rates? So if I were Kevin Warsh, I would be feeling a little nervous right now, given how Trump has behaved toward a previous president.
Fed chair appointee who did not cut rates as much as he wanted. Who none of us in this room need to name. OK, Greg, we now turn to the we now turn to the vibes portion of this conversation. And let's pick up on Kevin Warsh's mood and the general sort of feeling out there that money is about to get more expensive. AI is spending money hand over fist.
We're going to talk about that in a little while. And with Stephanie Hughes, what's the what's your sense of the vibes?
So this is a good week to talk about vibes because there were two very important vibes in the markets, but they kind of cut in opposite directions. The first vibe goes to artificial intelligence, AI. Now, we all know there's been this AI boom that's been going on for years. It's one of the reasons the stock market's been so strong.
But this week, we saw growing signs of nervousness that maybe it's too strong. People were saying, oh, my gosh, look, open AI is going to delay their IPO. Yeah. SpaceX's stock price is down and they're issuing all these new bonds to borrow more money. And Apple is raising prices because memory chips are so expensive. And so some of the air is coming out of that AI boom or bubble, if you want.
But wait, sorry, sorry to interrupt.
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Chapter 5: How is garage sale culture in Alaska unique?
Do you really think so? Because if you look at Mike, not that this is a stock picking show, but if you look at micron technologies the other day, they blew the doors off their earnings.
Well, they did, but that wasn't enough to pull the whole stock market up. Now, if I were a stock market guru, which I'm not, I might say that when the earnings are good and the stock prices don't react well, that's kind of a bad sign. But what I think for the purposes of our show and our listeners, what matters is does this tell us that the AI boom itself is about to run aground?
And we just don't have any evidence of that. We don't see signs of the demand for AI slackening or the investment in AI infrastructure going down, and that would be good for the economy. Now, the other vibe, very quickly, is the price of oil coming down a lot because of, you know, such as it is in the Strait of Hormuz.
And that should, before long, lead to much lower gasoline, which is already below $4 a gallon. So that's kind of pushing in a positive direction. Although that said, Kai, I have to say I'm surprised that when gasoline went as high as it did, it didn't really shatter the mood of the economy that much. So maybe I shouldn't be so optimistic about what happens when it comes down.
Well, hold on, because maybe you should. I don't know. But Catherine, this one goes to you and it goes to consumer sentiment, which came in today up a little bit, but it's still low. Consumers are cranky, but they're still spending.
I mean, the vibe, my read of the vibe is people are really cranky and they're pulling money out of savings and accumulating credit card debt, but they are still spending and driving this economy. Yeah, I basically agree with that. I would say that the vibes of the economy are extremely negative, just in the sense of consumer sentiment being abysmal.
I mean, being lower than it was during the deepest depths of the great financial crisis and the Great Recession and all of that. Worse. I don't actually don't know if it's worse than it was during the pandemic in the most recent imprint, but it certainly has been.
So on paper, the fundamentals of the economy would not seem to justify that level of sourness in terms of attitudes about the economy or how people say that they are experiencing the economy. But people are clearly frustrated. Some of this is that we should – Take it with a grain of salt. People are answering these questions with a little bit of a partisan lens in how they look at things.
And that's been a problem for interpreting consumer sentiment data for a while. But people seem real mad, kind of regardless of how good or bad the economy is, which makes me wonder how mad will they be if the economy actually does go into a recession? I should say when the economy eventually goes into a recession, which is hopefully no time soon.
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Chapter 6: What economic impact does the 127-yard sale have on rural communities?
Just a question of proximity. Catherine Rampell, you can get her at The Bulwark, also MSNOW. Greg Ip at The Wall Street Journal. Thanks, you two.
Thanks very much, Guy.
Have a nice weekend. Wall Street today. Traders ended things to the downside. Details, numbers, you know the drill. I know it seems like forever ago, but we did a story on Monday, as I alluded to a minute ago, about AI and its inflationary undertones. Data center spending, chip demand, you can connect the dots as well as I can.
And sure enough, yesterday, Microsoft and Apple said prices for Xboxes and some MacBooks and iPads are going up. Here's the Apple statement. The rapid expansion of AI data centers has created an extraordinary surge in demand for memory and storage. We have never seen, Apple said, a component price increase this much this quickly.
Small comfort, I know, if you're in the market for a new gizmo now. But as Marketplace's Stephanie Hughes reports, expectations are that AI is going to boost productivity and thus actually ease inflation eventually. Say you're a lawyer and you handle about five cases at once.
I don't know. I'm not a lawyer, so I don't know the exact numbers.
Alan Detmeister is an economist with the bank UBS. But he's imagining a time when AI will let you, the lawyer, become more productive and handle, say, 10 cases at a time.
So what do you do? You probably lower your price a little bit.
Pushing down inflation. Dettmeister says that lower prices mean more people can afford to hire you and you're making more money because you've doubled your workload.
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Chapter 7: Why are retro matchbooks becoming popular among younger generations?
Part of it is that if somebody used an AI tool to try to do work two years ago, they probably didn't get a great result. And so some people got discouraged and they may not be trying anymore. It's also not clear exactly how productive AI will make us or when. Tech historian Margaret O'Meara at the University of Washington says we can learn from the advent of the digital age in the last century.
Sort of similar to now, there was a lot of heralding the internet as this extraordinary and transformative technology. And by the end of the 1990s, it wasn't quite delivering on all those promises. But the internet has turned out to be kind of a big deal. And the same could be true for artificial intelligence. It could make a whole lot of things cheaper, but it might take a minute or two.
I'm Stephanie Hughes for Marketplace. Hey, so here's a thought. What if rising health care costs weren't, you know, inevitable? Well, there's a labor union on the East Coast. It counts nearly 200,000 doormen and cleaners and food service workers in its membership. That is showing it is possible to offer good health care and save money at the same time. Alex Olgin has the details.
The $40 Alfreda Simpkins used to shell out for every doctor's visit she now spends on her grandkids.
They like to go to the arcade.
The 68-year-old grandmother is a porter at a Long Island apartment building. She keeps the lobby and hallways clean and takes out the trash.
At least I can take that and we can spend the day and we have memories and that's priceless.
Simpkins saves $40 per visit. Her union, 32BJ, expects to save $46 million this year alone. Claire Brockbank, who runs 32BJ's health fund, says the savings come from a simple idea. Take back control from the insurer. We have to change the dynamics of health care fundamentally. There are two ways to lower health care costs. Send patients to less expensive hospitals and negotiate better prices.
Brock Bank says the union's insurer stood in the way of both. So the union went directly to Northwell Health, a 28-hospital system across New York and Connecticut.
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Chapter 8: What insights can we gain from the rise of matchbook collecting?
and negotiated its own deal. Brock Bank says the union is now paying about half as much as before. Members can still get care elsewhere, but Brock Bank is trying to make Northwell the obvious choice. We give them economic incentives, but we do give them choice. And so we remove the co-pays for all the Northwell dogs as an added incentive.
For the Northwell health system, the appeal is less administrative rigmarole and more predictable payments. Nick Stefanesi runs the arm of Northwell that works directly with employers. He says Northwell spends a lot of money just to get insurers to pay for surgeries and visits.
It's expensive. The health system has thousands of employees whose job all day every day is to work to get the health system paid for the care that they've already delivered.
Northwell has these arrangements with 70 companies covering about 300,000 patients. So they still deal with traditional insurers for the vast majority of their patients. But Stefanese is bullish that these direct contracts will continue to grow.
We're not yet anywhere close to a majority. We will be one day. I am confident that we are on the trajectory.
Other big hospitals like Henry Ford in Michigan and Savrill in Indiana have done similar deals. Elizabeth Mitchell leads the purchaser business group on health, which represents large employers. She says those that have been doing these direct contracts for years see savings between 10 and 30 percent.
And I think you're going to see more and more of this because employers cannot continually absorb double digit increases year after year. And they're not looking to push more cost sharing onto their employees. Mitchell says these arrangements typically only work for large companies with people all in the same city.
and she warns they can be a big lift to set up. 32BJ's Brock Bank says that's why she's sharing exactly how the union did it.
We do believe that a rising tide lifts all boats.
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