Booming Economy Isn't Impressing All Investors
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whelan. The U.S. economy is growing at its quickest pace in years, and yet it's becoming more difficult to impress investors. We'll explain why in a moment. First, these money and market stories you need to know. It's no accident that consumers across the U.S. are being inundated with airline credit card offers.
Why aren't investors impressed by the U.S. economy's strong growth?
The Wall Street Journal's Andrew Tangle and Allison Sider report that every major U.S. carrier earned more from credit card and loyalty programs in the second quarter than during the year-earlier period. And for many airlines, those increases outpaced overall sales growth. Much of the revenue comes from the credit cards associated with loyalty programs, though the programs don't necessarily require customers to have a credit card. Revenue from American's loyalty program, for example, grew 7% to $1.4 billion in the second quarter, while overall revenue at the world's top airline by traffic rose by 4%. And the loyalty program accounted for 12% of American's overall sales. That's roughly flat from a year earlier.
And the tight labor market and visa shortage are hurting all kinds of industries that rely on seasonal workers. But the $82 billion a year landscaping industry is the largest user of the visa program. It allows employers to bring workers from abroad for temporary positions.
How are airline loyalty programs boosting carrier revenues?
That accounts for 50% of all such visas certified by the government this year. But with the national unemployment rate at 3.9% and hovering near its lowest level in nearly two decades, Filling the temporary seasonal jobs at landscapers is even tougher when year-round work is more available.
We're joined by Wall Street Journal reporter Amrith Ramkumar. Is there such a thing as too much success? Well, there just might be in the case of the U.S. economy. So, Amrith, it seems that with investors, the continued upward track of economic growth here in the U.S. just cannot seem to satisfy expectations.
This isn't saying that momentum is going down necessarily. It's just that expectations have gotten much higher after the U.S. grew at 4.1% last quarter, its fastest pace in almost four years, and people are kind of looking at what's next. They're kind of revising upwards some targets, and there's really, I would say, division among investors about whether that rate of growth from the second quarter will be a one-off or continue. And again, it's all kind of relative, right? It's not necessarily that the U.S. is doing badly or even doing much worse. It's just that other countries are having an easier time topping more meager targets. And the U.S. is starting to miss in certain sectors. So people are kind of divided.
And the U.S. has come a long way in terms of stocks and the dollar and assets more tied to U.S. growth outperforming. And so some people think later in the year that might reverse and we might go back to an environment where assets tied to global growth like commodities that have been punished do a little bit better.
So it seems like it has a lot to do with the focus on the rate of change. And what I mean by that, many global economies like Germany, as you write about in your story, have rebounded and have had more room to grow, while in the U.S. the economy chugs along but may not be growing at such a fast pace?
Even if the pace is faster in the U.S., though, and the rate even remains the same, it's more just that the expectations, again, are so high. So these index, the city's economic surprise index, for example, is really focused on consensus projections. So even if the rate is higher, people are kind of baking that in more, I guess, if that makes sense. So it's becoming easier for the countries, like you mentioned, like Germany and other emerging markets to exceed those expectations. And A lot of this, again, has to do with sentiment, even looking at how this is impacting investor behavior in markets. And that has been rocked, really, by trade tensions all year. And so kind of underlying some of the recent market movements, like the dollar coming down and assets more tied to global growth outperforming, has been kind of the improvement in U.S.-China trade relations and the country's charting a path to resolve that conflict by November.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:24
2
Why aren't investors impressed by the U.S. economy's strong growth?
0:24–1:20
3
How are airline loyalty programs boosting carrier revenues?
1:20–4:43
4
Why is the tight labor market and visa shortage hurting seasonal industries?
4:43–7:27
Speakers
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