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Right now, you can help unlock $25,000 from the Marketplace Investors Challenge Fund. That means your support for the Marketplace Morning Report can go even further, helping keep trusted economic reporting free for everyone. You can answer the call of the Marketplace Investors who gave extra to the challenge fund contribute one of the 500 gifts that's needed by Friday to unlock that $25,000 in extra funding. You can donate now at marketplace.org or or click the link in the show notes.
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Modern Enterprise has a lot of moving parts. Comcast Business helps you orchestrate it all with SD WAN working at scale to keep 150 hospital locations connected and working as one, plus SASE and Zero Trust Security protecting financial data across a bank's 2,000 branches, and AI powered networking that optimizes traffic across five continents. No one does business like Comcast Business.
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We're getting more productive. Well, maybe we is too much. Maybe you are. The country is From Marketplace, I'm Sabri Ben, ashore in New York. How much our economy makes for all the hours we all work. That is labor productivity. And it has been on a growth streak for the past year and a half or so. It increased 8/10 of a percent in the first quarter this year, according to the Bureau of Labor Statistics, and It's up almost 3% from a year ago. Diane Swan Wonk is chief economist at the audit, tax and advisory firm kpmg, and she is here to help us decode what is going on. Hi Diane.
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Good morning.
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So labor productivity, you know, how productive we are, seems to be on the upswing. Is that AI?
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Well, it's a little soon to say that AI and the application and adoption of AI is accounting for this, but certainly the fear of how AI may disrupt future business models is prompting firms to do more with less. That isn't necessarily the kind of productivity we want to see in the economy as it burdens those workers who are left with even more work.
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That's really interesting. So companies are kind of trying to get more productive because they know they're going to have to when I fully arrives.
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Or they're in fear of how AI may disrupt their entire business models and they're holding back on hiring or making cuts to hiring in anticipation of the cost of financing the investments they need in AI. So it's a whole spectrum of issues that are complicating our view of really how productive the economy is.
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Wow. Now, if you look at manufacturing, labor productivity in particular, it has been, well, manufacturing has been on the struggle bus for several years now. Productivity is now kind of where it was back in 2020, 2021, or what is going on there?
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Well, what we're seeing is since the pandemic in particular, we've seen AI investments start to crowd out other investments in the economy. And that, along with the weight of tariffs and the margin compression that we saw due to things like that, all set back productivity in the manufacturing sector, which is where, you know, historically we've seen productivity gains the strongest and where they deliver the most for workers. Instead, what we're seen is productivity gains really since the turn of this century accrue more to the owners of capital than workers in terms of wages. That has contributed to inequality and much of the political divisions and instability that we're currently enduring.
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Diane Swonk, chief economist at kpmg, Always a pleasure.
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Thank you.
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President Trump is threatening higher tariffs on the European Union. The EU is still working on finalizing a trade deal the two sides reached last summer, and President Trump is getting impatient. Marketplace's Nancy Marshall Genser has more in
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a social media post. Last week, President Trump threatened to raise tariffs on EU cars and trucks to 25%. They were cut to 15% as part of a trade agreement the US and Europeans reached last summer. But the EU hasn't passed final legislation to actually implement the deal, partly as a response to Trump's threats to annex Greenland. Some European lawmakers also want the Trump administration to cut tariffs on EU. Under last summer's agreement, the EU was supposed to eliminate tariffs on all U.S. industrial products in exchange for the lower U.S. import taxes on cars and most other EU products. The European negotiators are scheduled to meet again on May 19th. I'm Nancy Marshall Genser for Marketplace.
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Right now, you can help unlock $25,000 from the Marketplace Investors Challenge Fund. That means your support for the Marketplace Morning Report can go even further, helping keep trusted economic reporting free for everyone. You can answer the call of the Marketplace. Investors who gave extra to the challenge fund contribute one of the 500 gifts that's needed by Friday to unlock that $25,000 in extra funding. You can donate now at marketplace.org or click the link in the show notes.
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A vacation rental should come with support, not surprises. That's why VRBO comes with a VRBoCare guarantee and 24. 7 life support from real people. So if something goes sideways, Verbocare can help if the host cancels Verbo Care if the listing says heated pool, but there's actually no pool to heat. Definitely a Verbo Care thing.
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If my teenager starts calling me Leslie instead of mom.
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That's a family thing. Leslie.
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That makes sense.
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Sorry. Book with support, not surprises. VRBoCare and 24. 7 Life Support. If you know you're VRBO, terms apply. See vrbo.com trust for details.
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Oil is produced and refined all over the world, but it is bought and sold almost entirely using US dollars. This goes back to an agreement between the US and Saudi Arabia in 1971 where the Gulf state would price its oil exclusively in dollars. And as the US became the world's reserve currency, using dollars to trade in oil and a lot of other commodities became the norm. This oil money is referred to as petrodollars. Historically, those dollars were recycled either as loans to other countries decades ago or more recently invested in the US So with so many oil producing Gulf states unable to sell much oil and not recycling those dollars, some observers worry that could be a problem. Brad Setzer is not worried. He's an economist and senior fellow at the Council on Foreign Relations. Brad, thanks so much for being here.
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My pleasure.
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Are the oil countries, by selling their oil in dollars and then recycling those dol the stock market or Treasuries, are they propping up the economy and the US Government by doing so?
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Well, any country that's accumulating assets in dollars and lending to the US is providing financing to the US economy that supports the dollar. The Gulf countries actually haven't been the biggest source of dollar inflows recently. That has really been the bigger Asian manufacturing surplus countries. China, Korea, Taiwan. Before this shock, the Gulf countries collectively were maybe adding $100 billion to their foreign assets. Most of that was going into equities. Very little was actually going into the offshore dollar lending market. The classic Eurodollar petrodollar nexus. With this shock, the entire Gulf region, at least temporarily, is going to be a borrower. There's not enough of an oil flow getting out of the Gulf with the strait closed. So as opposed to being a source of petrodollars, the Gulf countries are now going to be borrowers in the offshore Eurodollar market. The Saudis already are. Abu Dhabi's been borrowing, Qatar's been borrowing. I'm sure Kuwait's going to be is borrowing. You're going to see an awful lot of dollar borrowing from countries that are normally lenders just because they don't have any oil proceeds.
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Does that affect us in any way? I mean, like one hears about, you know, significant investment from the Gulf in AI or other investments here in the US So if that's not happening because they're busy borrowing to, you know, deal with their problems. Does that have any negative impact on us?
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Look, if our tech companies can't raise money here at home, given how excited they are about their technology, there's a yes. The Gulf countries have been a source of financing, have been willing investors, have been willing to build out data centers. But at the end of the day, our tech companies are some of the world's richest companies. If AI is anywhere near as exciting and as promising as these companies claim, I am not worried about their ability to find other sources of money.
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That was Brad Setzer with the Council on Foreign Relations. More from that interview on the podcast in New York, I'm Sabri Ben, ashore with the Marketplace Morning report. From apm American Public Media.
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Anxiety, depression, bipolar disorder. At least half of us will experience a mental illness in our lifetime. In a new series of special reports from Call to Mind, we hear about the mental health impact of stress, climate change, immigration and more. Tune in for conversations with people managing hardship and experts seeking solutions. Listen to Call to Mind from American Public Media.