The Fed’s next moves could be a tightrope walk

Summary

Marketplace Morning Report: The Fed’s Next Moves Could Be a Tightrope Walk Release Date: March 28, 2025

In this episode of Marketplace Morning Report, host David Brancaccio delves into pressing economic and business issues shaping the current landscape. The episode covers three main stories: the Trump administration's executive order on federal unions, Florida's controversial bill on child labor laws, and the complexities surrounding inflation and the Federal Reserve's monetary policy. Additionally, the report examines the escalating trade tensions between the United States and Canada and their implications for businesses on both sides of the border. Below is a detailed summary of each segment, enriched with notable quotes and insights from expert guests.

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1. Trump Administration’s Executive Order on Federal Unions

Timestamp: 00:47 - 01:37

David Brancaccio opens the report by addressing President Trump's recent executive order aimed at limiting the influence of labor unions within federal agencies. The order targets several key departments, including Defense, Veterans Affairs, State, Justice, Treasury, Agriculture, Health and Human Services, and Interior. By prohibiting collective bargaining in these agencies, the administration asserts that the move is necessary for national security.

Nancy Marshall Genser, a Marketplace contributor, provides an in-depth analysis:

“The executive order appears to cover most federal agencies, including the Departments of Defense, Veterans Affairs, State, justice and treasury, and parts of other agencies including Agriculture, Health and Human Services and Interior.” [00:47]

Unions have responded vigorously, with the American Federation of Government Employees Union announcing preparations for immediate legal action. The AFL-CIO has also criticized the order, describing it as punitive towards unions already engaged in legal battles with the administration.

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2. Florida’s Bill to Loosen Child Labor Laws

Timestamp: 01:37 - 02:52

The next story focuses on a controversial bill in Florida proposing significant relaxations to child labor laws. The legislation seeks to allow 16 and 17-year-olds, and in some cases 14 and 15-year-olds, to work full-time, including during school days and overnight shifts.

Samantha Fields reports on the potential impacts and the surrounding debate:

“Florida has a shortage of workers, and Governor Ron DeSantis has said teenagers could fill some of that gap rather than immigrants.” [02:22]

However, experts like Robert Latham from the University of Miami express skepticism about the bill's efficacy and safety implications. Sadaf Night of the Florida Policy Institute warns that reducing protections for young workers could lead to negative outcomes, such as academic struggles and long-term economic disadvantages for the youth.

“Juggling school and juggling a job, coming to school exhausted and tired, not able to focus, will really hamstring them in their academic achievement.” [02:47 – Janelie Espinal]

The bill's proponents argue that it addresses labor shortages, but the opposition highlights the potential risks to young workers' well-being and future prospects.

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3. Inflation Metrics and the Federal Reserve’s Dilemma

Timestamp: 02:58 - 04:52

A significant portion of the episode is dedicated to discussing the latest inflation data and its implications for the Federal Reserve's monetary policy. The Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation, has risen more than expected, posing challenges for the Fed.

Susan Schmidt, a portfolio manager at Exchange Capital Resources, provides expert commentary:

“The core rate is higher than people expected, hotter than the Fed wants, and it's going to give some pause on any chance of changing interest rates in the near future.” [03:34]

She explains that the current PCE figures, which exclude food and energy prices, indicate persistent inflationary pressures. This uptick complicates the Fed's efforts to balance between controlling inflation and not stifling economic growth, especially with new tariffs that may further drive up prices.

“The Fed's in a difficult position right now. Last week's comments from Chairman Powell said that they're really not going to do anything. He's watching things carefully, and I think that's the way the market is going to take this.” [04:13]

Susan anticipates that the Fed is unlikely to lower interest rates soon, given the ongoing inflation concerns exacerbated by potential tariff implementations.

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4. US-Canada Trade Tensions and Business Implications

Timestamp: 05:07 - 08:33

The report shifts focus to the deteriorating trade relationship between the United States and Canada. Canadian Prime Minister Mark Carney has declared the traditional trade ties with the US as "over," signaling the imposition of retaliatory tariffs in response to US import taxes. This development forces Canadian businesses to reconsider their supply chains and explore reshoring—bringing operations closer to home.

Sam Grouet from the BBC provides on-the-ground insights:

“Like many Canadian businesses, Joanna Goodman is waiting for the dust to settle before deciding where to buy, where to sell, and what 'made in Canada' really means for the future.” [07:58]

Joanna Goodman, owner of Oleifine Linens in Toronto, discusses the challenges faced by businesses reliant on American products:

“The tariffs could be gone tomorrow. Let’s see how it all unfolds and then, you know, we'll start making decisions.” [08:09]

Economist Randall Bartlett offers a broader perspective on the potential shifts in Canadian industries:

“Maybe in processing steel and aluminum. You may see more upstream manufacturing to support sectors like mining. A lot of that I think will come back to Canada's comparative advantages.” [06:36]

Despite talks of reshoring, Bartlett notes that significant action has yet to materialize, with only a small percentage of Canadian businesses planning to relocate supply chain activities domestically. The focus appears to remain on leveraging Canada’s strengths in natural resources rather than overhauling entire industries like automotive manufacturing.

Sam Grouet highlights the complexities and uncertainties businesses face amid fluctuating tariffs:

“Hanging over all of this, the US Government's rapidly changing policies on tariffs.” [08:01]

The segment underscores the precarious position of Canadian businesses navigating between maintaining longstanding trade relationships and adapting to new economic realities.

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Conclusion

This episode of the Marketplace Morning Report provides a comprehensive overview of significant economic developments, from federal labor policies and state-level labor law changes to inflationary trends affecting national monetary policies and international trade tensions. Through expert analysis and real-world business perspectives, the report underscores the intricate balance policymakers and business leaders must maintain in an ever-evolving economic landscape.

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For more in-depth coverage and ongoing updates, listeners are encouraged to tune into future episodes of Marketplace Morning Report.

Transcript

[David Brancaccio]

Hi, it's David Brancaccio. Marketplace's March fundraiser is ending on Friday at midnight and we need your help. We can't afford to fall short of this goal. Every dollar you give comes back to you in the form of trustworthy, grounded journalism that helps you understand the economy. We're in this together. Whether it's your first time donating or you're a longtime Marketplace investor, please help us [e-mail] donate and thank you. The president wants federal employees out of labor unions. I'm David Brancaccio in Los Angeles. President Trump has signed an executive order limiting unions at a list of federal agencies and ends collective bargaining at those agencies. Unions are pushing back. Marketplace's Nancy Marshall Genser has that.

[Nancy Marshall Genser]

The executive order appears to cover most federal agencies, including the Departments of Defense, Veterans Affairs, State, justice and treasury, and parts of other agencies including Agriculture, Health and Human Services and Interior. Unions for workers at those agencies will no longer be able to negotiate on things like working conditions. The Trump administration cites national security as a rationale for the move. But the executive order doesn't cover, for example, US Customs and Border Protection. Its workers union endorsed President Trump. The American Federation of Government Employees Union says it's, quote, preparing immediate legal action to fight the executive order. The AFL CIO says the order is punished. Punishment for unions already fighting the administration in court. I'm Nancy Marshall Genser for Marketplace, A.

[David Brancaccio]

Workplace Safety and Culture. Story of the week. Lawmakers in Florida have advanced a bill to loosen child labor laws in the state. It would allow all 16 and 17 year olds, along with some 14 and 15 year olds, to work full time, including on school days and on overnight shifts. Marketplaces Samantha Fields has more kids can.

[Samantha Fields]

Work in Florida now if they're at least 14. But Robert Latham at the University of Miami says there are restrictions on how many hours a day and a week they can work when school's in session.

[David Brancaccio]

We also limit the time that they can work, capping it off at 11 o'clock at school night.

[Samantha Fields]

This bill would lift many of those limits. Florida has a shortage of workers, and Governor Ron DeSantis has said teenagers could fill some of that gap rather than immigrants. Latham is skeptical.

[David Brancaccio]

Our immigrant workforce is in fields and farming and agriculture in kitchens. These are hard jobs.

[Samantha Fields]

But teenagers and struggling families might sign up for long hours at hard jobs. Sadaf night at the nonprofit Florida Policy Institute says for them, having fewer protections could be harmful.

[David Brancaccio]

Juggling school and juggling a job, coming to school exhausted and tired, not able.

[Janelie Espinal]

To focus, will really hamstring them in their academic achievement.

[Samantha Fields]

And she says that could have lifelong economic consequences. I'm Samantha Fields for Marketplace.

[David Brancaccio]

A key measure of inflation is running hotter than expected, according to data out this morning. It's the one that needs to be rebranded to something zestier. But it's now the personal consumption expenditures, or PCE price index, adjusting it to ignore food and fuel prices the way the guardians of interest rates at the Fed prefer. Susan Schmidt is portfolio manager at Exchange Capital Resources. I got her on the phone from France. Hey, Susan.

[Susan Schmidt]

Good morning.

[David Brancaccio]

All right. This is the inflation measure that the cool kids use. You use the core rate that takes out food and energy prices. And how do you read the results?

[Susan Schmidt]

Well, the core rate is higher than people expected, hotter than the Fed wants, and it's going to give some pause on any chance of changing interest rates in the near future. This month's reading was positive, 0.4%. That's more than the 0.3% expected and it's more than than the 0.3% we saw in January. Things aren't cooling off. They're still heating up. That's concern for the Fed. And that also means that we probably aren't going to see a decrease in interest rates anytime soon.

[David Brancaccio]

And that's with many of the promised tariffs not even kicking in quite yet. And we're not sure if they will. But those, some economists believe can be inflationary.

[Susan Schmidt]

That's right. So when those tariffs kick in, if they kick in, that's going to likely increase prices further. That puts additional pressure on the Fed to figure out how to handle this economy that might be slowing because of those tariffs, but also might be inflationary because of those very same tariffs. The Fed's in a difficult position right now. Last week's comments from Chairman Powell said that they're really not going to do anything. He's watching things carefully, and I think that's the way the market is going to take this. No change to be seen, at least for the time being.

[David Brancaccio]

Susan Schmidt, portfolio manager at Exchange Capital Resources, based in Chicago normally. Susan, thank you.

[Susan Schmidt]

Thank you.

[David Brancaccio]

Canada's Prime Minister Mark Carney told reporters yesterday that his country's old trade relationship with the United States is, quote, over and that Canada will implement retaliatory tariffs in response to US Import taxes. Carney also said Canada will have to reduce its reliance on the United States. For some, for Canadian businesses, this means reconsidering supply chains and maybe bringing more of their operation closer to home, something known as reshoring. The BBC's Sam Grouet reports.

[Sam Grouet]

In the Toronto store of bedding retailer Oleifine Linens, owner Joanna Goodman is weighing up what's best for the business. As U.S. canada trade tensions mount.

[Joanna Goodman]

The products that we do bring in from the U.S. i would say, let's say it's about 20% of our entire offering. You see how much inventory we have on the shelves. So even 20% of our offerings, quite a lot.

[Sam Grouet]

Her giant warehouse is home to elegantly made up beds and mannequins in silk pajamas. Nearly all of it is made in Canada.

[Joanna Goodman]

But I have a lot of inventory here of American brands that I've had relationships with for 20 years. The question is, will I reorder?

[Sam Grouet]

Despite talk of reshoring so far, it's hard to tell if there's been any action. Just over 4% of Canadian businesses surveyed in 2023 said they intend to relocate supply chain activities to Canada. Statistics Canada survey suggested. Economist Randall Bartlett thinks whatever we do see will be focused on key industries.

[Randall Bartlett]

Maybe in processing steel and aluminum. You may see more upstream manufacturing to support sectors like mining. A lot of that I think will come back to Canada's comparative advantages, which are very much tied historically to the natural resource sector in Canada.

[Sam Grouet]

In southwest Ontario, one of those is soybean, of which Canada is among the largest producers in the world.

[Randall Bartlett]

But what we don't do enough of is processing those value added ingredients into more valuable ingredients here at home in.

[Sam Grouet]

Canada, Graham Markham's firm, New Protein International, is constructing Canada's first soybean protein manufacturing plant just miles from the U.S. border.

[Randall Bartlett]

We had envisaged that being a larger part of our future customer mix than what it may end up being.

[Sam Grouet]

Despite the potential benefits of reshoring from lower carbon emissions to a boost to small businesses, building up production and supply chains has major hurdles. The highly integrated auto industry, for example, would take years to establish. Says Randall Bartlett.

[Randall Bartlett]

It's going to be very difficult for Canada to start building cars which are 100% Canadian content. Some countries are better at producing some things than other countries are. And it makes more sense to focus on those things that you're good at.

[Joanna Goodman]

So this is the warehouse back at.

[Sam Grouet]

Only Fine Linens in Toronto. Hanging over all of this, the US Government's rapidly changing policies on tariffs.

[Joanna Goodman]

I mean, these tariffs could be gone to every day you look at the news and it's like tomorrow, today they're gone. Let's see how it all unfolds and then, you know, we'll start making decisions.

[Sam Grouet]

Like many Canadian businesses, Joanna Goodman is waiting for the dust to settle before deciding where to buy, where to sell, and what made in Canada really means for the future. From Toronto, I'm the BBC Sam Grouet.

[David Brancaccio]

For Marketplace, and in Los Angeles, I'm David Brancaccio. This is the Marketplace Morning Report from apm, American Public Media.

[Janelie Espinal]

If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal finance. Financially Inclined from Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of. I'm the host, Janelie Espinal, and each week I ask experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially Inclined Wherever you get your podcasts.