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- [00:02]
Kai Ryssdal
Economic growth, a little commercial real estate and a steak dinner to top it off. From American Public Media, this is Marketplace in Los Angeles. I'm Kyle Rysdal. It is Thursday today. This one is the 19th of December. Good as always to have you along, everybody. Remember yesterday when Fed Chairs Jay Powell said the economy's in a good place? This is part of what he was talking about. The Bureau of Economic Analysis let it be known this morning that the final update on gross domestic product showed an annual growth rate of 3.1% in the third quarter. That's an upward revision from the last estimate, and it means economic growth actually sped up in July, August and September compared to the previous three months. One driver of that growth, exports. They were up nearly 10% over the past quarter. Marketplace's Stephanie Hughes gets us going with this. Look at what we're selling that the rest of the world is buying.
- [01:10]
Stephanie Hughes
The US exported more of what are called capital goods in the third quarter. These are things that help businesses make other things, especially semiconductors and other ICT products. Information, communication technology, think computers and stuff. Emily Blanchard studies international economic policy at Dartmouth. She points out that the computing industry is highly dependent on global trade. And while the US does import a lot of computer parts, it exports them too. The components and the bits and the bobs and the machinery. This is all going in and out, almost like respiration, like breathing. Blanchard points out that the increase in computer related goods lines up with an increase in the export of computer related services. You sell the machine, but you also sell the engineers who can fly over and help you set up the product or go and maintain the product. This export growth might not be sustainable, says Cornell trade policy professor Ishwar Prasad. He says the US economy is doing really well, but other countries are stumbling.
- [02:11]
Emily Blanchard
When the rest of the world is in crummy shape, economically speaking, the reality is that they're just not going to be able to buy much stuff or.
- [02:20]
Stephanie Hughes
Services from the U.S. prasad points out that imports also increased in the third quarter, underscoring the U.S. economy's growth.
- [02:27]
Emily Blanchard
Especially because a lot of this growth has been driven by consumer demand. We are buying a lot more stuff from the rest of the world.
- [02:34]
Stephanie Hughes
Those imports could be going up, says Syracuse economics professor Ryan Monarch, as both companies and consumers rushed to buy things before anticipated tariffs from the Trump administration.
- [02:44]
Ryan Monarch
Let's get it on the boat. Let's make our orders. Let's buy our car now before we have to pay more for the parts, right?
- [02:51]
Stephanie Hughes
Monarch says if more US tariffs are imposed, he expects other countries will impose tariffs on our exports too, making our stuff more expensive, which means they might buy less of what we're selling in the future. I'm Stephanie Hughes for Marketplace.
- [03:05]
Kai Ryssdal
More on tariffs coming up a little later in the broadcast. On Wall street today, the Dow snapped its longest losing streak in 50 years, but just by the hair on its chinny CH chin. We will have the details when we do the numbers. The Marketplace organized labor macroeconomic word of the day today is leverage because just in time for the holiday crunch, Amazon is having some union troubles. Thousands of workers at seven of the company's fulfillment centers across the country have gone on strike. Amazon does say that it doesn't figure the strike is going to disrupt holiday deliveries, so there's that. Meanwhile, though, the company is facing an altogether different problem with its office workforce. Starting in the new year, corporate Amazon employees are supposed to return to the office five days a week, But Bloomberg is reporting the retailer is delaying some of those plans because it just doesn't have enough places for those people to go. And Amazon's not alone. Premium office space is once again at a premium. As Marketplace's Matt Levin reports, Generally speaking.
- [04:24]
Matt Levin
The office real estate market is still not good. Vacancy rates across all types of office space are around 20%, and higher tier properties are still struggling to find tenants. If your return to office pitch is, hey, you can cosplay last of us in this vaguely post apocalyptic central business district, your employees are going to prefer Zoom, but for some very fancy offices in certain locations, yeah, demand is back.
- [04:50]
Kai Ryssdal
Fulton Market, West Loop, Chicago, Uptown, Dallas.
- [04:55]
Matt Levin
Downtown Miami, Thomas La Salvia's head of commercial real estate at Moody's Analytics. What do those neighborhoods have in common?
- [05:03]
Kai Ryssdal
They have life. They have restaurants and bars. They have parks. They have walkability.
- [05:10]
Matt Levin
The era of big companies rapidly shedding office space is just about over, says David Smith at Cushman and Wakefield, as return to office plans finally leave the planning stage.
- [05:21]
Ryan Monarch
So now they're looking at their portfolio and saying, okay, we're gonna need to expand over the next couple of years as we grow and as we bring people back.
- [05:30]
Matt Levin
Leasing activity and prices were up this year in elite Class A offices in desirable areas. And it's not just being driven by big tech.
- [05:39]
Ryan Monarch
The legal sector has actually been setting records in terms of leasing space the last couple of years.
- [05:45]
Matt Levin
Smith says that's partly because law firms want young associates to spend more time getting face to face mentorship. Thing is, the number of shiny new Class A office buildings under construction is set to decline, which could bring some life back to Class B office buildings, especially those that have made post pandemic upgrades, says Mike Watts at cbre. That would be a fitness center, that.
- [06:08]
Kai Ryssdal
Would be a conference center, that would.
- [06:10]
Samantha Fields
Be a tenant lounge.
- [06:12]
Matt Levin
One obstacle though, even if that fitness center is nicer, you still have to work out in front of your co workers, which you don't have to do at home. I'm Matt Levin for MarketPL.
- [06:38]
Kai Ryssdal
Don't know if you saw this yesterday, but the Environmental Protection Agency made some news. It decided to let California and 11 other states ban the sale of new gasoline powered cars after 2035. The clock of course is running on the Biden administration's policies. But as the political fight over the EV sales plays out here, let us turn our eyes to Norway, shall we? Kari Lundgren wrote in Bloomberg the other day about how Norway is oh so very close to the only new cars being sold there being EVs. Corey, welcome to the program. Good to have you on.
- [07:12]
Emily Blanchard
Yeah, nice to be speaking with you.
- [07:14]
Kai Ryssdal
There are so many ways that EVs should not be working in Norway, right? It's cold, there's lots of hills, and yet somehow they've done it. How?
- [07:23]
Emily Blanchard
It's been an amazing journey. I mean if you look back about a decade, there were only 3% of the cars on the road were EVs. Today it's close to 30% and about a 96% of sales are EVs. So that's been an incredible journey. I think we can look if you looking back to sort of the mid-90s, there was actually a homegrown EV. It wasn't the greatest of EVs. It was boxy and awkward, but there were a lot of policies put in place at the time to sort of incentivize that car. Then fast forward, you started seeing other models being made available. And because those incentives had been in place since the mid-90s, they were actually price competitive with fossil fuel models and that was really key to, to them taking off in Norway.
- [08:07]
Kai Ryssdal
When you're driving around Oslo, first of all, do you drive an ev?
- [08:10]
Emily Blanchard
I don't, I don't actually have a car.
- [08:13]
Kai Ryssdal
All right, well when you're, when you're walking around Oslo, what does it look like? I mean, are there, you know, high powered chargers all over the place and all of that stuff? The infrastructure?
- [08:24]
Emily Blanchard
Yeah, I mean it's incredible. You see just the range of EVs on the road. I mean all sorts of different Chinese models, xpengs, neos, voyeurs and then, yeah, char chargers on pretty much every block of all sorts of different descriptions. Some are from the city, some are, you know, Tesla one, some are Circle K, like the one I read about. Circle K, Circle K, yeah, Circle K, Circle K. They actually have been really pushing EV charging and it's interesting because initially, you know, the government did subsidize some of the charging network, but now, you know, they don't need to do that anymore because it's actually competitive for companies like Circle K and some of the other oil and gas companies to actually be installing the chargers.
- [09:04]
Kai Ryssdal
Since you mentioned oil and gas, Norway has a huge reserve, shall we say, of oil and gas, both buried underground, but also the money in the bank. That helps here, right?
- [09:15]
Emily Blanchard
Yeah. You know, I think it's quite, it's an interesting aspect of this because I often get people saying, well Norway had lots of money so like how is this relevant for the rest of the world? And I think what is important to realize that Norway was a first mover here and there's always a cost to being a first mover but that, you know, this was expensive 10 years ago, but now what you're seeing is that the price of the cars has come down a lot. So where the money has helped has been sort of for building some of that infrastructure. You know, these people weren't actually paid to buy an ev. What happened is that through, through taxation it was more costly to buy a fossil fuel car, so people naturally chose an ev. But what has happened is that in the tax budget, normally the taxes you would have made off of having, you know, get bringing in revenue from fossil fuel car, the registration tax, nor we can forego that because we have this, there's this excess of oil wealth.
- [10:06]
Kai Ryssdal
Right. You do mention in this piece that government policies have been remarkably consistent over the decades and that has really helped. And obviously I'm thinking here now of what's going on in the States and how we are not consistent in our policies.
- [10:19]
Emily Blanchard
Well, and it's so interesting, I mean you mentioned earlier the oil wealth and if I were to actually say to you like what sets Norway apart? I would say that that government consensus has been really critical because like you've had left leaning governments, you'd have had right leaning governments and either way they've basically kept these polic in place. So all that like you know it and it's a small place. I think there's been a bit of pride that we're a world leader or Norway's a world, I shouldn't say we, but where Norway is a world leader in this, there's something about that as well.
- [10:48]
Kai Ryssdal
Yeah, we should say here just on the way out, gas powered vehicles are still the majority of cars on the road over there and they're going to be there for a good long while.
- [10:58]
Emily Blanchard
Yes. And I think that is actually also has underpinned this policy in some ways is that people aren't being forced to choose an ev like they're being incentivized to do so. And if you're a farmer up in some of these valleys, you may have legitimate reasons for why you just don't think an EV makes sense for you or you may be somebody who just loves trying driving a fossil fuel car. So I think that's been really also important in that it takes like the air out of the balloon in terms of the controversy around it. Like people just are like, oh, I'm going to get a car and it happens to be an ev. And I'm if I'm excited about that, it's like one of the guys in one of the shops I went into and he's like, you know, five years ago it was always a discussion about like, oh, are you going to buy an ev that's going to be kind of different. And now it's like the opposite. Oh, you're buying a fossil fuel car. That's kind of different. Why are you doing that? You have to explain yourself, you know. But as you say, there are still fossil fuel cars on the road and they will be for, for a while yet.
- [11:54]
Kai Ryssdal
Carlunger at Bloomberg Car, thanks a bunch. Appreciate your time.
- [11:57]
Emily Blanchard
No worries. Thanks.
- [12:14]
Kai Ryssdal
The thing about tariffs, as we know President elect Trump's favored trade tactic, the thing about them is that they happen not in a vacuum. We obviously can't know exactly what the once and future President has in mind until he tells us. But at the moment, the offers on the table are for 10% tariffs on everything coming into this country from anywhere, 25% on goods from Mexico and Canada and another 10% on top of the current duties on goods coming from China. Last time around in 2018, when then President Trump imposed tariffs on Chinese goods, China countered with tariffs of its own. See also tariffs not happening in a vacuum. This time it's going to be same same. And businesses in China that import from the United States are bracing themselves. Marketplace's Jennifer Paak reports from the central Chinese city of Wuhan.
- [13:04]
Jennifer Pak
At a restaurant in a Wuhan mall, I meet entrepreneur Su Ng Wu for dinner. Business has been good, he says, but not as good as it used to be. Su sells water treatment equipment for cooling systems, mostly from the US to Chinese data centers. He started the business in 2018, the year the first Trump administration imposed tariffs on Chinese exports.
- [13:31]
Patrick Weigel
When Trump imposed extra tariffs on Chinese exports, China fought back by levying an extra 10% tariffs on American exports. So the total tariff rate for us became 23%.
- [13:43]
Jennifer Pak
He says he absorbed the additional costs, some $290,000 between 2018 and 19.
- [13:52]
Patrick Weigel
Today, the counter tariffs remain, but the Chinese government also has a policy to exempt some firms. We applied and we were exempted from the extra 10% duties.
- [14:04]
Jennifer Pak
But that exemption might not last. Last month, President elect Trump made headlines when he said he will impose another round of tariffs an extra 10% Chinese exports once he gets into office. China's Foreign Ministry reacted by saying no one wins in a trade war. Then Chinese Vice Minister of Foreign Affairs Hua Chunying posted a video on the social media platform X. China, it said, would be ready for whatever happens. What cannot kill you will only make you stronger. There followed a list of China's great modern achievements, from its first supercomputer in 1983 to to its own satellite system. Today, Cameron Johnson is a supply chains expert based in Shanghai with the consultancy Tidal Wave Solutions. Johnson says in 2018, one of then President Trump's stated goals in imposing tariffs was to bring manufacturing back to the US but so far there's really no.
- [15:03]
Ryan Monarch
Reshoring whatsoever to the US he says.
- [15:05]
Jennifer Pak
If you want high end products and lots of them, China is still the place to make them, though some Chinese manufacturers have also opened a factory site elsewhere.
- [15:15]
Ryan Monarch
Often it's in Southeast Asia, perhaps Vietnam, Thailand, Malaysia.
- [15:20]
Jennifer Pak
Meanwhile, he says, Chinese counterterroriffs have hurt firms selling American products in China by making them more expensive, and European and.
- [15:29]
Ryan Monarch
Other Asian companies took market share from them.
- [15:33]
Jennifer Pak
Entrepreneur Su Nang Wu says he started selling US Equipment because Chinese goods couldn't match their quality.
- [15:41]
Patrick Weigel
Many Chinese people also believed that American products were the best and wanted them.
- [15:48]
Jennifer Pak
But not if prices go up because of tariffs or anything else. Su says already his American suppliers have increased prices twice because of inflation in the US.
- [16:00]
Patrick Weigel
I absorb the extra cost because my Chinese clients won't. All I can do is take a cut in profits. So I've been importing less from the US and looking for substitutes from the domestic market.
- [16:13]
Jennifer Pak
And are some of those Chinese substitutes possibly copying American designs? I ask. Possibly, he says. In Wuhan, I'm Jennifer Pak for Marketplace.
- [16:39]
Kai Ryssdal
Coming up, the jury rendered a verdict.
- [16:42]
Ryan Monarch
In his favor for $725 million.
- [16:46]
Kai Ryssdal
That is real money. But first, let's do the numbers. Dow industrials picked up 15 points today, less than a tenth of 1%. Finished at 42,342. Did the blue chips. The Nasdaq down 19 points, a tenth percent 19,372. The S&P 500 gave back five points, just shy of a tenth percent 5,867 there. Micron technology tumbled 16.2% today after the chipmaker issued weaker than expected guidance for its fiscal second quarter. Homebuilder Lennar gave back 5.2% after posting fourth quarter earnings that missed expectations. The firm said high mortgage rates limited its sales.
- [17:24]
Ryan Monarch
Hmm.
- [17:25]
Kai Ryssdal
Toll Brothers off 1 1/2 percent. Bonds fell. Yield on the 10 year T note rose to 4.56%. Take that, Jay Powell. You're listening to Marketplace.
- [17:39]
Jennifer Pak
Hi, this is Nicole from Camp Hill, Pennsylvania.
- [17:42]
Emily Blanchard
I'm always surprised how much content Marketplace can pack into 30 minutes. Listening is part of my daily routine. I love the way they make the content digestible and relatable.
- [17:52]
Jennifer Pak
For us folks who don't have a.
- [17:53]
Emily Blanchard
Strong background in economics or business, join me by making a gift to Marketplace.
- [17:58]
Jennifer Pak
Today@Marketplace.Org donate.
- [18:07]
Kai Ryssdal
This is Marketplace. I'm Kai Ryssdal. If you've been to an Olive Garden lately or a Longhorn Steakhouse, Ruth's Chris Steakhouse, Cheddar's or the Capital Grill, Darden restaurants would like to thank you because they have had a good couple of months. Sales were up 6% in Darden's second quarter, but that is an overall number. At its more casual brands, things were good at its more fine ish dining establishments, though not so which, as it turns out, most things do can tell us a little something about this economy. Marketplace's Samantha Fields is on it.
- [18:41]
Sabri Benishore
At the Capital Grill, you can get a filet mignon or a dry aged New York strip steak for about $60. Or there's always the porcini rubbed bone in ribeye for 80. At Longhorn Steakhouse, meanwhile, you can get a filet or a New York strip for around $30 these days. Andrew Sharpy at Alex Partners says more people seem to be opting for the latter.
- [19:02]
Patrick Weigel
Longhorn. It's a good quality steak in the minds of the consumer at a reasonable price.
- [19:08]
Sabri Benishore
It's not inexpensive, but it's not overly expensive either. Sam Okas at Nation's Restaurant News says 2024 has been a year of people looking for deals and value. And when it comes to eating out.
- [19:20]
Matt Levin
Customers are trading down.
- [19:22]
Sabri Benishore
Trading down from fine dining to casual and casual to fast casual.
- [19:26]
Matt Levin
Casual dining brands, I think are really benefiting from people who still want a high quality experience. They still want a great meal, but they don't want to spend as much money.
- [19:35]
Sabri Benishore
A lot of companies don't want their employees to spend as much money these days either. And Sharpie at Alex Partners says that has posed another challenge for expensive restaurants.
- [19:44]
Patrick Weigel
You know, the business traveler drives a lot of the higher end, finer dining. And as folks are being told to be mindful of their expenses, that's creating some headwinds in fine dining.
- [19:56]
Sabri Benishore
Casual restaurants have another advantage over fancier ones these days, too. Steven Sagor at Columbia Business School says that's delivery.
- [20:04]
Kai Ryssdal
Delivery has become a force in restaurants and you see it much more frequently in more modest priced restaurants, more casual.
- [20:14]
Patrick Weigel
Restaurants than you do in luxury restaurants.
- [20:17]
Sabri Benishore
Because if you're going to spend $60 or $80 on a steak, you probably want the nice tablecloth and the ambiance to go with it. I'm Samantha Fields for Marketplace.
- [20:36]
Kai Ryssdal
Saw this in a publication called Reinsurance News the other day. Reinsurance, of course, is the industry that insures insurance companies. It's a way for those primary insurers to lay off a bit of their risk in case of big claims. Anyway. Reinsurance News is reporting that a division of Lloyds over in London, one of the insurance biggies, has launched a new index to track global personal injury awards. And in point of fact, the size of jury awards in personal injury cases here is up quite a bit. As Marketplace's Sabri Benishore reports, Paul Gill.
- [21:09]
Samantha Fields
Worked as a mechanic for an oil company in the 70s. He would use gasoline as a cleaning material, came into contact with it a lot.
- [21:16]
Ryan Monarch
As a result of his exposure to benzene in the gasoline as well as from other sources, he developed a blood cancer.
- [21:24]
Samantha Fields
Patrick Weigel is one of Gill's attorneys. Gil had to get a stem cell transplant and go on immunosuppressant drugs.
- [21:30]
Ryan Monarch
He developed a secondary colon cancer as a result of the immunosuppressive treatment and he's currently undergoing chemotherapy.
- [21:38]
Samantha Fields
Gill sued Exxon and won, and the.
- [21:42]
Ryan Monarch
Jury rendered a verdict in his favor for $725 million.
- [21:48]
Samantha Fields
Exxon is appealing. Verdicts like this often fall on insurers, and insurers have a term to describe them. Nuclear.
- [21:56]
Matt Levin
Nuclear verdicts are typically defined by those in the insurance industry as those verdicts.
- [22:02]
Ryan Monarch
Which exceed $10 million.
- [22:05]
Samantha Fields
Chad Marzin is a professor of business law at Penn State.
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Matt Levin
There's also a related term known as a thermonuclear verdict, which involves jury verdicts in excess of $100 million.
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Samantha Fields
The size of such verdicts has been growing. The average compensation awarded by juries for personal injury increased around 250% between 2009 and 2019, according to the Swiss Re Institute. In 2023, there were 89 verdicts of more than $10 million, 27 of them more than $100 million. That's a record, according to Marathon Strategies. This is making insurers increasingly nervous.
- [22:45]
Ryan Monarch
Our civil justice system should be predictable, stable, efficient, and these verdicts are not predictable.
- [22:55]
Samantha Fields
Rhonda Hurwitz is senior director for the American Property Casualty Insurance Association. She says these mammoth verdicts are often not driven by punitive damages, but rather for compensation for pain and suffering, things that are very hard to quantify.
- [23:08]
Kai Ryssdal
We're not saying that if there is.
- [23:11]
Sabri Benishore
A legitimate injury that they shouldn't have.
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Patrick Weigel
Their ability to receive compensation.
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Samantha Fields
Matt Webb is senior vice president for legal reform policy at the U.S. chamber of Commerce.
- [23:20]
Patrick Weigel
What the concern is, though, is that.
- [23:22]
Kai Ryssdal
When you look at verdicts in the.
- [23:24]
Sabri Benishore
Nuclear category, there's not really any rational.
- [23:28]
Kai Ryssdal
Basis for where the numbers are coming from.
- [23:31]
Sabri Benishore
I mean, literally, numbers are being picked out of thin air.
- [23:34]
Samantha Fields
He and insurers argue the rise in nuclear verdicts tracks with ad spending by lawyers and an increase in outside groups funding lawsuits as a form of investment. Others point to rising anti corporate sentiment. Lawyers counter the high amounts reflect the value juries place on pain and suffering and life. Florida attorney Kuri Padgett has won multiple jury awards of well over $100 million.
- [23:57]
Kuri Padgett
But our founding fathers guaranteed the right to trial by jury of our peers.
- [24:03]
Kai Ryssdal
Because the rich and powerful can't control a jury.
- [24:07]
Kuri Padgett
It is an expression of the will of the people.
- [24:09]
Samantha Fields
Patrick Weigel, the attorney in the Exxon case, says insurers concerns are a PR campaign.
- [24:14]
Ryan Monarch
So obviously the insurance industry has an interest in trying to do whatever they can to denigrate significant jury verdicts.
- [24:25]
Samantha Fields
But appropriate or not, the growth in massive jury awards has had consequences. Insurers are covering less and premiums are going up. Dan Murray is with the American Transportation Research Institute. He says trucking has borne the brunt of this, with premiums rising 15, 30, 40% a year in some cases, total.
- [24:44]
Kai Ryssdal
Disconnection between insurance costs and safety data.
- [24:47]
Kuri Padgett
It's sort of the Wild west out there.
- [24:50]
Samantha Fields
Numerous trucking bankruptcies, he says, cite increasing insurance costs in New York. I'm Sabri Benishore for Marketplace.
- [25:05]
Kai Ryssdal
This final note on the way out today, there may or may not be, by the time you hear this, a deal in Congress to avoid a government shutdown that looms tomorrow come midnight. But a word here about something President Elect Trump has injected into the debate the federal debt limit. Trump said he wants it lifted now, no doubt because his tax plans will call for borrowing trillions more dollars over the next decade or so. And come January, Republicans will be in charge and thus responsible. Trump said in various interviews today he would like to see the debt limit done away with once and for all. That is interesting because regular listeners to this program will know that the debt limit and the accompanying threat of default is used regularly by congressional Republicans as a political weapon. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Pietra and Stephanie Sieck are the Marketplace editing staff. Amir Babawe is the managing editor and I'm Kyle Rysdal. We will see you tomorrow. Everybody, this is apm.
- [26:14]
Kuri Padgett
Hi, this is Michael from Sinking Spring, Pennsylvania. Marketplace is both enjoyable and extremely informative. Kai and the reporters go out to all kinds of people in the community and they ask straight ahead questions like how are you holding up these days? It's very personal and as we listen we get a good sense of the challenges people face as they are trying to make it from day to day. I listen to the Marketplace podcast every day and have been doing so for a number of years. It's a breath of fresh air that helps me understand the economic world better. Join me by making a gift to marketplace@marketplace.org donate.