Marketplace Podcast Summary: "The Deal with Steel" | January 3, 2025

Host: Kristen Schwab

In this comprehensive episode of Marketplace, host Kristen Schwab delves into a range of pressing economic and business topics, from the housing market's current state to international steel deals, gentrification battles in Los Angeles, and the rising tide of Latino entrepreneurship. Below is a detailed summary capturing all key discussions, insights, and conclusions from the episode.

1. Economic Overview: Housing and Mortgage Rates

Kristen Schwab opens the episode by discussing the latest housing data, including pending home sales, home prices, and significant mortgage rate changes.

Mortgage Rate Stability and Implications

• Rachel Siegel notes, "[...] 7% figure [...] just hasn't budged a whole lot" (02:25). Despite expectations that Federal Reserve rate cuts would lower mortgage rates, they have remained relatively steady or even increased slightly.
• David Gura adds, "There's a sense that they're getting kind of accustomed to rates being where they are" (03:43), highlighting consumer patience amidst uncertainty.

Economic Resilience and Uncertainty

• Rachel Siegel suggests this stability may signal a "new normal" and reflects a stronger economy that might require fewer Fed rate cuts (02:25).
• David Gura discusses the broader economic uncertainty, including trade and immigration policy implications, contributing to a cautious outlook for consumers and businesses (03:43).

2. Manufacturing and Construction: Mixed Signals

The episode explores recent manufacturing and construction data, presenting a mixed economic picture.

Manufacturing Sector Growth

• David Gura interprets the slight uptick in manufacturing numbers as a potential rebound, indicating resilience in this sector (04:49).

Challenges in Construction

• Gura also touches on construction spending challenges, linking them to potential tariff impacts under the incoming Trump administration, which could affect supply chains and labor in construction (04:49).

3. Steel Industry Showdown: Nippon Steel vs. US Steel

A significant portion of the episode focuses on President Biden's decision to block Nippon Steel's $15 billion acquisition of US Steel, raising national security concerns.

Government Intervention and Legal Battles

• Nancy Marshall Genzer reports that both steelmakers are ready to court to protect their deal, stating, "they said President Biden's decision left them no choice but to take all appropriate action" (10:04).
• Rachel Siegel emphasizes the difficulty for the courts to overturn the administration's national security stance if firmly held (10:27).

Potential Appeals and Policy Implications

• Christine McDaniel from the Mercatus Center suggests that the incoming Trump administration might reassess the deal through the Committee on Foreign Investment in the United States (CFIUS) (10:35).
• Rachael Siegel speculates that even under a neutral Trump administration, the deal could continue to face scrutiny (10:57).

Stakeholder Perspectives

• Henrietta Treys from Veda Partners points out national security concerns, while Sean Higgins of the Competitive Enterprise Institute acknowledges both union concerns and potential job security benefits from the deal (11:19; 11:46).

4. Gentrification in Los Angeles: Community vs. Development

Reporter Megan Jamerson from KCRW presents a nuanced story on gentrification in Boyle Heights, LA, highlighting both community resistance and development efforts.

Community Resistance to Demolition

• Rosa Garcia, owner of a family-run restaurant, fears displacement due to proposed demolitions for new developments, stating, "The pressure grabs hold of you because you say, what's going to happen when tomorrow comes?" (16:37).

Developer's Inclusive Approach

• Will Tiao, a developer, argues for inclusive growth by incorporating low-income apartments and retaining commercial spaces, aiming to balance development with community needs (14:28).

Legal and Regulatory Challenges

• Despite initial successes in halting demolition through city appeals, Megan Jamerson notes that California state law favors new housing projects, pushing developers like Tiao to pursue legal avenues to continue their plans (15:54).

5. Financial Markets Recap: Stocks and Bonds

Kristen Schwab provides a snapshot of the financial markets for the week.

• Stock Performance: The Dow Jones Industrial Average rose by 8.10% to finish at 42,732, while the Nasdaq and S&P 500 also saw gains (17:54).
• Steel Deal Impact: President Biden's blocking of the steel acquisition led to a 6.5% drop in US Steel's shares, although Nippon Steel saw gains in Tokyo (17:54).
• Bond Yields: The ten-year Treasury note yield increased to 4.59% (17:54).

6. Automobile Market: Strength Amidst Challenges

Henry Epp reports on the surprisingly strong new car sales in the US, despite underlying financial strains on consumers.

Surge in New Car Sales

• Henry Epp highlights that 2024 saw the highest new car sales since 2019, attributed to improved inventory and lifted production constraints (19:56).
• Scott Polite from Stivers Ford Lincoln notes increased consumer confidence due to better inventory levels (19:56).

Financial Strain on Consumers

• Edmunds' Jessica Caldwell points out that nearly 20% of new car buyers are managing monthly payments of $1,000 or more, indicating financial pressure (20:49).
• Jonathan Smoke from Cox Automotive warns of potential disruptions from policy changes like tariffs and electric vehicle tax credits (21:30).

Sustainability of Sales Growth

• Rachel Siegel expresses cautious optimism for the next three to six months but remains wary of long-term sustainability due to potential economic policy shifts (21:43).

7. Latino Entrepreneurship: A Growing Economic Force

The episode spotlights the significant rise in Latino-owned businesses, supported by robust data and personal narratives.

Statistical Growth

• According to a Stanford Graduate School of Business survey, Latino-owned businesses have experienced strong growth, aligning with Treasury Department data showing a 50% increase in new business applications since 2019 (22:19).

Personal Success Story: New Romantics Bookstore

• Jane Rodriguez, owner of Orlando's first romance-only bookstore, "New Romantics," shares her entrepreneurial journey, overcoming challenges in securing loans by relying on family support. She emphasizes the emotional fulfillment of realizing her dream and cautiously managing business growth amid financial uncertainties (22:52 - 25:59).

8. Healthcare Trends: Rise in GLP1 Drug Prescriptions

The episode concludes with a brief overview of the increasing prescriptions for GLP1 drugs, commonly known as Ozempic.

• Prescription Growth: There was a 10% increase in GLP1 drug prescriptions from 2023 to 2024, with significant growth in states like Rhode Island (68%), Massachusetts (48%), and New Jersey (35%) (26:31).
• Industry Impact: This rise affects not only the healthcare sector but also food and beverage industries, as executives react to potential shifts in consumer health behaviors (26:31).

Notable Quotes

• Rachel Siegel on Mortgage Rates: "I think that's really a reflection of a couple of things. One, that we aren't necessarily going to see mortgage rates drop [...] that might just be a little bit of a signal of a new normal." (02:25)

• David Gura on Economic Uncertainty: "There's a real kind of apprehensiveness or kind of maybe not worry, but nervousness about what's going to happen in the year ahead." (03:43)

• Rachel Siegel on Gentrification Policies: "There's a lot we're waiting on when it comes to the incoming tax debate, the new Congress, tariffs, immigration, executive orders, Fed policy." (07:50)

• Jane Rodriguez on Entrepreneurship: "I genuinely cried when the books arrived at my store because it felt like the first step in like a dream coming true." (22:52)

Conclusion

This episode of Marketplace offers a multifaceted exploration of current economic challenges and transformations. From the steadfastness of mortgage rates and contentious international steel deals to the heartfelt stories of small business owners and the dynamic shifts in the automobile and healthcare sectors, Marketplace provides listeners with a nuanced understanding of the forces shaping the economy in early 2025.

For more insights and detailed reporting, visit Marketplace's website.

Produced by Nancy Fargoli, Executive Editor Donna Tam, and Neil Scarborough, Vice President and General Manager. Theme music by BJ Lehrman.