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OK, new game. What is Kevin Warsh thinking? But this time, you got four and a half minutes to figure it out. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Monday, today, the 20th of July. Good as it always is to have you along, everybody. There is the war, of course, and its attendant economic trickle down. There are consumers in this economy because we get a vote on what happens, too. There's business sentiment and a zillion other things that are going to affect which way this economy goes in the short and medium term. But way up high on that list is what Federal Reserve Chairman Kevin Warsh is thinking. It is early days yet in the Warsh era, but even after his testimony last week on Capitol Hill, it is tricky to figure out exactly what he is thinking. So we've called Wendy Edelberg. She's a senior fellow at the Brookings Institution, also one of our go-tos for all things big picture. Wendy, it's great to have you back. Nice to be back. All right, so let's take Chairman Warsh at his word. He is speaking in declarative sentences when he says, we are going to get inflation under control. The committee will do what it takes. It is, I don't know if we use these words, but he says, you know, it's our solemn oath. Um, what does that translate into for you?

I am surprised that the market is putting so little weight on possible rate cuts. The market seems to be betting that Kevin Warsh will revert to his traditionally hawkish instincts and disappoint Trump the way that Powell did. And that's certainly possible, but I would not bet so strongly against Trump getting at least some of the rate cuts he wants. I mean, second term, Trump has achieved so many of his goals on other fronts. And indeed, I see Warsh as already laying the intellectual groundwork for rate cuts.

All right, keep going. You got to spell that out then.

All right. So he's already he's created these five task forces examining issues, including inflation measurement. He thinks that like the official measures may not be, you know, adequate. The effects of AI policy rules, the balance sheet. those task forces are going to report over the next months. And, you know, the way he talked about them with Congress, I think he's telegraphing that this work will eventually produce an analytical case for lower rates without any suggestion that he's responding

to pressure from the White House. Don't you think, though, I mean, that he torpedoes his own credibility if he, in essence, gives the president what he wants, having constructed

this intellectual framework? I mean, it's a coincident of wants, potentially. So take the way he talked about artificial intelligence at the hearing. He, you know, just I'm quoting him exactly. He said, will it increase measured prices over the course of the next 12 months? I suspect it will. But whether that's inflationary or not, that's up to the Federal Reserve. And we're going to have something to say about that. That's an extraordinary thing for the chairman of the Fed

to say. I keyed on the exact same thing when he said it. And my response, and I was either screaming at my TV or putting it out on the socials, I was like, doesn't the market get to decide what's inflationary here? Don't consumers get to decide? Well, I think in this

case, it's the task force that's going to get to decide. And my bet is that the task force says that AI-related price increases should be ignored. And I think the task force is also going to find just serendipitously that there are alternative measures of inflation that show that inflation is lower than the official indices indicate. And, you know, Warsh will follow those.

You are insinuating here that he is stacking the deck.

I, again, I am coming back to a coincident of wants. I think that President Trump made it very, very clear when he chose

who he was going to nominate to be chair of the Fed, that he wanted interest rate cuts. And it wouldn't surprise me that a smart guy who wanted that job would think about, could he create the intellectual infrastructure, the scaffolding to justify such cuts?

I'm going to go back to the credibility thing here. Chairman Wors said, and this is a paraphrase, he used these numbers, though. It's been 63 or 64 months that inflation has been above the Fed's target. And that is a problem for both this economy and for the Federal Reserve. Don't you think there is an institutional requirement that he fix that?

I think that there's an institutional requirement that he looks like he's always on the verge of fixing that. I don't know. I think that the institution can withstand it not being fixed in real time. I think it always has to look like it's going to get fixed around the corner six months from now next year. And, you know, I think that it's also going to depend on what measure of inflation you use, right? Like you can find a different measure of inflation that shows that inflation is indeed under control.

Yeah. Super quick. You got half a minute. I'm sure you saw this morning that Bill Dudley, who used to run the New York Fed, came out and said, the Federal Reserve has to raise rates. Don't you think pressure mounts on Warsh the longer it goes with inflation and price levels

elevated? I do. And I think, look, I get why markets have priced in a possible rate increase. You know, I see the argument for that, for sure. I just don't see why no one's talking about all the indicators pointing to a rate cut. Wendy Edelberg at Brookings. Thanks,

Wendy. Good to talk to you. Thank you. Wall Street on this late July Monday, you know, meh. Details numbers when we get there. The thing about what Chairman Walsh and the Fed may or may not do with interest rates is that a whole lot of what happens with prices is outside their control. Exhibit A, perhaps, is that as Walsh and other Fed shares have said time and again, tightening or loosening monetary policy is not magically going to bring another barrel of crude oil to market. The natural segue here, then, is that oil is up another percent or so today, and the average price of a gallon of gas in this economy is $4 on the nose, just about where it was a month into the war. That would be the end of March. So, first of all, yes, we have been here before, but also we've been here before. And oil markets can use that experience to set prices today. Here's Marketplace's Kristen Schwab.

At the heart of oil prices right now sit two questions, says Severin Bornstein at UC Berkeley's The Energy Institute at Haas.

How much political stomach Trump has for higher gas prices and how much the Iranians can live with in terms of disruption to their economy.

Oil hit $90 a barrel this morning, which so far reflects the idea that markets think Trump and the Iranians want to negotiate. Because otherwise, Borenstein says, prices would be worse.

Early on in the war, there were predictions of $150 or $200 per barrel, but that never happened.

Oil prices peaked at about $110 because 30-some countries released strategic reserves. And, says Catherine Wolfram, an energy economist at MIT, China's quickly learned to live using less fuel.

Basically insulated us from much higher run-up in oil prices by the reduction in mainly gasoline consumption there from the diffusion of electric vehicles.

Still, there are some price pressures. Remember, says Tom Kloza, chief energy advisor at Gulf Oil, there's a whole other war happening between Russia and Ukraine.

A lot of international refineries are out of commission right now.

We're also entering hurricane season in the Gulf of Mexico. But on the upside, demand for gas tends to go down in the fall, and refineries will soon switch to cheaper winter blends. All in all, Kloza thinks gas prices will continue to bounce around.

We might have another Groundhog Day where we go back below $4 and above.

We've been here before. We might be back here again. I'm Kristen Schwab for Marketplace.

We talked last week about earnings for a lot of the big Wall Street banks. They're doing quite fine, thanks. But the kinds of banking that they do, investment banking, trading, all of that, are a couple of steps removed from the economy that most of the rest of us live in. To find out what's going on there, it's more instructive to turn to regional lenders, several of which are set to report their earnings over the next couple of weeks. Marketplace's Justin Ho has more on that.

Regional banks aren't the small community banks that you might see in the corner of a small town. But they aren't sprawling multinational empires either, says Julie Hill at the University of Wyoming.

They're basically larger banks that focus on traditional banking model. That's borrowing money from people in the form of deposits and lending it out as loans either to businesses or consumers.

Hill says most of regional banks' revenue comes from that kind of traditional banking.

So typically what you want to see for regional banks is you want to see strong loan demand and you want to see low losses on loans.

And right now, loan demand is up. Gerard Cassidy with RBC Capital Markets says that's partly because of all the AI spending that's been happening this year.

So, for example, a bank may have a relationship with cement companies that are being hired to build the foundations for data centers or the HVAC installers.

But Cassidy says loan demand is also coming from all kinds of other industries, including from health care companies, trucking companies, auto dealers. Tom Collins with the consulting company West Monroe says midsize businesses in particular are demanding credit.

These would be businesses that would range from, you know, manufacturing companies to service companies, kind of the bread and butter of the economy.

Collins says many are borrowing because they're realizing that interest rates probably aren't going lower anytime soon. But he says many are also feeling optimistic and they feel comfortable borrowing. Stephen Bigger with Argus Research says many consumers do too, despite higher interest rates and higher gas prices.

I think it's really the jobs economy. So to the extent that unemployment remains down, that means consumers are going to feel reasonably good about taking out that loan.

And Bigger says delinquencies have been falling, which means banks are going to feel more comfortable making loans. I'm Justin Howe for Marketplace.

It's been a while since we've talked shipping, but just because it's not in the headlines, straight over home is accepted, of course, but just because it's mostly not in the headlines doesn't mean it doesn't matter. So we've gotten Weston Labar back on the phone. He's the chief strategy officer at Waterfront Logistics. They're at the ports of Los Angeles and Long Beach. Mr. Labar, welcome back to the program. Thank you for having me, Kai. First question, as always, is how's business? You know, for the first time in a while,

I can say business is booming. Yeah, the ports are busy. Earlier this year in speaking with many of the major importers that we work with and throughout the network, many of them anticipated a second round of tariffs coming sometime in July or August. And so they started shipping and shipping they did. The amount of containers we have in our facility – remember, we have an 85-acre facility right next to the ports of Los Angeles and Long Beach. it has been so full the last two weeks, we actually took additional space over next to our facility. And if you remember, previously, we discussed it would fill up and empty out and fill up and empty out. It's just remained full. And depending on what happens with tariff announcements, we anticipate this to continue through the rest of this year or until the tariff shoe drops.

All right. So people are front-ringing the tariffs, which I get. And we've seen that before, obviously last year. I do wonder, though, whether the folks who are filling up your yard are aware of the conflict in the Middle East and what that's doing to sort of the macro economy.

Yeah, I think there's other contributing factors to what we're seeing right now. And I also believe that folks are looking at consumer spending and consumer confidence. But warehouse inventories have been pretty depleted. And so not only are you seeing the front loading of product to get ahead of tariffs, but much of this product was going to be needed for back to school, holidays, end of year, et cetera. And so that is why I think you're seeing this culmination. You want to get ahead of it in a world where you know what your costs are going to be as opposed to trying to replenish your shelves when potentially your costs could skyrocket.

Right. Speaking of costs, is diesel a thing for you guys?

always a thing for folks that are operating heavy equipment. What's good in our world is many of our contracts and in our industry, this is very typical, fuel is calculated outside of the base rate. So many customer contracts have what's called a fuel surcharge. So we've protected ourselves. But there are definitely companies out there who've had to rework their rates because they might have that baked in and you could be finding yourself in a very difficult position.

But things are busy, as we've established, at the Port of Long Beach and Los Angeles. Is the same true necessarily? I mean, what do you hear from your colleagues and contemporaries at, like, Seattle and New York and Miami, you know?

Yeah, we coordinate freight at seaports and gateways throughout the nation. And working with not just our equipment, but we have many partner carriers in those gateways, you are seeing a tightening in the market pretty much everywhere. You're seeing capacity that you need to pre-book or it may not be there for you. You'll see a little bit more of a hardline approach on rates because people aren't desperate to move cargo the way they previously were. So this has been, I think, a very refreshing period.

Yeah. So when we call you back in January, do you expect things to have continued a pace or is it just we don't know what's going to happen between now and January?

Well, we really don't know. But I will say my crystal ball tells me that as soon as we get clarification on tariffs, people will mad dash and continue to bring in product until those tariffs go into effect. Then we'll see a slow period again. I think too early to tell what that all looks like. But but that will be the theme.

Hmm. I was going to let you go, but now I have to ask you, why do you expect something constant on tariffs? Why do you expect stability?

Yeah, the biggest thing is the tariffs that were implemented where the courts found them to be non-constitutional, they're going to come back, but in the form of constitutional Section 301 or Section 302 tariffs. Those hearings are happening in Washington, D.C. Stakeholders are meeting to talk about the impacts of these tariffs no differently than we have leading up to the implementation of other ones, which is why I say this feels eerily similar to 2018. Tariffs were announced, they'd go into effect to start 2019. And we all saw very busy 2018 and then had to reassess going out of it. And I think that's really what we're seeing right now. All right,

we'll call you in January. Wesson Labar, he's the chief strategy officer down at Waterfront Logistics down at the ports of Los Angeles and Long Beach. Miss Labar, thanks for your time,

sure it was always good to talk to you. Thanks for having me. Always appreciate it.

coming up to her like i was abandoning her to go live in the wilderness

which is kind of true. Well, at least for being honest, right? First, though, let's do the numbers. Dow Industrial is down 307 points today, 0.6%, 51,839. The Nasdaq subtracted 12 points. We'll call that flat percentage-wise, 25,508. The S&P 500 down 14 points, 0.2%, 74.43. A federal judge in Oakland has paused the merger between Paramount Skydance and Warner Brothers' Discovery, a coalition of 12 states, as you might have heard, has stood to stop that merger on antitrust grounds. The Writers Guild of America has also filed suit. Paramount Skydance down 2.1% on the day. Warner Brothers' Discovery gave up about 3.75% of 1%. Domino's Pizza brought in more revenue last quarter than analysts had been guessing. Domino's heated up 2.1%. Bond prices went down, thus the yield on the 10-year T-note went up 4.59%.

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This is Marketplace. I'm Kyle Rizdahl. A data point and an observation on the way to this next story. The data point is that the average rate on a 30-year fixed-rate mortgage sits at 6.55%. That's from Freddie Mac as of last Thursday. The observation is that in this real estate market as of right now, with rates and prices where they are, the phrase starter home kind of doesn't stand to reason. And it's been that way for a while. A report out today from Realtor.com points out that in 2022, fresh off the pandemic, the number of homes that were affordable for first-time buyers was at the lowest it had been in recent memory. However, comma, that same report says the starter home crunch has eased a bit since then, although how easy it is depends on where you're looking to buy and where you're hoping to live. Marketplace Stephanie Hughes has that.

If you're looking to buy a starter home in the southern U.S., you have a lot more choices than in much of the country.

Builders in Texas, Florida, and the Carolinas really responded to demand during the boom years of the pandemic, and that supply has come to market.

Economist Hannah Jones is author of that new Realtor.com report, which, when looking at inventory, defines a starter home as costing under $350,000. Jones says the supply of starter homes in the South has grown substantially since the low point in 2022.

too. You know, really taking advantage of the more permissive zoning laws and regulations in

the South. Meanwhile, in the Northeast, the starter home market is getting worse. It's already very densely built, as anyone who's traveled through North New Jersey can tell you, which makes new

construction harder. There's just not as much space for the sprawl. You also run into the ocean.

One reason new construction is so important is more would-be sellers are clinging to their existing homes and their low mortgage rates. Cheryl Merritt's a real estate broker in Raleigh,

North Carolina. Years ago, the average time a person would stay in their house would be 7, 10, 12 years. We're seeing people stay in their houses for 20 years now.

Despite the increased inventory, the Realtor.com report points out sales of starter homes are down 7.2 percent so far this year. Zillow senior economist Orphi Divonghi says buyers have to

factor in the high cost of everything. It's very difficult for people to go out and commit to a new purchase when there's so much uncertainty about how far their incomes will go. Some people are

abandoning the idea of a starter home altogether. Economist Hannah Jones says they want to buy their forever home and just be done with the whole thing. I'm Stephanie Hughes for Marketplace.

Seasonal hiring, says the Bureau of Labor Statistics, is one of the noisier parts of the American labor market. Just like it sounds, it's companies in...

retail and hospitality mostly, hiring more people when there is high demand. So holidays for retail and summertime for bars and hotels and restaurants and the like. Thing is, the hospitality industry lost about 61,000 jobs last month, suggesting that a lot of that seasonal hiring isn't happening. That said, lots of people do make their living from seasonal work, which in turn affects what and where they call home. Here's today's installment of our series, Adventures in Housing.

My name is Brian Eval, and I live in Terlinga slash Studi Butte outside of Big Bend National Park, and I'm a maintenance supervisor in the park. I've committed to at least a year in order to achieve that supervisor position. So I'll be here at least until July of next year. And I live in a little spot they call a casita. It's a little one-bedroom house. house. I've got a fully equipped kitchen, a nice bathroom, a queen bed. As a supervisor, one of the perks is that this is my place and it's going to stay my place. Nobody's going to be moving in with me. This is my eighth job that I would consider seasonal. In 2015, my ex-girlfriend and her family were able to get a spot up on Mount Leconte, Leconte Lodge and Great Smoky Mountains National Park. Just being up there as a guest, I was just blown away by the whole place. And my first question to one of the employees there was, how do I get a job up here? And she said, well, we're actually looking for somebody and pointed to some other guy. He's leaving next week. Two days later, you know, I got on my computer and filled out an application and I heard back from him the next day at the time it was kind of uh i don't know it was a sore point in our relationship because it felt like to her like i was i was abandoning her to go live in the wilderness which is kind of true um but yeah it was just a matter of like being there realizing okay i can't experience this place unless i'm here uh how do i get here how do i stay here the number of times that i've relocated in the last even just decade um is about 12 times and that's not always for a seasonal thing but a lot of it has very much been related to going from one place to the next the idea of buying a long-term property is very daunting to me not just because i have that wanderlust and i know that i'm always going to be wanting to travel but because i feel that that would be like an anchor uh you know a rope tying me to a place and um that's kind of an uncomfortable feeling for me the only time i have ever considered buying a house it was not in the united states uh and it was for the purposes of turning it into something hospitality related this isn't something we're doing next year this is something we're doing five to ten years from now. And I want to give people an experience unlike anything they could experience just staying in the, you know, Holiday Inn or whatever.

Brian Eval, living for the next year at least, just outside Big Bend National Park in Texas. If you've got an adventure in housing, send it to us. Wouldjumarketplace.org is where you can do that. This final note on the way out today in which we will close the books on the World Cup. First of all, the final itself, underwhelming as a game. Second, the halftime show was a lot. But third and more to the point, I saw this on CNBC, that FIFA is going to have total revenue this year of nine, count them, nine billion dollars, making the tournament the most lucrative sporting event ever. Now, wildly unrelated, and as they say, this just in, President Trump has just imposed 50 percent tariffs on Canadian imports, the USMCA notwithstanding. So stability in tariffs, not something that's happening. Amir Babawi, Caitlin Esch, John Gordon-Noikar, Steve Mullis and Stephanie Siek are the marketplace editing staff. Kelly Savera is the news director, and I'm Kai Risdahl. We will see you tomorrow,

everybody. This is APM. Have you ever daydreamed about leaving your office job and starting a life off the grid? I'm Rima Gres, host of This is Uncomfortable.

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