0:01

On the program today, how

0:04

this economy really works from

0:07

American public media, this

0:10

is Marketplace. In

0:19

Los Angeles, I'm Colin Rizdahl. It is Thursday, today,

0:21

the 27th of June. Good

0:23

as always to have you along, everybody. Two

0:26

words as a way to get

0:28

going today, administrative state. And

0:31

now, just for the heck of it, a

0:33

handful of more words, Securities and Exchange Commission

0:36

versus Jarkozy. The logjam

0:38

of pending decisions from the United States Supreme

0:40

Court broke up a little bit more today,

0:43

the last couple of days of their term,

0:45

with of interest to us in particular, a

0:47

ruling in SEC versus Jarkozy

0:49

about the power of federal agencies to

0:51

make policy and then, most

0:54

importantly, enforce it. Blake Emerson

0:56

is a professor of law and political science

0:58

at UCLA. He's our go to on matters

1:00

of administrative law. Professor Emerson, good to have

1:02

you back on the program. Great

1:04

to be here. First blush, what did you make of this

1:06

decision? So this opinion

1:08

is of a piece with a

1:10

number of cases that the Supreme

1:12

Court has recently laid down that

1:15

significantly limit the powers of Congress

1:17

to regulate the economy, to promote

1:19

public health and public safety. And

1:21

this opinion on the Securities and

1:24

Exchange Commission's authority to

1:26

impose penalties in its

1:28

in-house courts furthers

1:31

that overall project. This

1:34

is not just about the Securities and Exchange Commission, though.

1:36

That's kind of the point. Yes,

1:38

very much so. So the powers

1:41

that the court said

1:43

the SEC unconstitutionally exercised

1:46

are powers that other

1:48

agencies also hold. And

1:51

if we look beyond the narrow ruling

1:53

of the case about penalties to this

1:56

broader question about regulatory

1:58

agencies' powers to. regulate

2:00

private rights like rights to

2:02

property and contract. There's

2:04

a much larger swath of agencies like

2:07

the National Labor Relations Board and

2:09

the Federal Trade Commission that could

2:11

come under threat now if the court has made

2:13

this significant change in law. Am

2:16

I going too far if I say that

2:18

these regulatory agencies and the powers they exercise

2:20

are how this economy works? I

2:23

think they're certainly central to the

2:25

way in which the economy

2:27

has operated at least since

2:30

the New Deal. The

2:32

theory of the administrative state in the United States

2:34

is that we want to have a free

2:38

market economy but there are many cases

2:40

where the market doesn't function

2:42

properly or where there are

2:44

values other than maximizing profit

2:46

that the people through Congress

2:49

want to recognize. So the Securities and

2:51

Exchange Commission for instance was created in

2:54

response to the Great Depression in

2:56

order to counter

2:59

widespread fraud and abuse in the sale

3:01

and marketing of securities. And

3:04

this opinion takes away one of the tools,

3:06

one of the key tools in the arsenal

3:09

that these kinds of agencies have to

3:11

limit those kinds of abuses. Does it then

3:13

follow that there may be more financial fraud

3:15

and abuse if the Securities and Exchange Commission

3:18

doesn't have these powers? Yes,

3:21

well in a very straightforward way you

3:23

can think of this kind

3:25

of ruling as increasing the costs to

3:28

agencies like the SEC of enforcing the

3:30

law and at the

3:32

same time decreasing the cost for people who want to

3:34

break the law of doing so because

3:37

this will make it harder for

3:39

the SEC to enforce the various

3:41

securities laws that Congress has given

3:43

it responsibility to administer. The phrase

3:45

that comes to mind here professor is chilling effect right?

3:48

Absolutely and that's consistent

3:51

with a number of other rulings

3:53

the Supreme Court has laid down

3:56

that send a very strong signal

3:58

both to other courts. courts, to lower

4:01

courts in the federal judiciary, as

4:03

well as to Congress

4:05

and to administrative agencies that

4:08

they are under very close scrutiny

4:10

by the Supreme Court and the

4:12

court will look skeptically at

4:14

their exercise of significant powers. Well,

4:16

so let's play this forward

4:19

a little bit because either tomorrow or Monday

4:21

now, I understand, are going to be more

4:23

decision days. And we've still got a case

4:25

coming about the Chevron deference or deference, depending

4:27

on how you want to pronounce it, about

4:29

whether we ought to defer

4:31

to regulatory agencies in interpretation of

4:34

law. What does today's decision in the body of work

4:36

that you've just cited lead

4:38

you to believe about what might happen with the understanding

4:40

that trying to spitball what the court's going to do

4:42

is a fool's errand? That's right.

4:44

It's always hard to make predictions, but

4:46

I think it is very likely that

4:48

the court will either overrule

4:51

or significantly limit what's called Chevron

4:53

deference. And Chevron deference is a

4:55

principle going back to the 1980s

4:57

that when a statute is unclear,

5:00

when it could mean more than

5:02

one thing, the courts

5:04

are supposed to accept the executive

5:06

agency's interpretation of the statute if

5:09

it's reasonable. Agencies

5:11

both have scientific and technical expertise

5:13

that the courts lack. And

5:15

they're also more democratically accountable than the

5:17

courts because the president exercises a lot

5:19

of control over the people who are

5:21

in charge of agencies. The

5:24

court has given, I'd

5:27

say, a lot of notice that Chevron is on

5:29

the chopping block. And so I

5:31

expect to see that doctrine either overruled or severely

5:33

limited. Do you ever sit back? Here comes the free

5:35

response question. Do you ever sit back as a guy

5:37

whose job it is to figure out administrative law and

5:39

teach it to new lawyers? Do

5:42

you ever sit back and wonder how

5:44

the administrative state and how this economy

5:46

runs became so

5:48

vilified? Yeah. It's

5:51

a good question. It's a good question. I

5:54

think what has happened is that

5:56

we have really profound, not

5:58

only legal, but also political disagreements

6:00

about the proper role of

6:03

the federal government in regulating

6:05

the economy, in

6:08

trying to prevent unfair practices, in

6:10

trying to avoid harmful pollution, things

6:12

of that nature. And

6:15

unfortunately, that has broken down along partisan lines.

6:17

The Republican Party tends to be opposed to

6:20

such measures, and the Democrats are broadly

6:22

in favor of it. Another side to it

6:24

that I would note is that Congress

6:29

has not shown a lot of willingness

6:31

or alacrity to get in the game, and

6:34

to write new statutes, to

6:36

refine the powers of agencies. And

6:39

so in the absence of that kind

6:41

of legislative action, what we see increasingly

6:43

is more and more unilateral presidential action.

6:47

And so today we're seeing the

6:49

culmination of that process in what

6:51

Justice Kagan has called in another

6:53

opinion an existential threat to the

6:56

administrative state. Blake

6:58

Emerson is professor of law and political science

7:00

as well at UCLA. Professor

7:02

Emerson, thanks for your time, sir. I appreciate it. Thanks

7:04

so much, Guy. Wall Street

7:06

today, traders at last check still

7:08

playing by the SEC's rules. Flat-ish

7:10

were the major indices. Chevron

7:13

shares, in case you're curious, they got some

7:15

deference of about a quarter percent. We'll have

7:17

the details when we do the numbers. The

7:45

setup for this next item began this

7:47

morning at the Bureau of Economic Analysis,

7:50

which gave us its third and final

7:52

estimate of gross domestic product growth for

7:54

the first quarter. That's January through March.

7:56

It's of interest to all of us,

7:59

but particularly to the Federal Reserve,

8:01

which wants to know how GDP, economic growth

8:03

is another way to say that, right? They

8:05

want to know how GDP is changing. And

8:08

it's changing pretty substantially, actually. GDP growth fell from

8:10

3.4% in the last quarter of last year to

8:12

1.4% at the beginning of this year. The

8:18

data out today does contain more

8:20

than just overall GDP, though. There are

8:23

various and sundry components, one of which

8:25

Fed Chair Jay Powell said at his

8:27

last press conference he is watching in

8:29

particular, private domestic final purchases, which Powell

8:32

said, and this is a quote, usually

8:34

sends a clearer signal on

8:37

underlying demand. Demand,

8:39

of course, can drive prices, which can drive

8:41

inflation. You see where this is going, right?

8:44

Marketplaces Mitchell Hartman has our primer.

8:47

GDP is the broadest measure of

8:49

goods and services produced in the

8:51

U.S. economy. It includes pretty much

8:53

everything. But the Fed

8:55

needs to get a bead specifically

8:57

on the level of demand from

9:00

U.S. businesses and consumers for goods

9:02

and services, says Kathy Busjansik at

9:04

Nationwide. They will prioritize

9:06

the core readings. And one

9:09

of the core is final sales

9:11

to private domestic purchasers. That's

9:13

the one Fed Chair Powell is all set

9:16

on right now. Essentially GDP,

9:19

less exports plus

9:21

imports, less inventory

9:24

investment. Dave Washausen is

9:26

at the Bureau of Economic Analysis,

9:28

which produces the GDP report. By

9:31

removing that net export component, you're

9:33

getting the purchases that are happening

9:35

here in the United States, regardless

9:37

of where they are produced. Final

9:40

sales also strips out businesses buying

9:42

up inventory and sticking it in

9:44

warehouses to sell later, says Mark

9:46

Zandi at Moody's Analytics. Inventory

9:49

changes, which go up, down, all around, but

9:51

don't get to kind of the underlying growth

9:53

rate in the economy. And note

9:55

that this only counts sales in the

9:57

private sector. Government spending is excluded. included,

10:00

too, because it tends to be

10:02

more stable over time and can

10:04

obscure cyclical changes in the economy.

10:07

So right now, what is this

10:09

Jay Powell-approved GDP measure telling us?

10:12

Well, final sales growth fell from 3.3% at the end

10:14

of last year to 2.6% early this year. Ask two

10:16

economists what

10:22

that means, you get at least

10:24

two answers. Kathy Busjancik at Nationwide.

10:27

It's still a really strong result for

10:29

the core GDP. It shows

10:32

that consumers continue to spend and

10:34

also businesses are still investing. And

10:37

Mark Zandi at Moody's Analytics. I think

10:39

the economy, no matter how

10:41

you measure it, is slowing. And

10:43

he says in the second quarter, which is

10:45

about to end, it looks to be slowing

10:47

even more. I'm Mitchell Hartman

10:49

for Marketplace. The

10:58

American labor market is, give or

11:00

take, 168 million people. So tracking

11:02

it should be

11:18

seen as a more of a trend

11:21

thing than a single data point thing.

11:23

There is the monthly unemployment reports, of

11:25

course, again, trend. There's a

11:27

weekly report as well called First Time

11:29

Claims for Unemployment Benefits, again, trend.

11:32

Those weekly numbers bounce around quite a bit.

11:35

They can be affected by one-off events like

11:37

the federal holiday last week for Juneteenth, One

11:39

Last Business Day, which helps explain

11:41

why those new applications for unemployment fell just

11:43

a little bit. Here's

11:45

the trend part though. Continuing jobless benefits claims

11:48

are tracked as well. And they rose last

11:50

week to the highest they've been since November

11:52

of 2021. Marketplace's

11:55

Megan McCarty-Carino explains what that might be

11:57

telling us about this labor It's

12:00

hard for one data point from one

12:03

week to say too much, but in

12:05

this case, it seems to be harmonizing

12:07

with a number of other recent signals,

12:09

says Daniel Zhao, lead economist at Glassdoor.

12:12

Jobless claims are telling us a similar

12:14

story to what we're seeing in the

12:16

unemployment rate or the hiring rate where

12:18

the job market is slowing. Job

12:21

openings have been on the decline, and

12:23

so have quits. Assigned workers

12:25

are losing confidence, even though layoffs

12:27

are still relatively low by historic

12:30

standards. A weaker labor

12:32

market doesn't just come from

12:34

layoffs. It often does manifest

12:36

as weaker hiring. So

12:38

for those unlucky enough to lose a

12:41

job, it's likely taking longer to find

12:43

a new one, says Gregory Dacco, chief

12:45

economist at EY. We

12:47

are seeing signs that employers are

12:49

being more cautious with who

12:51

they hire, how much they hire. That

12:54

wasn't always the case in the decades

12:56

before the pandemic, he says. You

12:59

would often see business leaders, employers reacting

13:01

very rapidly to the initial signs of

13:03

an economic slowdown, and they would proceed

13:05

with rapid layoffs in an effort to

13:08

cut costs. It's led

13:10

to a labor market that can

13:12

feel vastly different depending on your

13:14

circumstances, says Julia Pollack, chief economist

13:16

at ZipRecruiter. If you have a

13:18

job you love, this is a great economy. You

13:21

have unprecedented job security. But if

13:23

you don't have a job, and if you've never

13:25

had a job, finding one is proving tricky. She

13:28

notes the increase in unemployment last

13:30

month was driven by young workers

13:32

aged 20 to 24. But

13:35

comparing this moment to any time

13:37

since March of 2020 doesn't

13:40

really tell you much, says Robert Frick,

13:42

corporate economist at Navy Federal Credit Union.

13:45

I think people are still remembering

13:47

how easy it was to get a job a

13:49

year or two ago. Well, it's not

13:51

so easy anymore, but that just means it's

13:53

getting back to normal. Voting

13:56

claims are now just a tad above where they

13:58

were in 2019. I'm

14:00

Megan McCarty Carino for Marketplace.

14:28

Coming up. Riding bikes, discovering

14:30

the city through food and hopefully

14:32

opening a restaurant soon. Not

14:35

so bad, right? Not so

14:37

bad. First though, let's do

14:39

the numbers. Dow

14:41

Industries up 36 points today, 10th percent, 39,164. The

14:46

NASDAQ picked up 53 points, about 3 tenths

14:49

percent, 17,858. The

14:51

S&P 500 pocketed 4 points, a tenth percent, 54 and 82. Walgreens

14:57

plans to close a significant portion of

14:59

its U.S. stores over the next three

15:02

years. The drugstore chain reported disappointing earnings

15:04

today and told investors that the current

15:06

pharmacy model is challenging for business. Walgreens

15:09

plummeted to 22 percent today.

15:12

Competitors CVS dipped 3 and 7 tenths

15:14

percent. The country's biggest banks have passed

15:16

the Federal Reserve's most recent stress test.

15:18

That's an annual thing. The Fed subjects

15:20

major lenders to a hypothetical disaster scenario

15:22

as the Fed found the banks were

15:24

well resourced to withstand severe economic or

15:26

market shakeups. JPMorgan Chase crept up 9

15:28

tenths percent today. Citigroup added about a

15:31

half percent. U.S. Bank slid about a

15:33

tenth percent. Bond prices went up the

15:35

yield on the 10-year Treasury note, thus

15:37

down 4.28 percent. As

15:39

the yield on the 10-year, you're listening to Marketplace.

15:45

This is Marketplace. I'm Kai Rizdahl. It's

15:47

been a while since I've been in

15:49

a really crowded movie theater. This summer,

15:52

probably, and the one-two punch of

15:54

blockbusters that we all heard way too much about

15:56

at the time. Now, though, theaters

15:58

and a lot of the people who work in

16:00

Hollywood are still recovering, kind

16:03

of, from a pandemic and the strikes of

16:05

last year. Stephanie Silverman, with whom we chat

16:07

from time to time, runs a nonprofit movie

16:09

house in Nashville, Tennessee. It's called the Bell

16:11

Court, and we've caught up with her in

16:13

Chicago, Illinois, where she's at a conference of

16:15

independent exhibitors. Stephanie Silverman, great to talk to

16:17

you again. Kyra Stahl, it's great

16:20

to be in conversation with you right

16:22

now. In conversation. That's why I like these interviews

16:24

to go. So what is the

16:26

vibe amongst independent exhibitors, of which obviously you

16:28

are one at the Bell Court? You

16:32

know, first of all, every

16:34

time you say, how's it going? There's

16:36

always a little sigh first. And then

16:38

it is like, you know, it's okay.

16:41

We're definitely commiserating a little bit, but

16:43

I'd say on the whole, the vibe

16:45

is positive. Well, tell me about

16:47

the optimism, because, you know, there have been

16:49

Hollywood strikes, there's a pipeline challenge,

16:51

you know, people are getting laid off. I mean, and

16:54

you're kind of on the receiving end. Yeah,

16:56

we are definitely on the receiving end. I

16:59

think honestly, the optimism is because it feels

17:01

like we're coming to the end of the

17:03

of what is a profound impact from the

17:05

strikes. We are still

17:07

seeing some really wonderful first run like

17:10

new release movies, but you

17:12

know, it's just not barbenheimer

17:15

level awareness right now. But the

17:18

world of good movie making is still alive and well.

17:20

Did you show either of those options, the

17:23

barbenheimer or the heimer? We

17:25

showed the heimer. Did you? Yeah,

17:27

well, we showed it on 35 millimeter

17:29

film, but yeah, Barbie didn't need the

17:31

help of the bell court. She was

17:33

doing fine on her own. What had

17:35

done some business for you though? Of

17:37

course, but it's doing business for other

17:39

people. And so we try and center

17:42

filmmakers who maybe aren't Barbie, right? They're

17:44

smaller filmmakers, they're foreign films, they're repertory

17:46

films. That's where we feel like our

17:48

place in the world lies. So I was

17:50

obviously being flipped because I knew you weren't going to

17:52

show Barbie, but it does get to the whole your

17:56

challenges programming, right? You have to program

17:58

things really carefully. Yeah. Every day,

18:01

we exist showing two

18:03

sectors of movies. First runs,

18:05

the new released content and

18:07

repertory. Usually, the

18:10

first runs are the bigger revenue

18:12

titles for us. So we make

18:14

more money on the new shiny

18:16

releases. Repertory is just

18:18

part of our curatorial work and is

18:20

core to who we are, but

18:23

has traditionally been secondary. Frankly, this

18:25

year, that has been fully flipped

18:27

on its head. So right now,

18:30

it's the repertory programming that is

18:33

really our bread and butter in terms of

18:35

how we are paying our people. So

18:37

the work requirements from our curators and

18:39

from our programming staff are huge. All

18:42

the marketing assets we put

18:45

together, it's exponentially increasing our

18:47

work to do that, but

18:49

it's also got great

18:51

returns. So it's just a functional part

18:53

of our reality right now. All

18:57

right, a couple other things on my list here

18:59

I need to take through. Inflation, obviously the headline

19:01

numbers are down, but price levels are still elevated.

19:03

What are your input costs like? What's going on

19:05

with you? You know, they're still

19:07

up. They're of course, for things

19:09

especially like cost of goods, concessions items, things

19:11

like that, we don't expect them to go

19:13

down. We've had to increase pricing a little

19:15

bit. I think we've done it in a

19:17

way that hasn't been too stressful on our

19:19

patrons. If I wanna come on a Saturday date

19:21

night with me and my wife, how much is it gonna cost me

19:23

at the Bell Court for two seats? Well, if you're

19:25

a member of the Bell Court. Of course I would be,

19:27

yes. Okay, good. Well then it's only gonna cost you

19:29

$950. Oh, that's nothing.

19:32

And your wife. Yeah, exactly. That's

19:34

like 1980s movie pricing, frankly. Right,

19:37

right, right, right. Okay,

19:40

business model question. I'm

19:42

sure you saw the thing where

19:44

Sony, big producer of movies,

19:46

is going to buy Alamo Drafthouse. Yeah.

19:49

That's a very big deal in the whole movie

19:53

producers owning theaters thing. There's

19:55

history involved. What does that mean for you? Does it

19:57

mean anything for you? How do you feel about it?

20:00

Well, right now, the positive for me

20:02

is that it is just like the

20:04

rubber stamp of approval on theatrical

20:06

matters, and it matters so much that

20:09

we, this giant movie studio, are buying

20:11

some of our own movie theaters. Now,

20:14

of course, we don't want to get into

20:16

the, you know, back return to the years

20:18

of the Paramount consent decree, right? Right, right, right,

20:20

right. Where the studios owned every theater and there was

20:22

a lot of confusion about who got to show what. I

20:25

don't think we're going to get there, but

20:27

I am just thrilled that a major studio

20:30

says, this matters so much to us that

20:32

we are putting our money in it, and

20:34

we're going to experiment around how we build

20:36

audiences over time. So frankly, I'm

20:39

glad to have Sony as a colleague in the

20:41

theater exhibition business. That's

20:44

pretty funny. You and Sony. I

20:46

know, right? Stephanie Sommerman, Bellcourt

20:48

Theatre, Nashville, Tennessee. You should check it out.

20:50

It's great. Talk to you soon.

20:52

Thanks, Kai. Good to

20:55

you. I

21:19

think we mentioned this the other day, that

21:21

consumer confidence was down a bit in June.

21:24

Not a lot, but down. Another

21:26

sign that consumers are growing more

21:28

hesitant about this economy. A

21:30

more hesitant consumer often, although not always,

21:33

indicates a slowdown in spending. So

21:35

the data shows us. What

21:38

though have small business owners been seeing? We

21:41

call it Jelon Hall-Johnson. She's the owner of

21:43

the Sassy Biscuit Company in Billings, Montana, to

21:45

find out. So summer

21:47

for us is typically a busier

21:49

season in Billings. There's

21:53

lots of tourism. There's lots of different

21:55

events. People are out. It's not

21:57

as cold. You know, the last snow is... In

22:00

April, sometimes May, once

22:02

that's over, people like to get out

22:05

and eat good food. Beginning

22:11

in April, we start to ramp up our

22:13

staffing as we know business is guaranteed to

22:15

pick up. Our wages range

22:19

from about $10.50 to $14 an hour, and we

22:21

typically see

22:25

about $7 to $9 additional

22:27

in tips per hour for each

22:30

employee. Wages

22:33

have definitely increased since we've opened.

22:35

Minimum wage has absolutely increased. And

22:37

so the tip sharing

22:40

and the team effort is so

22:42

huge within our work environment because

22:44

it's the only way we can

22:47

really sustain paying our decent

22:49

wage to our employees while

22:53

also maintaining our costs. So

23:00

our first location is in

23:02

Billings, Montana, but I

23:05

am currently in Richmond, Virginia,

23:07

working on a new location. We

23:09

have always struggled with financing, and

23:11

our last major

23:14

project, we had to walk away

23:17

because of financing. So our

23:19

scaling up is looking a little different

23:21

these days. Instead of leasing, we're hoping

23:24

to buy. One of the thoughts

23:26

was, well, if we are able to purchase

23:29

a building, then we have

23:31

equity, then banks look at it differently,

23:34

lenders look at it differently. The

23:36

way I work is we're going to go for it and

23:38

see if we can make it happen. And so that's what

23:40

I've been working on. Part

23:46

of how I decide on a new location is

23:49

by exploring the city. And so I've been in Richmond

23:51

for a little over a year now. And I

23:54

have recently just bought

23:56

a new bike. I tell you, with a

23:58

bike, it's just... You can

24:00

explore, but on a bike, it's just so

24:03

magnificent. And so it just

24:05

allows me to get out there and

24:07

see what's going on in the city,

24:09

understand more about the people and the

24:11

places and the history. That's

24:13

what I'm focusing on, riding bikes,

24:15

discovering the city through food and

24:18

hopefully opening a restaurant soon. Alana

24:24

Hall-Johnson, owner of the Sassy Biscuit

24:26

Company in Billings, Montana, and maybe

24:28

soon, Richmond, Virginia. This

24:31

final note on the way out,

24:48

today I direct your attention to the concurrence

24:50

by Justice Gorsuch in today's decision in Securities

24:52

and Exchange Commission versus Jarkozy that I was

24:54

talking to Professor Emerson about at the

24:57

top of the program. Everybody is

24:59

entitled to a typo I know, but

25:01

this is the Supreme Court we're talking

25:03

about. Here is Gorsuch's opening line in

25:05

his concurrence. The court decides

25:07

a single issue, whether the Security and

25:10

Exchange Commission's use of in-house hearings to

25:12

seek civil penalties violates the Seventh Amendment

25:14

right to a jury trial. Security

25:17

and Exchange Commission, Mr. Justice,

25:20

Security. John

25:23

Buckley, I know a mistake. John Buckley,

25:25

John Gordon, Noia Cardayet, the Parker, Amitipiach,

25:27

and Stephanie Seek are the Marketplace editing

25:29

staff. Amir Bivawi is the managing editor.

25:32

I'm Kai Rizdahl. We will see you tomorrow,

25:34

everybody. This

25:50

is APM.