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Speaker 1: Bloomberg Audio Studios, podcasts, radio News.

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Speaker 2: To have it play. Yes, thanks for making the course

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Speaker 2: with them.

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Speaker 3: Yeah, so we're just getting started off the business.

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Speaker 1: That's Tom Barkin, President and CEO of the Richmond Fed,

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Speaker 1: one of the twelve regional banks of the Federal Reserve.

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Speaker 4: He's talking to executives at Carport Central, a manufacturing firm

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Speaker 4: that builds and sells carports, garages, barns, and even homes

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Speaker 4: made out of metal tubin.

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Speaker 1: In addition to being a voting member of the Central

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Speaker 1: Bank's monetary policy body, the FOMC, Tom's responsible for actually

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Speaker 1: implementing that policy in his district.

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Speaker 5: So united to.

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Speaker 2: Prefers himself for worlds.

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Speaker 4: Yeah, he's on one of his regular listening tours, traveling

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Speaker 4: by car around the Richmond Fed area, which covers DC

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Speaker 4: and several Southeast states, including North Carolina where we are

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Speaker 4: right now in Mount Airing, North Carolina.

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Speaker 1: To be exact, Tom's invited us to come along as

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Speaker 1: he learns about the businesses in his district and what

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Speaker 1: they're seeing when it comes to inflation, the labor market,

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Speaker 1: consumer demand, and the general economic outlook.

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Speaker 6: Thank you guys for coming out. First of all, we

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Speaker 6: don't know.

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Speaker 7: Whatever you guys need from us, We're here to answer

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Speaker 7: the questions, and we're going to tell you about our

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Speaker 7: industries demand.

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Speaker 3: We're interested in labor markets for insta in supply chains,

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Speaker 3: for instance of pricing.

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Speaker 2: Perfect to understand.

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Speaker 4: You'll get to hear what a FED president hears is

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Speaker 4: he embarks on one of these research trips. What are

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Speaker 4: the questions he asks to get a better handle on

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Speaker 4: the direction of the economy, And what kind of questions

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Speaker 4: get asked to him.

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Speaker 7: What is it like now that prevents from lower interests?

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Speaker 3: Well, technically nothing our next meeting, but I mean, but

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Speaker 3: practically it's that inflations too.

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Speaker 1: We're also going to hear from local businesses themselves and

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Speaker 1: learn about things like car ports, thermal underwear, and spinning

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Speaker 1: yarn from plastic bottles.

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Speaker 4: And we'll here's some of the challenges and opportunities facing

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Speaker 4: some of America's small towns, things like shrinking populations, housing shortages,

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Speaker 4: and the difficulty of finding childcare. This is odd lots

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Speaker 4: on the road.

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Speaker 8: Historic downtown mount Airy. There's a candy store, Let's go there.

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Speaker 1: In many ways, mount Airy really is the quintessential American

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Speaker 1: small town. Sitting in Surrey, County in the northwest corner

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Speaker 1: of North Carolina. It was the inspiration for Mayberry, the

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Speaker 1: fictional idyllic home of the Andy Griffith Show. It's also

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Speaker 1: the first leg of Barkin's trip for this week.

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Speaker 3: We try to go to that we haven't been the

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Speaker 3: big cities work themselves. I'm there naturally to give speeches

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Speaker 3: to rotary clubs or chambers of commerce, but the small

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Speaker 3: towns you have to put them on your calendar. And

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Speaker 3: we picked am on Eric as we hadn't been here

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Speaker 3: before and we'd heard some interesting stuff about what they're

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Speaker 3: doing in the workforce.

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Speaker 4: Once the locations are chosen, Barkin and his team generate

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Speaker 4: a list of the region's key employers, then start reaching

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Speaker 4: out to set up interviews and maybe a meal or

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Speaker 4: two with some of the local community leaders.

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Speaker 3: We always want to find whoever the biggest businesses are

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Speaker 3: and try to understand because they'll have the best input

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Speaker 3: on the labor market. And then I do try to

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Speaker 3: do a round table where I can of whatever the

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Speaker 3: core businesses in that community. It was aquaculture and the

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Speaker 3: Northern Neck. It's tourism in a place like Mount Area.

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Speaker 3: I'm trying to understand the core part of every town's

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Speaker 3: economy and how that's performing.

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Speaker 4: Tom's not wrong about the importance of tourism in mount Airy.

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Speaker 4: The Andy Griffith Museum and Mayburry themed shops on main

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Speaker 4: Street inspire thousands of tourists to come every year.

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Speaker 1: It's a pretty cute town. There's a downtown area with

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Speaker 1: a store that sells moonshine ice cream, which was delicious.

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Speaker 1: There's Mayberry RFD cop cars parked on the street, and

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Speaker 1: a gospel music store is selling guitars, which you love,

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Speaker 1: Joe I did.

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Speaker 4: But there's also other types of businesses around too. Take

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Speaker 4: for instance, Carport Central. The company makes these outdoor structures

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Speaker 4: that you can use to protect your car from rain

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Speaker 4: or snow or sun, but it also makes bigger things

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Speaker 4: like barn dominiums or prefabricated houses. It's actually one of

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Speaker 4: several companies in the immediate area that manufactures these structures,

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Speaker 4: making the rural county a sort of hub for the industry.

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Speaker 1: Albert Laura, the president of Carport Central, explains to Tom

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Speaker 1: why that is.

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Speaker 7: My brother and I've been in this industry over close

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Speaker 7: to twenty four to twenty five years, so almost since

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Speaker 7: it first started back in ninety nine and ninety said,

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Speaker 7: and actually ninety eight ninety nine the beginnings of this industry,

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Speaker 7: but it kind of grew in this area. So Surrey

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Speaker 7: County is pretty much the hometown or home place, so

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Speaker 7: the birthplace of this type of structure. Now there's been

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Speaker 7: other structures made out of different you know, tubing, like

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Speaker 7: round tubes all that that's you know on the West coast,

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Speaker 7: but to be square tubing and to go to what

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Speaker 7: we're doing now is different. So a start off, and

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Speaker 7: you probably drove by even where you live, you see

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Speaker 7: the little tops and people perked their cars, or you

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Speaker 7: drive by some kind of dealer that sells outdoor equipment

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Speaker 7: or something you see a little sign that as a price.

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Speaker 6: Well, that's how it pretty much started in.

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Speaker 4: It's an interesting time to be a FED president talking

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Speaker 4: to businesses about what they're seeing day to day. Across

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Speaker 4: the economy. Inflation is still above the Central banks two

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Speaker 4: percent inflation target, but unemployment is still at its lowest

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Speaker 4: level in years.

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Speaker 1: And even though the FED isn't satisfied with progress on

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Speaker 1: prices in some respects, the US economy has to fight expectations.

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Speaker 1: A lot of people thought things would cool down as

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Speaker 1: the FED hyped interest rates at the fastest pace in decades.

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Speaker 1: Many thought we'd be in a recession by now.

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Speaker 4: But that hasn't happened, and yet there's still a lot

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Speaker 4: of un certainty over things like consumer demand and the

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Speaker 4: ultimate impact of tighter monetary policy.

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Speaker 1: And in many ways, the carport business is kind of

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Speaker 1: emblematic of a lot of recent trends in the economy.

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Speaker 1: Sales boomed in the aftermath of the pandemic when everyone

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Speaker 1: was buying cars or adding stuff to their houses, and

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Speaker 1: then there were supply chain issues, and the business has

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Speaker 1: since seen some tailing off in demand.

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Speaker 7: COVID hit and it was like a boom because everybody

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Speaker 7: pretty much got an influx so that they had bought

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Speaker 7: in our video and they bought Yeah, they needed this,

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Speaker 7: and people were at home, well, I now needed a

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Speaker 7: place to put my stuff in redo my bathroom. I'm

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Speaker 7: going to put all my stuff in this building now,

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Speaker 7: which is great, but again, you know what happened. They

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Speaker 7: are supply chain issues, and so a lot of the

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Speaker 7: material was delayed and then they came in and it

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Speaker 7: was a higher price, and it was just a crazy time.

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Speaker 1: But so for Tom the big questions right now are

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Speaker 1: what carport Central is seeing in terms of pricing. Because

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Speaker 1: when stuff was booming, carport manufacturers could all raise their prices.

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Speaker 1: But as things normalize, it's becoming a lot more competitive.

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Speaker 3: So on the rest on the car port side, does

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Speaker 3: that mean that your pricing is under pressure.

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Speaker 7: Yes, so we have to compete with an inferior product,

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Speaker 7: but we the consumer at a certain point, they don't

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Speaker 7: really take that in consider. So, you know what, I

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Speaker 7: just want the lowest product, even if we tell them, well,

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Speaker 7: you know, our product is you know, thirty to forty

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Speaker 7: fifty percent stronger than what you're getting, and unfortunately we

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Speaker 7: have to either match the price or in some cases

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Speaker 7: try it undercut it. But the thing is we're paying

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Speaker 7: a whole lot more for our you know, our materials

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Speaker 7: and of course our designs and everything.

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Speaker 6: They're they're just they're they're way above what most people

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Speaker 6: are are getting.

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Speaker 2: Now.

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Speaker 9: To answer your question a little bit, is are pricing

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Speaker 9: Our profits have gone down because of the competitors in

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Speaker 9: the market that are continuously doing things wrong, so they've

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Speaker 9: cheapened the product. So we were making more money pre

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Speaker 9: covid COVID. Now we're the only industry that I know

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Speaker 9: of that the inflation. Everybody that went up, we were

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Speaker 9: the other way. When the person went down, Our pricing

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Speaker 9: went down with.

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Speaker 2: The inflation fighting organization. Thank you for that.

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Speaker 6: But our labor is still read yeah.

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Speaker 1: And labor costs and availability of workers creates an interesting

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Speaker 1: dynamic in Surrey County, North Carolina has seen its population

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Speaker 1: boom in the years since the pandemic. In fact, it's

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Speaker 1: still one of the fastest growing states in America, but

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Speaker 1: that population growth hasn't been spread evenly. In Mount Airy

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Speaker 1: there are now about ten seven hundred residents, not much

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Speaker 1: more than the ten four hundred people that were recorded

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Speaker 1: here more than a decade ago, back in twenty ten.

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Speaker 4: That means the area is having to get creative when

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Speaker 4: it comes to the labor market. For instance, there's an

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Speaker 4: apprentice program called Surrey Edgin Works. It's been placing hundreds

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Speaker 4: of local high school students into internships and apprenticeships for

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Speaker 4: things like welding, manufacturing, and teaching, providing future workers for

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Speaker 4: those businesses and giving young residents a re stentistick around.

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Speaker 3: So many of our small towns have a problem with

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Speaker 3: population growth and workforce growth, and this is an effort

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Speaker 3: to try to get local people meaningfully engaged in the

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Speaker 3: workforce in places where there are lots of good jobs.

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Speaker 3: And I think that's a very interesting thing that other

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Speaker 3: communities might want to replicate.

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Speaker 1: And businesses like carports Central have had to get more

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Speaker 1: creative when it comes to their labor too.

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Speaker 7: It's not as efficient when you get to a large

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Speaker 7: volume production. You have to have faster equipment, you have

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Speaker 7: to have more automation or more people. One of the two, right,

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Speaker 7: more people, more regular equipment. But for us, we went

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Speaker 7: with a little bit more automation. We still have to

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Speaker 7: have more people, but automation has helped us get to

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Speaker 7: where we're at streamlined. But what we've noticed is that

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Speaker 7: at the beginning, say last year, we were working forty

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Speaker 7: five to fifty maybe sixty hours of some cases, you know, Saturdays,

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Speaker 7: half Sundays, one shift. We wanted to cut back to

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Speaker 7: forty hours, and we didn't want them to work on weekends.

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Speaker 7: But we still have a lot of demand, so we

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Speaker 7: had to get more efficient in our processes. And the guys,

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Speaker 7: you know, they were very very hesitant at first because

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Speaker 7: obviously they were used to getting a fifty hour pay

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Speaker 7: check verse sixty hour overtime.

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Speaker 6: But we told them, look, let's try this.

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Speaker 7: We want you to spend more time with your family,

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Speaker 7: you know, we want you to enjoy. We don't want

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Speaker 7: you to have to stress having to come in and

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Speaker 7: finish this, or we don't want you to rush through

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Speaker 7: it where it's not.

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Speaker 6: The exact quality we want.

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Speaker 7: So yeah, so now that's changed a lot. And I

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Speaker 7: think that's probably why back Tommy's point is, our turnover

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Speaker 7: rate isn't as much as it probably is for other manufacturers.

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Speaker 4: So Carport Central has been able to adjust to some

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Speaker 4: post pandemic pressures.

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Speaker 1: But there are still some restraining factors on its business.

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Speaker 1: Take for instance, banks and the availability of credit. Not

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Speaker 1: only have interest rates surge as the FED fight's inflation,

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Speaker 1: but banks have also been pulling back on some loans.

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Speaker 10: What's the constraint on your growth right now? Is it

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Speaker 10: getting the materials?

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Speaker 1: Is it availability of contractors?

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Speaker 2: Like?

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Speaker 1: What what's stopping you from selling even more?

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Speaker 7: I guess for us it's gonna be more financial institutions

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Speaker 7: understanding our business more.

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Speaker 6: I think the supply chain issue.

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Speaker 11: For us, it's it's it's okay because we have access

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Speaker 11: to different supplies, but it's more of having a backing

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Speaker 11: of a financial institution for us.

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Speaker 7: So credit, but our turnaround time in our industry, luckily

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Speaker 7: it is pretty quick. But because of the fabrication time

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Speaker 7: and their time scheduled for commercial projects, they don't they

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Speaker 7: are not able to pay us let's say within maybe

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Speaker 7: ninety days, and we are credit terms are say net

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Speaker 7: thirty net forty five.

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Speaker 6: Uh So basically we have to have a reserve of cash.

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Speaker 7: You know it'll come in, but it's just a delayed situation.

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Speaker 7: The growth that we're seeing, we're actually being restrained because

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Speaker 7: of not having access to the capital that we need

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Speaker 7: to Actually.

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Speaker 3: What we're telling you when you go talk to them

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Speaker 3: and say I got a business and I got a

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Speaker 3: lot of demand and I just need.

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Speaker 7: A little more capital, well, I think right now it's

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Speaker 7: more mostly because of the way the economy is going.

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Speaker 7: They're really they're not as free you know, telling you, hey,

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Speaker 7: come on in, let's help it.

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Speaker 6: It's more like let me see if I can.

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Speaker 7: I don't know if I can. You know, that kind

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Speaker 7: of situation, not like it was before.

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Speaker 3: But it's access rather than rate because you could say, oh,

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Speaker 3: they'll give it to me it's just costing me too much.

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Speaker 6: Yeah, I think it's more access. I think people are

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Speaker 6: more reserved with that.

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Speaker 4: And as we've seen before, even as the company gets bigger,

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Speaker 4: that creates a new set of challenges.

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Speaker 7: But with the other challenges that we're facing, competition, but

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Speaker 7: also the lending part.

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Speaker 6: Getting to that, you know.

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Speaker 7: It costs money for an AUDI, you know, it cost

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Speaker 7: you have to have a team of CPAs you know,

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Speaker 7: you have to have a financial you know, it's more money,

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Speaker 7: more you know, income that's that's dedicated to that instead

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Speaker 7: of dedicated to equipment and growth.

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Speaker 9: So that's where and I don't know, maybe you've seen

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Speaker 9: other banks of other companies and internal processes too. For

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Speaker 9: on the accounting side, you know, growing so much that

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Speaker 9: we were growing twenty five thirty five percent every year

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Speaker 9: for the past five six years. But then we got

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Speaker 9: to that point where okay, quick books can only do

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Speaker 9: so much, right, so we went to an ERP system.

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Speaker 9: You know, going to that EP system has been a

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Speaker 9: very very hard struggle over a year now try and implement.

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Speaker 2: Nobody address that. So that's what also.

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Speaker 4: For those of you wondering, an ERP system is basically

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Speaker 4: software used to organize a company's finances, supply chain management,

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Speaker 4: and a lot more. The reason this is familiar to Tom

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Speaker 4: is because not only does he spend a lot of

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Speaker 4: his days on the road talking to businesses about stuff

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Speaker 4: exactly like this, but he also spent many years at McKenzie,

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Speaker 4: the consulting giant before he joined the Richmond Fed.

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Speaker 1: That background is one reason he takes such an intro

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Speaker 1: in the nuts and bolts of local companies. But what

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Speaker 1: does he do with the information that he gets from

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Speaker 1: these meetings. At the end of the first day of

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Speaker 1: his trip, we sat down with Tom to talk about

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Speaker 1: what he'd heard. You know, the town's commerce department says,

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Speaker 1: we have to compete with other areas in order to

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Speaker 1: attract developers. Or you speak to the head of a

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Speaker 1: carport company and they say, well, it's difficult to get

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Speaker 1: financing for what we're building here.

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Speaker 3: Well, sometimes what I learn is confirmatory, sometimes what I

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Speaker 3: learn is new. We had a dinner where we talked

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Speaker 3: to a bunch of people about the labor market, and

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Speaker 3: what they told me, which was news, was that they're

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Speaker 3: still short workers in teaching, in healthcare, in state and

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Speaker 3: local government. And you know, that's where most of the

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Speaker 3: jobs have been added over the last year, and one

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Speaker 3: of the big questions is is that cycle complete or not.

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Speaker 3: They sort of sent the message it's not yet complete,

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Speaker 3: which is helpful, you know, to know there's still a

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Speaker 3: little bit of juice left in the job market. We

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Speaker 3: had a conversation with a carport manuf facture and they're

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Speaker 3: feeling significant price pressure. And if you care about inflation,

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Speaker 3: that's good to know and again maybe confirmatory that on

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Speaker 3: the good side, there's still price pressure coming. This housing

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Speaker 3: thing is very interesting in terms of shelter costs. Is

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Speaker 3: housing availability getting plentiful enough that you can imagine shelter

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Speaker 3: costs coming down or is it still tight enough that

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Speaker 3: we have a challenge. And so you know, I try

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Speaker 3: to bring what I learn in the economy into the

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Speaker 3: room at the FOMC and hopefully am able to build

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Speaker 3: confidence when I do twenty of these conversations, not just

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Speaker 3: one that I learned something about what's happening to goods

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Speaker 3: inflation and services inflation and shelter inflation, that I know

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Speaker 3: what's happening to the labor market into wages, and I

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Speaker 3: have a real time sense of what's happening to demand.

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Speaker 3: So that's that's what I'm learning. And you will have

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Speaker 3: noted that I asked thirty those questions today, many of

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Speaker 3: them off cycle. You know, as I meet somebody right

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Speaker 3: before a speech or before I talk, I'll turn to

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Speaker 3: them and ask how their business is doing and try

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Speaker 3: to see what I can learn.

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Speaker 4: For Birken, the anecdote learns from local businesses help to

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Speaker 4: supplement and all the official data that DEFED gets constantly,

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Speaker 4: things like non farm payrolls, weekly jobless claims, and much more.

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Speaker 4: So it's interesting to ask him if he ever sees

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Speaker 4: or hears things on the ground before they show up

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Speaker 4: in the official data. So you mentioned when we talked

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Speaker 4: about the sort of anecdotal learnings or from the examples

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Speaker 4: you gave were sort of either confirmatory or maybe informed

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Speaker 4: something at the margins, like okay, maybe there's still more

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Speaker 4: juice on the public sector for labor side. How often

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Speaker 4: does it come up where people will start consistently saying

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Speaker 4: something that, oh, this is really not showing up in

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Speaker 4: the data yet, and it's sort of an early signal

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Speaker 4: of something that later on you say, yep, there it

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Speaker 4: is playing out in the numbers.

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Speaker 3: I'd say every quarter there's something like that. So in

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Speaker 3: the fourth quarter last year, in October, you may remember,

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Speaker 3: the numbers were really really frothy, and I wasn't hearing

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Speaker 3: any of that in the market. Actually came out and said,

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Speaker 3: that's just not consistent with what i'm The inflation numbers, know,

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Speaker 3: the demand numbers, the consumer spending numbers, retail sales numbers

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Speaker 3: were very fraud the that's not consistent. I'd say today.

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Speaker 3: We just got a retail sales report recently that was

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Speaker 3: quite strong, and I'm hearing decent consumer spending. I'm not

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Speaker 3: hearing that strong. Maybe I'll be proven wrong by the

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Speaker 3: time this errs, but you know that's what I'm hearing.

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Speaker 3: I do hear things that are different, and then i'd

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Speaker 3: hear some number of things that are in advance. May

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Speaker 3: of twenty twenty in Bristol, Tennessee opened, Virginia wasn't open.

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Speaker 3: It was right at the end of the first part

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Speaker 3: of COVID, and I talked to a developer who said, oh,

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Speaker 3: I got the malls are packed. And that was before

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Speaker 3: any of us knew that the opening of the economy

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Speaker 3: would lead to that kind of spending. That's a good

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Speaker 3: example I'll also get a reasonable amount of i'll call

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Speaker 3: it segment specific information. You know, how our higher income

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Speaker 3: consumers thinking versus lower income consumers, or what's the job

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Speaker 3: market for professionals versus skilled trades, and so the overall

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Speaker 3: number may be the same, but you'll get some insight

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Speaker 3: into what's really driving it.

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Speaker 1: While gathering information to supplement his data, the folks he

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Speaker 1: talks to are also learning from him. Something we saw

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Speaker 1: over and over again on our trip to North Carolina

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Speaker 1: is that people are just fascinated by what the FED

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Speaker 1: actually does and how it works. And at a time

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Speaker 1: when inflation is still running above target and there's still

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Speaker 1: a lot of doubt about the direction of the economy,

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Speaker 1: there are more questions than ever about what the FED

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Speaker 1: is doing.

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Speaker 4: Obviously, everyone wants to know where interest rates are heading,

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Speaker 4: but they also want to know what other businesses are saying,

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Speaker 4: what the Fed's hearing, and crucially, how the FED processes

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Speaker 4: all that information. So these trips are not just a

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Speaker 4: chance for business leaders to tell a FED president what

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Speaker 4: they think. They're also an opportunity to find out what's

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Speaker 4: on his mind and get their own questions answered. More

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Speaker 4: on that in our next segment.

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Speaker 10: I think we'd love it sooner by j Nuts.

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Speaker 1: Welcome to the Winston Salem Rotary Club's weekly luncheon. This

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Speaker 1: week's guest speaker is, of course, Tom Barkin.

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Speaker 4: Tracy, I'm glad we finally figured out what a rotary

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Speaker 4: club is.

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Speaker 1: Yeah, I had this sort of vague idea in my mind,

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Speaker 1: but I had to look it up to It is

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Speaker 1: a society of I would say, civic minded people who

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Speaker 1: meet regularly to network and take on some community projects.

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Speaker 6: About the community.

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Speaker 12: I felt like every week dot Com I learned something

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Speaker 12: about my city that I didn't have there.

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Speaker 2: That's cool.

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Speaker 4: The Winston Salem Rotary Club has been going on for

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Speaker 4: more than one hundred years, all the way back to

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Speaker 4: when Winston Salem was basically cigarette central. Today, driving around

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Speaker 4: Winston Salem, I'm pretty sure we saw more vineyards and

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Speaker 4: breweries than we did tobacco fields.

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Speaker 10: So please give Tom Barkin a warm welcome.

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Speaker 1: As part of his trips around the Richmond Fed District,

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Speaker 1: Barkin often speaks to local business groups and societies, giving

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Speaker 1: his regular stump speech about the state of the economy.

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Speaker 3: Thanks Chris, I appreciate that advertisement. So it's great to

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Speaker 3: be back in Winston. I'm a proud deacon parent.

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Speaker 1: But the reason he enjoys doing it is for the

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Speaker 1: Q and a portion afterwards. Taking questions from the audience

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Speaker 1: members helps reveal what's really on people's minds.

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Speaker 3: I want to know it because I do think this

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Speaker 3: two way interchange on the economy is really quite valuable.

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Speaker 4: Even if you're a regular watcher of the FED, you

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Speaker 4: can learn a lot from this discussions.

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Speaker 13: A flavor of which your int free media and you

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Speaker 13: had me favor not me, Midmar, very beautiful.

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Speaker 3: You know what I'm mostly interested in is real time information.

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Speaker 3: You're trying to figure out what's actually happening in the marketplace.

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Speaker 3: So I get credit cards spending every week year, every year,

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Speaker 3: and during COVID I got pretty calibrated on what that

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Speaker 3: means in terms of retail sales. But that's something I

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Speaker 3: look at closely to try to get a sense of

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Speaker 3: demand consumer spending. Seventy percent of the economy. On the

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Speaker 3: labor market, the job support that comes out every month

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Speaker 3: is clearly the best, most secure thing. But I take

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Speaker 3: some comfort from the weekly jobless claims because it's at

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Speaker 3: least a real time measure of whether layoffs are accelerating,

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Speaker 3: which is what you'd see if the economy turns out.

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Speaker 3: And I think you kind of get the point I'm

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Speaker 3: trying to figure out, is there any risk of the

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Speaker 3: economy turning? That's really what I focus on In terms

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Speaker 3: of the meeting. Maybe I'll give you a ten day

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Speaker 3: look at it rather than just the meeting itself, because

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Speaker 3: the weekend before ten days before the meeting. The weekend

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Speaker 3: ten days before the meeting, we'll get the staff does

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Speaker 3: a two hundred page vertical text, greatest analysis the economy

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Speaker 3: you've ever seen, and it'll include domestic and international and

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Speaker 3: financial markets and lending markets, and different scenarios for where

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Speaker 3: the economy might go, and different monetary policy operations, and

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Speaker 3: so it's a brilliantly done piece of work.

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Speaker 1: Wouldn't it be cool to see that two hundred page

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Speaker 1: FED staff analysis of the economy.

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Speaker 4: Definitely, But I'll settle for the speeches and meetings.

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Speaker 3: At the same time, Jay Powell sends around his first

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Speaker 3: draft of what the statement might be, and so we

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Speaker 3: work all weekend and into the week debating how we

441
00:22:18,720 --> 00:22:21,240
Speaker 3: want to talk about the economy and whether we like

442
00:22:21,359 --> 00:22:24,440
Speaker 3: that statement we'll offer. Jay, I'm giving this background, so

443
00:22:24,480 --> 00:22:26,800
Speaker 3: you understand that, I mean, we'll give offer Jay our

444
00:22:26,880 --> 00:22:31,720
Speaker 3: perspective on the statements. He always likes, mind best that

445
00:22:31,720 --> 00:22:34,720
Speaker 3: it's not actually true the statement. I'm making the point,

446
00:22:34,800 --> 00:22:37,080
Speaker 3: the statement that we issue the Wednesday of the meeting

447
00:22:37,640 --> 00:22:41,080
Speaker 3: has largely, not always, but largely been pretty well vetted

448
00:22:41,440 --> 00:22:42,920
Speaker 3: by the time you get to the meeting, So we

449
00:22:42,960 --> 00:22:45,240
Speaker 3: don't go to the meeting and try to line edit

450
00:22:45,240 --> 00:22:48,119
Speaker 3: a statement. For the most part, every time that the

451
00:22:48,200 --> 00:22:50,840
Speaker 3: chair has a bad press conference, that's because we've line

452
00:22:50,960 --> 00:22:52,959
Speaker 3: edited the statement in the meeting and we send him

453
00:22:52,960 --> 00:22:55,439
Speaker 3: out there two hours after the meeting to go defend it,

454
00:22:55,480 --> 00:22:58,399
Speaker 3: which is I think, in my judgment, a little bit

455
00:22:58,440 --> 00:22:59,600
Speaker 3: of malpractice. But we do it.

456
00:22:59,640 --> 00:23:00,000
Speaker 6: Sometimes.

457
00:23:00,600 --> 00:23:03,600
Speaker 3: In the meeting itself, there's often a special topic, and

458
00:23:03,640 --> 00:23:05,920
Speaker 3: so the staff will present some papers on a special

459
00:23:05,920 --> 00:23:08,480
Speaker 3: topic and we'll have a debate about it. Then we

460
00:23:08,560 --> 00:23:11,119
Speaker 3: all go around and talk about economic conditions. So I'll say,

461
00:23:11,200 --> 00:23:13,879
Speaker 3: I've been in the district for the last seven weeks,

462
00:23:13,880 --> 00:23:16,040
Speaker 3: and here's what I think I've learned, and here's what

463
00:23:16,119 --> 00:23:18,920
Speaker 3: I take solace from in the recent data. And here's

464
00:23:18,960 --> 00:23:22,199
Speaker 3: what I think you know are some interesting conclusions you

465
00:23:22,240 --> 00:23:25,960
Speaker 3: might not have otherwise thought about. Then we all talk

466
00:23:26,000 --> 00:23:30,480
Speaker 3: about the statement. Pretty productive meeting. It's a reasonably formal meeting.

467
00:23:30,560 --> 00:23:30,879
Speaker 10: It's not.

468
00:23:32,359 --> 00:23:35,840
Speaker 3: It's not really flippant. There's not tons of humor in there.

469
00:23:36,200 --> 00:23:38,480
Speaker 3: You know, it's a it's a pretty serious mean. But

470
00:23:38,520 --> 00:23:41,320
Speaker 3: it's also every every word is transcripted, so if you're

471
00:23:41,640 --> 00:23:43,800
Speaker 3: having trouble sleeping, you can go get them from five

472
00:23:43,880 --> 00:23:45,800
Speaker 3: years ago and read through both.

473
00:23:52,160 --> 00:23:54,959
Speaker 4: About thirty miles west of Winston Salem, then half an

474
00:23:54,960 --> 00:23:58,040
Speaker 4: hour's drive south from Mount Airy is Yatkinville in yet

475
00:23:58,200 --> 00:24:02,760
Speaker 4: In County, population thirty seven thousand, seven hundred, and for

476
00:24:02,800 --> 00:24:05,400
Speaker 4: the better part of the past decade that population has

477
00:24:05,400 --> 00:24:06,000
Speaker 4: been shrinking.

478
00:24:06,400 --> 00:24:09,040
Speaker 1: It's day two of Tom's North Carolina tour and we're

479
00:24:09,080 --> 00:24:13,040
Speaker 1: starting off at the offices of textile manufacturer in Deira Mills.

480
00:24:13,280 --> 00:24:15,200
Speaker 6: It works, it's worth a real good look.

481
00:24:15,680 --> 00:24:15,800
Speaker 7: Well.

482
00:24:15,800 --> 00:24:17,440
Speaker 3: One of the ways we pick our where we visit

483
00:24:17,520 --> 00:24:20,240
Speaker 3: is when you hear there's something interesting going on. And

484
00:24:20,320 --> 00:24:23,359
Speaker 3: we talked to the Sirri yak And Works yesterday up

485
00:24:23,400 --> 00:24:26,120
Speaker 3: in Surrey County. Yeah, and then we thought that would

486
00:24:26,119 --> 00:24:27,960
Speaker 3: be interesting today. And then we try to find the

487
00:24:27,960 --> 00:24:29,320
Speaker 3: big employers in a market.

488
00:24:30,359 --> 00:24:33,240
Speaker 14: Well We're not a big employer, but we're pretty unique.

489
00:24:33,920 --> 00:24:35,200
Speaker 6: We've got a good story to tell.

490
00:24:35,280 --> 00:24:38,560
Speaker 4: That's John Willingham, the fourth generation owner of India Mills

491
00:24:38,560 --> 00:24:41,600
Speaker 4: in Yadkinville. His company can trace its history back over

492
00:24:41,640 --> 00:24:44,840
Speaker 4: one hundred years, all the way back to Colonel Francis

493
00:24:44,880 --> 00:24:48,440
Speaker 4: Henry Freese, who is the first president of Lacovia Loan

494
00:24:48,520 --> 00:24:50,560
Speaker 4: and Trust, which eventually grew to be one of the

495
00:24:50,600 --> 00:24:53,160
Speaker 4: biggest banks in the US before being bought by Wells

496
00:24:53,160 --> 00:24:56,000
Speaker 4: Fargo in two thousand and eight. In addition to banking,

497
00:24:56,080 --> 00:24:58,520
Speaker 4: the colonel started a bunch of textile businesses in the

498
00:24:58,560 --> 00:25:00,720
Speaker 4: early nineteen hundreds.

499
00:25:00,160 --> 00:25:02,879
Speaker 1: Right because North Carolina used to be a global player

500
00:25:02,880 --> 00:25:06,040
Speaker 1: in textiles. There were mills in almost every single one

501
00:25:06,080 --> 00:25:08,960
Speaker 1: of the state's counties as recently as the nineteen nineties,

502
00:25:09,240 --> 00:25:12,119
Speaker 1: and just thirty years ago, those mills were employing some

503
00:25:12,280 --> 00:25:15,320
Speaker 1: two hundred and eighty thousand workers, but that started to

504
00:25:15,440 --> 00:25:19,160
Speaker 1: change as global competition heated up and companies moved production

505
00:25:19,320 --> 00:25:22,960
Speaker 1: outside of the US. Today, there's just an estimated thirty

506
00:25:23,040 --> 00:25:25,119
Speaker 1: nine thousand textile workers in the state.

507
00:25:25,240 --> 00:25:28,240
Speaker 14: We migrated up here in nineteen ninety eight. We were

508
00:25:28,240 --> 00:25:31,240
Speaker 14: in one hundred year old facilities in Western settem and

509
00:25:31,280 --> 00:25:33,800
Speaker 14: this was a good community. We already had satellite plants

510
00:25:33,840 --> 00:25:37,760
Speaker 14: up here, so we came to Yakinville and then we

511
00:25:38,880 --> 00:25:41,760
Speaker 14: got on board with NAFTA and moved our manufacturing a

512
00:25:41,760 --> 00:25:44,440
Speaker 14: lot of our labor work to Mexico.

513
00:25:45,359 --> 00:25:47,520
Speaker 3: And is that I managed to survive the whole exact

514
00:25:47,880 --> 00:25:49,200
Speaker 3: trauma that happened around here.

515
00:25:49,280 --> 00:25:50,200
Speaker 6: That's exactly why.

516
00:25:50,320 --> 00:25:54,680
Speaker 14: So what we kept here in Yakinville is a back office, functions,

517
00:25:54,720 --> 00:26:00,480
Speaker 14: design work, and distribution. So all of our labor work

518
00:26:00,560 --> 00:26:03,760
Speaker 14: is in Mexica. We have plants in Monera, Mexico.

519
00:26:04,320 --> 00:26:07,399
Speaker 1: So Yakinville was a big mill town once upon a time,

520
00:26:07,680 --> 00:26:10,720
Speaker 1: but like lots of places in America, this particular type

521
00:26:10,760 --> 00:26:12,960
Speaker 1: of manufacturing just got hollowed out.

522
00:26:13,520 --> 00:26:16,720
Speaker 4: In Dera survived in part by outsourcing its production. They

523
00:26:16,800 --> 00:26:20,280
Speaker 4: also started specializing in thermal underwear and tracy. I just

524
00:26:20,320 --> 00:26:24,200
Speaker 4: have to say I love thermals anyway, today you can

525
00:26:24,200 --> 00:26:27,000
Speaker 4: buy in Deer's Thermals and places like tractor supply and

526
00:26:27,119 --> 00:26:28,080
Speaker 4: exporting goods.

527
00:26:28,359 --> 00:26:31,959
Speaker 6: We realized that to survive we needed a niche. We

528
00:26:32,000 --> 00:26:33,320
Speaker 6: needed something.

529
00:26:33,560 --> 00:26:36,480
Speaker 14: That we could control, and that was a very small

530
00:26:36,520 --> 00:26:39,040
Speaker 14: market and not a very interesting one for a lot

531
00:26:39,080 --> 00:26:42,560
Speaker 14: of larger players like Hange of Gildan for the looms,

532
00:26:42,560 --> 00:26:45,919
Speaker 14: so we picked thermal underwear and we became sort of

533
00:26:45,920 --> 00:26:46,320
Speaker 14: the go to.

534
00:26:46,400 --> 00:26:47,640
Speaker 6: People in thermal underwear.

535
00:26:48,160 --> 00:26:51,040
Speaker 14: It's a highly seasonal business, or coires a lot of

536
00:26:51,040 --> 00:26:54,479
Speaker 14: working capital because we built inventory all year and that

537
00:26:54,560 --> 00:26:55,680
Speaker 14: keeps people out of it.

538
00:26:55,960 --> 00:26:57,119
Speaker 6: And who do you sell into?

539
00:26:57,320 --> 00:26:58,920
Speaker 2: Do you sell? Do you brand yourself?

540
00:26:58,920 --> 00:26:59,439
Speaker 6: Do you sell it?

541
00:26:59,480 --> 00:27:03,600
Speaker 14: We do mostly our brands, but we also do private label.

542
00:27:03,800 --> 00:27:07,320
Speaker 14: We like to tell people that we do everybody but Walmart.

543
00:27:08,359 --> 00:27:11,760
Speaker 1: Now, just like with the carport business, pricing is obviously

544
00:27:11,800 --> 00:27:14,640
Speaker 1: an issue in the apparel industry too. If you look

545
00:27:14,640 --> 00:27:17,320
Speaker 1: at apparel in the Consumer Price Index, you can see

546
00:27:17,359 --> 00:27:20,760
Speaker 1: clothing inflation basically peaked at more than six percent year

547
00:27:20,760 --> 00:27:23,840
Speaker 1: on year back in twenty twenty two, but in more

548
00:27:23,920 --> 00:27:27,600
Speaker 1: recent months, inflation and apparel has been kind of moderating.

549
00:27:28,040 --> 00:27:30,960
Speaker 1: It came in at zero point four zero percent in March,

550
00:27:31,320 --> 00:27:33,880
Speaker 1: and that's kind of been the story of inflation across

551
00:27:33,920 --> 00:27:37,560
Speaker 1: the US recently. Housing costs and services keep going up,

552
00:27:37,800 --> 00:27:41,200
Speaker 1: but some goods like apparel, aren't seeing quite the same

553
00:27:41,320 --> 00:27:42,920
Speaker 1: kind of pricing increases anymore.

554
00:27:43,280 --> 00:27:47,000
Speaker 4: Endearer's experience also says something about post pandemic demand. It's

555
00:27:47,000 --> 00:27:50,080
Speaker 4: basically ridden a roller coaster here. When COVID struck, it

556
00:27:50,119 --> 00:27:53,400
Speaker 4: started making face masks, but demand for masks went away.

557
00:27:53,480 --> 00:27:56,280
Speaker 4: Is the pandemic petered out and people aren't buying thermals

558
00:27:56,320 --> 00:27:57,320
Speaker 4: like they once were either.

559
00:27:57,520 --> 00:28:00,240
Speaker 14: We were the very first people to make man I

560
00:28:00,240 --> 00:28:03,600
Speaker 14: mean we were like the day after the shut down,

561
00:28:03,840 --> 00:28:07,040
Speaker 14: and we couldn't we couldn't get off the telephone. It

562
00:28:07,080 --> 00:28:11,520
Speaker 14: was everybody from American airlines to Centas uniforms. They all

563
00:28:11,560 --> 00:28:14,679
Speaker 14: wanted masks, and so we we just did.

564
00:28:14,520 --> 00:28:18,520
Speaker 6: Everything we could do. By June, it was parent that

565
00:28:18,520 --> 00:28:19,560
Speaker 6: that wasn't going to last.

566
00:28:20,960 --> 00:28:24,920
Speaker 14: When the economy started to come back, it was so

567
00:28:25,000 --> 00:28:28,640
Speaker 14: strange because demand was this outh roof.

568
00:28:30,280 --> 00:28:31,320
Speaker 6: There was a lot of.

569
00:28:31,280 --> 00:28:36,280
Speaker 14: Money in the consumer's hands and they were buying anything

570
00:28:36,359 --> 00:28:41,240
Speaker 14: and everything. They were buying online like crazy, and so

571
00:28:41,480 --> 00:28:45,760
Speaker 14: there was a surge of business that occurred, and we

572
00:28:45,760 --> 00:28:48,560
Speaker 14: were all chasing it as hard as we possibly could.

573
00:28:49,040 --> 00:28:51,160
Speaker 14: We were just you know, we were blind to the

574
00:28:51,200 --> 00:28:54,040
Speaker 14: fact that this was an artificial situation and it wasn't

575
00:28:54,080 --> 00:28:54,640
Speaker 14: going to last.

576
00:28:54,640 --> 00:28:57,880
Speaker 6: We were riding the wave, and then.

577
00:28:57,920 --> 00:28:59,960
Speaker 14: It caught up with itself and there was a letter

578
00:29:00,280 --> 00:29:03,280
Speaker 14: a crash. Obviously, inflation had gone crazy.

579
00:29:03,400 --> 00:29:06,040
Speaker 2: But that's now we're in late twenty one, early twenty two.

580
00:29:05,920 --> 00:29:10,720
Speaker 14: Exactly, and demand just fell off. Our largest customer at

581
00:29:10,720 --> 00:29:12,400
Speaker 14: that time, Amazon.

582
00:29:12,040 --> 00:29:16,280
Speaker 6: Just shut the books. They were so overstopped because they

583
00:29:16,280 --> 00:29:18,720
Speaker 6: had been chasing it, just like all of us, everybody.

584
00:29:20,480 --> 00:29:23,320
Speaker 1: Joe Indarra Mills is also where we learned there's basically

585
00:29:23,360 --> 00:29:26,600
Speaker 1: a Jones Act for textiles. It's called the Bury Amendment.

586
00:29:26,920 --> 00:29:29,760
Speaker 1: Here's Tom and John talking about that, as well as

587
00:29:29,800 --> 00:29:33,080
Speaker 1: the company's decision to move their textile production out of

588
00:29:33,120 --> 00:29:33,600
Speaker 1: the US.

589
00:29:33,800 --> 00:29:35,280
Speaker 3: I know I know the answer this question, but I'm

590
00:29:35,280 --> 00:29:37,200
Speaker 3: going to ask because I get asked a lot, which is,

591
00:29:37,280 --> 00:29:40,280
Speaker 3: did you consider moving it back to the States.

592
00:29:41,560 --> 00:29:43,960
Speaker 2: No, and just give us your logic.

593
00:29:44,760 --> 00:29:45,040
Speaker 13: It was.

594
00:29:47,600 --> 00:29:49,920
Speaker 14: This skill level is just not here anymore. When we

595
00:29:50,320 --> 00:29:55,080
Speaker 14: closed out sewing here in nineteen ninety four AFT I

596
00:29:55,080 --> 00:29:57,360
Speaker 14: believe it was ninety four. When after it came in,

597
00:29:58,280 --> 00:30:00,800
Speaker 14: we had three hundred people here and yet can feel

598
00:30:00,880 --> 00:30:02,880
Speaker 14: sewing and.

599
00:30:05,120 --> 00:30:07,920
Speaker 6: They were they were gone instantly. They found other.

600
00:30:07,840 --> 00:30:11,040
Speaker 14: Jobs to bring that labor force back and to train

601
00:30:11,160 --> 00:30:15,440
Speaker 14: it and to pay not just the base but all

602
00:30:15,480 --> 00:30:18,680
Speaker 14: the fringes and all the ancillary costs to go with it.

603
00:30:19,200 --> 00:30:21,480
Speaker 6: We would not be competitive. I just say it.

604
00:30:21,560 --> 00:30:24,600
Speaker 14: Now, you're from me with a Bury Act, which is

605
00:30:25,040 --> 00:30:27,520
Speaker 14: products that have to be made into US because of

606
00:30:27,560 --> 00:30:28,920
Speaker 14: government requirements, whether it's a.

607
00:30:28,920 --> 00:30:33,280
Speaker 6: Military sort of think. There are manufacturers of our.

608
00:30:33,200 --> 00:30:35,800
Speaker 14: Type of product on a small scale here because of

609
00:30:35,840 --> 00:30:36,560
Speaker 14: the Bury Act.

610
00:30:37,560 --> 00:30:42,840
Speaker 6: They made flags and they make uniform lots of military.

611
00:30:43,240 --> 00:30:46,080
Speaker 14: We chose not to get into that, but we would

612
00:30:46,120 --> 00:30:50,200
Speaker 14: not be able to bring our company, the labor part

613
00:30:50,520 --> 00:30:53,240
Speaker 14: of our company back to the to the States. It's unfortunate.

614
00:30:53,320 --> 00:30:54,960
Speaker 14: I mean, it broke our hearts when we had to move,

615
00:30:55,480 --> 00:30:58,160
Speaker 14: but we either moved or are.

616
00:30:59,440 --> 00:30:59,920
Speaker 2: So it happened.

617
00:31:00,280 --> 00:31:00,520
Speaker 11: I did.

618
00:31:01,520 --> 00:31:04,960
Speaker 4: But even after outsourcing production in Mexico, a company like

619
00:31:05,000 --> 00:31:08,880
Speaker 4: Indira isn't sitting still and they're currently shifting manufacturing again.

620
00:31:09,080 --> 00:31:12,040
Speaker 6: We're leaving Mexico. Oh to go where else?

621
00:31:12,120 --> 00:31:12,480
Speaker 2: Our door?

622
00:31:13,280 --> 00:31:15,800
Speaker 1: Oh that's interesting, Yeah, you're sort of a lot of

623
00:31:15,800 --> 00:31:17,960
Speaker 1: companies are just now moving into Mexico.

624
00:31:18,040 --> 00:31:18,800
Speaker 2: Well, John is.

625
00:31:22,280 --> 00:31:22,800
Speaker 6: Mexico.

626
00:31:23,160 --> 00:31:26,560
Speaker 14: We were in Mexico twenty five years in Monterey, Mexico.

627
00:31:26,600 --> 00:31:27,760
Speaker 14: I don't know if you've ever been there.

628
00:31:28,280 --> 00:31:29,440
Speaker 6: It's quite a city.

629
00:31:30,560 --> 00:31:32,280
Speaker 14: You could be dropped in there and you would think

630
00:31:32,320 --> 00:31:35,080
Speaker 14: you were in Atlanta or somewhere, But we've seen it

631
00:31:35,120 --> 00:31:38,720
Speaker 14: grow up in twenty five years from carts and buggy,

632
00:31:38,800 --> 00:31:43,800
Speaker 14: horse and buggy to modern highways and everything. Inflation is

633
00:31:43,840 --> 00:31:46,480
Speaker 14: pretty serious there. Of course, everything is unionized there, so

634
00:31:46,520 --> 00:31:50,080
Speaker 14: you're dealing with an element that we don't have to

635
00:31:50,400 --> 00:31:50,840
Speaker 14: focus on.

636
00:31:50,880 --> 00:31:51,000
Speaker 15: Now.

637
00:31:51,040 --> 00:31:52,720
Speaker 6: We have Makuila doors, so we don't we.

638
00:31:52,800 --> 00:31:55,120
Speaker 14: Just contract for labor, we don't own it, we don't

639
00:31:55,240 --> 00:31:59,560
Speaker 14: know pay directly. But inflation is pretty tough there, and

640
00:32:00,400 --> 00:32:02,120
Speaker 14: they've essentially priced us out.

641
00:32:02,720 --> 00:32:04,840
Speaker 4: And so when Deer has been able to survive in

642
00:32:04,880 --> 00:32:08,000
Speaker 4: the mill business in part by adapting to these new challenges.

643
00:32:08,240 --> 00:32:10,600
Speaker 4: But there are still some complications that come from being

644
00:32:10,600 --> 00:32:11,680
Speaker 4: based in the small town.

645
00:32:12,320 --> 00:32:12,720
Speaker 2: Housing.

646
00:32:12,920 --> 00:32:16,920
Speaker 14: Housing shortage here is is dramatic and it hurts. It

647
00:32:16,960 --> 00:32:22,160
Speaker 14: hurts the manufacturers here, it hurts the economy. Small town

648
00:32:22,200 --> 00:32:24,880
Speaker 14: America is a special place to live. And I consider

649
00:32:24,920 --> 00:32:25,560
Speaker 14: you active.

650
00:32:25,320 --> 00:32:25,880
Speaker 6: A small town.

651
00:32:25,960 --> 00:32:28,400
Speaker 14: I mean, the values are so great, the work ethic,

652
00:32:28,880 --> 00:32:34,640
Speaker 14: just knowing everybody in town first named basis, fewer fears

653
00:32:34,920 --> 00:32:36,200
Speaker 14: and of certain things.

654
00:32:36,200 --> 00:32:38,960
Speaker 6: So it's a it's a cool place to live small town.

655
00:32:39,000 --> 00:32:41,040
Speaker 6: But you've got to you've got to be successful as a.

656
00:32:41,040 --> 00:32:44,920
Speaker 14: Small town, you need good progressive government, and you need

657
00:32:44,960 --> 00:32:47,480
Speaker 14: a base of businesses, a few large businesses.

658
00:32:47,040 --> 00:32:49,040
Speaker 6: A lot of small medium sized businesses.

659
00:32:49,360 --> 00:32:53,240
Speaker 14: You need, you need culture, uh, you need, you need

660
00:32:53,280 --> 00:32:56,040
Speaker 14: the elements that make life enjoyable.

661
00:32:56,520 --> 00:32:59,480
Speaker 1: Yeah, Kinville isn't alone here. We heard similar things in

662
00:32:59,520 --> 00:33:03,520
Speaker 1: Mount Airy too. Smaller towns may have cheaper land for construction,

663
00:33:03,920 --> 00:33:06,880
Speaker 1: but that doesn't mean developers are flocking to them. Here's

664
00:33:06,960 --> 00:33:08,880
Speaker 1: Tom talking to us about exactly this.

665
00:33:09,440 --> 00:33:12,239
Speaker 3: You know, every small town is competing for developers, and

666
00:33:12,280 --> 00:33:14,280
Speaker 3: there's a limited number of developers that gave a speech

667
00:33:14,320 --> 00:33:18,760
Speaker 3: on this in November, and developers care a lot about

668
00:33:18,840 --> 00:33:22,400
Speaker 3: availability of cheap land. Developers care a lot about permitting

669
00:33:23,200 --> 00:33:26,560
Speaker 3: and infrastructure in the land, and developers have the ability

670
00:33:26,600 --> 00:33:29,040
Speaker 3: to choose. And so what they told us here is

671
00:33:29,560 --> 00:33:31,160
Speaker 3: if you go a little bit further south, where it's

672
00:33:31,200 --> 00:33:34,160
Speaker 3: closer to an interstate, the developers are prioritizing there.

673
00:33:34,240 --> 00:33:34,480
Speaker 7: Now.

674
00:33:34,840 --> 00:33:36,800
Speaker 3: They had a bit of a roadshow for developers and

675
00:33:36,880 --> 00:33:39,680
Speaker 3: they think they're making some progress. So that says something

676
00:33:39,680 --> 00:33:42,240
Speaker 3: about what a community can do in terms of proactively

677
00:33:42,320 --> 00:33:45,560
Speaker 3: seeking developers. And I think that's actually a pretty important thing.

678
00:33:45,560 --> 00:33:47,240
Speaker 3: If you want housing built in your community.

679
00:33:47,320 --> 00:33:49,560
Speaker 4: I find this actually to be like a kind of

680
00:33:49,560 --> 00:33:52,840
Speaker 4: fascinating dynamic, right because in my mind you would think

681
00:33:52,880 --> 00:33:56,160
Speaker 4: of like the developers are all competing against each other

682
00:33:56,360 --> 00:33:59,840
Speaker 4: to find the cheapest land available or whatever it is.

683
00:34:00,240 --> 00:34:03,680
Speaker 4: But this idea that from maybe like a community standpoint,

684
00:34:04,360 --> 00:34:07,720
Speaker 4: it's the other way around arguably, and that it works

685
00:34:07,720 --> 00:34:10,719
Speaker 4: and such that they need to basically pitch the developers

686
00:34:10,719 --> 00:34:11,359
Speaker 4: on coming here.

687
00:34:12,000 --> 00:34:15,480
Speaker 3: Yeah, So after the Great Recession, what happened is a

688
00:34:15,480 --> 00:34:17,560
Speaker 3: lot of developers went under and left the business, a

689
00:34:17,600 --> 00:34:21,719
Speaker 3: lot of banks stopped financing development. We underbuild housing for

690
00:34:21,760 --> 00:34:25,880
Speaker 3: a decade, so we're light developers. In addition, what's happened

691
00:34:25,920 --> 00:34:29,680
Speaker 3: during the post pandemic era is there's been so much

692
00:34:29,719 --> 00:34:33,720
Speaker 3: construction going on, not just houses, but also data centers

693
00:34:33,760 --> 00:34:38,440
Speaker 3: and warehouses and state, local government, educational that we're short

694
00:34:38,440 --> 00:34:41,319
Speaker 3: construction people too. And so you know, if you took

695
00:34:41,360 --> 00:34:45,640
Speaker 3: the entire economy, you'd say, we're actually really short construction capacity.

696
00:34:45,680 --> 00:34:48,640
Speaker 3: And that's what leads to it. It's an adjustment issue.

697
00:34:48,680 --> 00:34:51,040
Speaker 3: It doesn't mean it's a permanent problem, but it is

698
00:34:51,120 --> 00:34:53,600
Speaker 3: right now an adjustment issue. And if you're short housing

699
00:34:53,640 --> 00:34:56,480
Speaker 3: in your community, you really need that housing to get

700
00:34:56,520 --> 00:34:57,240
Speaker 3: launched today.

701
00:34:57,760 --> 00:35:00,640
Speaker 1: So towns like Yatkinville and mount Airy are doing what

702
00:35:00,680 --> 00:35:05,000
Speaker 1: they can here by proactively courting developers and experimenting with

703
00:35:05,080 --> 00:35:09,480
Speaker 1: new models for childcare to course correct for that ongoing shortage.

704
00:35:09,520 --> 00:35:13,319
Speaker 15: And there just isn't enough childcare. When we did the

705
00:35:13,360 --> 00:35:18,280
Speaker 15: study in twenty twenty one, Yatkin County was the third

706
00:35:18,360 --> 00:35:22,440
Speaker 15: worst in the state for the number of children according

707
00:35:22,480 --> 00:35:25,880
Speaker 15: to I think Babi's report for the number of infants

708
00:35:25,920 --> 00:35:30,400
Speaker 15: in toddlers per slot, we're about nineteen two. One side

709
00:35:30,640 --> 00:35:34,719
Speaker 15: why is that there has been a huge reduction in

710
00:35:34,800 --> 00:35:39,000
Speaker 15: the number of childcare providers. It's like eighty two percent

711
00:35:39,600 --> 00:35:44,440
Speaker 15: have reduced within the last twelve years.

712
00:35:45,280 --> 00:35:47,160
Speaker 2: So it's so it's.

713
00:35:47,000 --> 00:35:52,080
Speaker 15: Been shrinking partially because it is difficult to maintain a

714
00:35:52,160 --> 00:35:55,080
Speaker 15: license to get the star rating. Star rating is like

715
00:35:55,120 --> 00:36:00,359
Speaker 15: a quality rating, and here for private providers, we don't

716
00:36:00,719 --> 00:36:04,160
Speaker 15: other than one family home in the western part of

717
00:36:04,160 --> 00:36:06,840
Speaker 15: the county, there are no four or five star rated

718
00:36:07,160 --> 00:36:08,960
Speaker 15: childcare providers.

719
00:36:09,320 --> 00:36:13,120
Speaker 4: That's Sandy Scanelli of the shallow Ford Foundation. She's spearheading

720
00:36:13,160 --> 00:36:15,560
Speaker 4: a new type of childcare model that would see providers

721
00:36:15,600 --> 00:36:19,359
Speaker 4: pool and share resources like buildings, playgrounds, and operations to

722
00:36:19,360 --> 00:36:22,040
Speaker 4: help load their costs. Tom met with her as part

723
00:36:22,080 --> 00:36:24,440
Speaker 4: of his tour of the county. So typically speaking, a

724
00:36:24,520 --> 00:36:27,640
Speaker 4: childcare provider would have to do the legwork of like

725
00:36:27,680 --> 00:36:31,719
Speaker 4: finding the location and furnishing it and building it out itself. Yes,

726
00:36:31,800 --> 00:36:36,640
Speaker 4: and so the main right and so the main thing

727
00:36:36,719 --> 00:36:39,799
Speaker 4: that this solved sounds like is just like they just

728
00:36:39,800 --> 00:36:41,440
Speaker 4: have to rent this. They can focus on what they

729
00:36:41,480 --> 00:36:44,399
Speaker 4: do taking care of children without having a tour about

730
00:36:44,400 --> 00:36:46,840
Speaker 4: all these other ancillary things to get the physical.

731
00:36:46,960 --> 00:36:50,759
Speaker 15: Because licensing is both for the individual as well as

732
00:36:50,800 --> 00:36:54,200
Speaker 15: for the facility. And when we did our study, what

733
00:36:54,280 --> 00:36:59,040
Speaker 15: we found is that I'll give you an example. One

734
00:36:59,040 --> 00:37:03,160
Speaker 15: of the playgrounds needed new mulch. It was going to

735
00:37:03,200 --> 00:37:06,640
Speaker 15: cost eight thousand dollars to replace the mulch. That's the

736
00:37:06,760 --> 00:37:09,560
Speaker 15: key licensing factor is you have to have six inches

737
00:37:09,680 --> 00:37:13,759
Speaker 15: of fluffing mulch. And so every time it rained, they

738
00:37:13,800 --> 00:37:18,560
Speaker 15: were running outside with pitchworks to fluffuck the mulch. Well,

739
00:37:18,600 --> 00:37:25,120
Speaker 15: those kinds of stresses are a distraction, honestly from managing

740
00:37:25,160 --> 00:37:28,680
Speaker 15: that facility. So to have the facility taken care of

741
00:37:29,280 --> 00:37:34,680
Speaker 15: and maintaining that license really allows more focus on the childcare.

742
00:37:35,000 --> 00:37:37,759
Speaker 10: Smart starts only doing the facility. It's not an other

743
00:37:38,080 --> 00:37:39,480
Speaker 10: shared cost model like.

744
00:37:40,239 --> 00:37:44,520
Speaker 15: HR that sort of Actually no, they will also offer

745
00:37:44,640 --> 00:37:48,080
Speaker 15: back on support to each of those businesses if they

746
00:37:48,120 --> 00:37:50,040
Speaker 15: are interested in it. Part of this.

747
00:37:50,280 --> 00:37:51,799
Speaker 4: So the hope is that if some of the back

748
00:37:51,920 --> 00:37:55,319
Speaker 4: end can be centralized, then the actual childcare providers can

749
00:37:55,360 --> 00:37:58,880
Speaker 4: focus on what they do best, providing childcare and reversing

750
00:37:58,880 --> 00:38:00,000
Speaker 4: the decline in total capacit.

751
00:38:00,800 --> 00:38:03,640
Speaker 1: And of course this isn't just a small town problem.

752
00:38:03,680 --> 00:38:07,160
Speaker 1: A shortage of childcare providers and high housing costs, all

753
00:38:07,160 --> 00:38:10,200
Speaker 1: of which contribute to inflation, is pretty much the story

754
00:38:10,239 --> 00:38:13,840
Speaker 1: across America's economy. At our next stop, we talked to

755
00:38:13,880 --> 00:38:16,520
Speaker 1: one of the largest employers in the county and see

756
00:38:16,560 --> 00:38:20,600
Speaker 1: how all the things we've talked about labor, housing prices

757
00:38:20,920 --> 00:38:22,279
Speaker 1: have impacted them as well.

758
00:38:41,320 --> 00:38:46,080
Speaker 10: Hi, thank you, Hi, welcome, Welcome to Unified.

759
00:38:46,200 --> 00:38:50,839
Speaker 4: Hie Tracy allow Eddie, I'm Joe Wise great to make Eddie,

760
00:38:50,960 --> 00:38:53,640
Speaker 4: Eddie Ingle and the CEO of Grace.

761
00:38:53,800 --> 00:38:55,200
Speaker 2: And thereby calls from Sweden.

762
00:38:56,760 --> 00:38:59,000
Speaker 1: Just a few minutes away from Indarram Mills is the

763
00:38:59,120 --> 00:39:04,279
Speaker 1: Yatkinville factory for Unify, a publicly listed manufacturer of polyester

764
00:39:04,640 --> 00:39:08,840
Speaker 1: nylon and spandex yarns. It's headquartered in Greensboro, but it

765
00:39:08,920 --> 00:39:11,440
Speaker 1: has a pretty big facility here in Yachtkinville.

766
00:39:11,480 --> 00:39:14,160
Speaker 4: It is a big facility. There is a huge recycling

767
00:39:14,160 --> 00:39:17,360
Speaker 4: center where Unified turns plastic bottles into a recycled fiber

768
00:39:17,440 --> 00:39:20,520
Speaker 4: and calls Reprieve. There are big trucks parked outside that

769
00:39:20,600 --> 00:39:25,160
Speaker 4: say bottles equal cool stuff, and there's cool stuff inside too,

770
00:39:25,239 --> 00:39:28,640
Speaker 4: including a showroom showing off some of Unified materials even.

771
00:39:28,400 --> 00:39:29,240
Speaker 2: Where it comes from.

772
00:39:29,080 --> 00:39:35,279
Speaker 12: The absolutely Reprieve is a product that we have now

773
00:39:35,320 --> 00:39:41,239
Speaker 12: that we take recycled plastic bottles and is chopped up

774
00:39:41,760 --> 00:39:46,640
Speaker 12: almost a lot of plastic corn flakes. At our reasonable

775
00:39:46,719 --> 00:39:50,480
Speaker 12: facility is cleaned, we separate the green and the brown

776
00:39:50,520 --> 00:39:53,040
Speaker 12: plastic from the clear in the blue. We use the

777
00:39:53,040 --> 00:39:55,040
Speaker 12: clear in the blue plastic in our yarn.

778
00:39:55,640 --> 00:40:00,000
Speaker 1: That's Smith Williams Unifies hr Manager, but everyone calls them smitty.

779
00:40:00,160 --> 00:40:03,319
Speaker 12: But the clear and the blue plastic is shipped here

780
00:40:03,360 --> 00:40:07,040
Speaker 12: to our recycle center where it goes through another process

781
00:40:07,200 --> 00:40:08,400
Speaker 12: becomes pet.

782
00:40:08,760 --> 00:40:11,000
Speaker 2: This is from REDS and is pt REDS and.

783
00:40:11,200 --> 00:40:15,840
Speaker 12: Then we take it and it is in lock plastic

784
00:40:15,920 --> 00:40:19,879
Speaker 12: bbes and it is melted and extrude, it goes through

785
00:40:20,239 --> 00:40:24,400
Speaker 12: large shower hands and as it falls five floors it

786
00:40:24,480 --> 00:40:25,600
Speaker 12: becomes a solid again.

787
00:40:25,680 --> 00:40:29,200
Speaker 4: That plastic yarn is then sold to companies like Nike, Patagonia,

788
00:40:29,320 --> 00:40:32,200
Speaker 4: A six and others who weave it into their products.

789
00:40:33,200 --> 00:40:34,880
Speaker 10: In this country, only about twenty eight percent of the

790
00:40:34,880 --> 00:40:35,359
Speaker 10: bottles are.

791
00:40:35,280 --> 00:40:39,359
Speaker 5: Collected, and when we get a bail of bottles, if

792
00:40:39,400 --> 00:40:42,040
Speaker 5: we get around fifty six percent yield, because the collection.

793
00:40:41,800 --> 00:40:45,000
Speaker 1: System here is not and that's Unified CEO at ee Ingle.

794
00:40:45,320 --> 00:40:48,640
Speaker 1: Bigger companies like Unify haven't been immune to post pandemic

795
00:40:48,719 --> 00:40:51,880
Speaker 1: challenges either. Eddie describes to Tom how the price of

796
00:40:51,920 --> 00:40:54,839
Speaker 1: plastic shot up in twenty twenty one and twenty twenty two,

797
00:40:55,320 --> 00:40:58,000
Speaker 1: including the cost of the plastic bottles that they used

798
00:40:58,040 --> 00:40:59,360
Speaker 1: to make into fabric.

799
00:41:00,280 --> 00:41:02,680
Speaker 5: Marketplace, So that price that bail bottle goes up and

800
00:41:02,680 --> 00:41:05,480
Speaker 5: down significantly. It's been as low as thirteen cents in

801
00:41:05,520 --> 00:41:07,479
Speaker 5: the last six months, it's been as high as eighteen cents,

802
00:41:07,480 --> 00:41:09,399
Speaker 5: but it has been as high as fifty cents two

803
00:41:09,480 --> 00:41:12,000
Speaker 5: years ago. So with a fifty six minute yeld, it

804
00:41:12,040 --> 00:41:13,720
Speaker 5: can get very very expensive, very quickly.

805
00:41:14,440 --> 00:41:15,920
Speaker 10: And that's an average number I've given you.

806
00:41:15,960 --> 00:41:19,280
Speaker 5: But it's the fact that we have to take the bottles,

807
00:41:19,320 --> 00:41:20,840
Speaker 5: and we have to take the caps oft, take the

808
00:41:20,880 --> 00:41:22,880
Speaker 5: labels off, make this flake, and then we have to

809
00:41:22,920 --> 00:41:24,680
Speaker 5: take this flake and make it the chip and their

810
00:41:24,760 --> 00:41:26,319
Speaker 5: year losses are throughout.

811
00:41:26,040 --> 00:41:27,560
Speaker 10: That whole supply chain.

812
00:41:27,800 --> 00:41:31,960
Speaker 5: But it's what's cool is I say this all the time,

813
00:41:31,960 --> 00:41:36,919
Speaker 5: but you've never met a sad recycling. So what we're

814
00:41:36,920 --> 00:41:40,719
Speaker 5: doing here at tracks young people who want to be sustainable,

815
00:41:40,880 --> 00:41:42,080
Speaker 5: want to be purpose rhythm.

816
00:41:42,600 --> 00:41:43,919
Speaker 10: And while yes.

817
00:41:43,920 --> 00:41:46,800
Speaker 5: This raw material is more expensive and the yields are higher,

818
00:41:47,280 --> 00:41:49,640
Speaker 5: we aren't giving the brands what they need.

819
00:41:49,960 --> 00:41:52,080
Speaker 4: So Unify as a lot bigger than many of the

820
00:41:52,160 --> 00:41:55,000
Speaker 4: other local businesses around it. In fact, it's the biggest

821
00:41:55,000 --> 00:41:57,960
Speaker 4: private sector employer in the Edkin County and it's had

822
00:41:57,960 --> 00:42:00,200
Speaker 4: the sort of secular tail end of demand from more

823
00:42:00,239 --> 00:42:04,480
Speaker 4: sustainable fabrics behind it, but it has encountered some similar issues.

824
00:42:04,760 --> 00:42:08,120
Speaker 4: Supply chain disruptions are still kind of reverberating and clouding

825
00:42:08,120 --> 00:42:08,880
Speaker 4: the picture of demand.

826
00:42:08,920 --> 00:42:12,840
Speaker 5: So I'd say from a demand perspective, there was a

827
00:42:12,880 --> 00:42:16,799
Speaker 5: lot of over purchasing and the stocks of all these

828
00:42:16,920 --> 00:42:20,160
Speaker 5: brands and quoted the power brands went way up because

829
00:42:20,200 --> 00:42:22,719
Speaker 5: they basically had this supply chain issue. What used to

830
00:42:22,719 --> 00:42:25,600
Speaker 5: take thirty days from China was taking three months because

831
00:42:25,600 --> 00:42:29,080
Speaker 5: the votes were sitting out there. But everybody started ordering them,

832
00:42:29,120 --> 00:42:31,200
Speaker 5: not just in China, from Vietnam, from India, so they

833
00:42:31,239 --> 00:42:33,919
Speaker 5: had not just long supply chains.

834
00:42:33,960 --> 00:42:35,759
Speaker 10: They over ordered to compensate.

835
00:42:36,320 --> 00:42:39,239
Speaker 5: And then suddenly eighteen months ago, nineteen twenty months ago,

836
00:42:40,640 --> 00:42:44,840
Speaker 5: things started freeing up, so that all the brands globally

837
00:42:44,920 --> 00:42:47,640
Speaker 5: just pulled back on as many purchases as they could,

838
00:42:47,640 --> 00:42:51,520
Speaker 5: and that really impacted us. We're seeing consumer demand for

839
00:42:51,560 --> 00:42:54,919
Speaker 5: our products or down about seven or eight percent, maybe

840
00:42:54,920 --> 00:42:56,959
Speaker 5: six percent, so with.

841
00:42:56,960 --> 00:42:58,759
Speaker 10: The de stocking.

842
00:42:59,560 --> 00:43:02,560
Speaker 5: And not only do de stalking happen, but they said, oh,

843
00:43:02,840 --> 00:43:05,239
Speaker 5: I don't want to spend any of my cash on inventory,

844
00:43:05,560 --> 00:43:09,560
Speaker 5: so they're actually tightening up the supply changes. They're growing further,

845
00:43:09,880 --> 00:43:12,600
Speaker 5: taking more risk than they normally would. But I will say,

846
00:43:12,840 --> 00:43:17,319
Speaker 5: starting really beginning this year, most of the inventory seem

847
00:43:17,360 --> 00:43:21,200
Speaker 5: to be cleared out. So we are seeing business come

848
00:43:21,280 --> 00:43:27,319
Speaker 5: back slowly. Consumers are still constrained a little bit as

849
00:43:27,320 --> 00:43:28,200
Speaker 5: far as what we're reading.

850
00:43:28,320 --> 00:43:29,400
Speaker 10: You got us better than I do.

851
00:43:29,520 --> 00:43:32,759
Speaker 5: But you know that when the COVID happened, everybody jumped

852
00:43:32,760 --> 00:43:35,480
Speaker 5: to a casual and now they're coming back to wearing

853
00:43:35,520 --> 00:43:36,880
Speaker 5: a bit more formal. Oh, I got to go to

854
00:43:36,960 --> 00:43:38,440
Speaker 5: the office. I'm not going to the office. I got

855
00:43:38,480 --> 00:43:39,160
Speaker 5: to go to the office.

856
00:43:39,200 --> 00:43:40,680
Speaker 2: So if I had thought about that, I'd want to

857
00:43:40,719 --> 00:43:41,280
Speaker 2: fleees today.

858
00:43:41,280 --> 00:43:41,480
Speaker 7: Sorry.

859
00:43:41,520 --> 00:43:46,040
Speaker 1: Yeah, And of course, hovering over this entire conversation, there

860
00:43:46,120 --> 00:43:47,840
Speaker 1: is still the question of price.

861
00:43:48,600 --> 00:43:50,920
Speaker 2: But you know, in my day job, I'm worried about inflation.

862
00:43:51,400 --> 00:43:51,719
Speaker 2: I think.

863
00:43:51,920 --> 00:43:53,920
Speaker 3: I think what I take from what you just said is,

864
00:43:54,560 --> 00:43:56,480
Speaker 3: you know, over the last couple of years, we have

865
00:43:56,560 --> 00:43:57,560
Speaker 3: not been your problem.

866
00:43:57,960 --> 00:43:59,719
Speaker 2: You know, our prices have been headed down not.

867
00:44:00,800 --> 00:44:03,520
Speaker 5: I mean I think you know one person's finish with

868
00:44:03,920 --> 00:44:06,320
Speaker 5: to somebody who's very knowledge about this. I think labor

869
00:44:07,040 --> 00:44:09,120
Speaker 5: always goes up no matter what. Yes, but if you

870
00:44:09,200 --> 00:44:13,200
Speaker 5: think about energy here, energy in North Carolina was very,

871
00:44:13,280 --> 00:44:14,560
Speaker 5: very stable for a long time.

872
00:44:15,000 --> 00:44:15,560
Speaker 10: But as.

873
00:44:17,000 --> 00:44:20,879
Speaker 5: Energy companies like two have invested in renewables, they've been

874
00:44:20,920 --> 00:44:23,600
Speaker 5: able to pass that cost on as they should or shouldn't,

875
00:44:23,600 --> 00:44:25,319
Speaker 5: I don't know, but they passed that cost on. So

876
00:44:25,360 --> 00:44:27,560
Speaker 5: our energy costs have gone up, not just because CREU

877
00:44:27,640 --> 00:44:30,640
Speaker 5: has gone off, but because the investment renewables. So we're

878
00:44:30,920 --> 00:44:33,840
Speaker 5: we are very, very energy intensive company. We use a

879
00:44:33,840 --> 00:44:36,319
Speaker 5: lot of energy here, we're involved in trying to negotiate that.

880
00:44:36,320 --> 00:44:38,880
Speaker 3: With exact That took your cost, That took cost practicing

881
00:44:38,920 --> 00:44:41,080
Speaker 3: labour's taking your labor cost package take it.

882
00:44:41,160 --> 00:44:43,320
Speaker 2: Yes, so you're saying prices have actually done about.

883
00:44:43,239 --> 00:44:43,920
Speaker 10: Yes, But.

884
00:44:45,600 --> 00:44:48,440
Speaker 5: When two thousand and twenty one, twenty two happened, we

885
00:44:48,520 --> 00:44:51,400
Speaker 5: had cost escalations because of bail.

886
00:44:51,160 --> 00:44:53,480
Speaker 2: Bottle prices going out of and you've had that, and we.

887
00:44:53,520 --> 00:44:56,120
Speaker 5: Had record it was record, Patrick Chmical prices went up

888
00:44:56,160 --> 00:44:57,920
Speaker 5: to a record if you remember CREWD was out one

889
00:44:58,000 --> 00:45:01,399
Speaker 5: hundred and twenty tw three, maybe one thirty is spike

890
00:45:01,480 --> 00:45:03,920
Speaker 5: for a day. But so all of that got you

891
00:45:03,960 --> 00:45:06,160
Speaker 5: had to put passed off. Yeah, otherwise you wouldn't be here.

892
00:45:06,200 --> 00:45:09,719
Speaker 5: And then but as it crashed and because demand slow down,

893
00:45:09,960 --> 00:45:12,920
Speaker 5: there was pressure to drop pricing. So I think we're

894
00:45:12,960 --> 00:45:16,360
Speaker 5: in this today, this weird spot where everybody knows prices

895
00:45:16,400 --> 00:45:18,000
Speaker 5: have to go up and it's just a matter of

896
00:45:18,440 --> 00:45:24,680
Speaker 5: slowly doing that in a scientific way. And again, where

897
00:45:24,719 --> 00:45:27,120
Speaker 5: is the value, How we capture that, how we price that?

898
00:45:27,760 --> 00:45:29,880
Speaker 10: It is very challenging, you have to say from a

899
00:45:29,920 --> 00:45:30,480
Speaker 10: pricing pre here.

900
00:45:30,880 --> 00:45:34,160
Speaker 1: This is another theme that comes up regularly in Tom's meetings.

901
00:45:34,440 --> 00:45:37,359
Speaker 1: Big and small companies seem to have experienced a lot

902
00:45:37,360 --> 00:45:40,480
Speaker 1: of the economy of recent years in very different ways.

903
00:45:40,800 --> 00:45:43,359
Speaker 1: We asked Tom about this. Do you notice a big

904
00:45:43,400 --> 00:45:47,600
Speaker 1: difference between what larger companies are saying versus smaller companies.

905
00:45:48,160 --> 00:45:48,520
Speaker 11: I do.

906
00:45:48,680 --> 00:45:52,480
Speaker 3: Smaller companies are still struggling to fill workforce jobs. They're

907
00:45:52,480 --> 00:45:54,800
Speaker 3: still struggling to fill jobs, and that's in part because

908
00:45:55,400 --> 00:45:58,799
Speaker 3: there was more wage more capacity to raise wages in

909
00:45:58,840 --> 00:46:01,880
Speaker 3: the larger companies than there were in the smaller companies.

910
00:46:01,920 --> 00:46:04,359
Speaker 3: So when we were with one earlier today, but when

911
00:46:04,400 --> 00:46:07,200
Speaker 3: you go to a smaller company, you do hear that

912
00:46:07,320 --> 00:46:10,080
Speaker 3: kind of constraint being much bigger. During the supply chain

913
00:46:10,440 --> 00:46:13,560
Speaker 3: shortage era, you absolutely heard that the big companies had

914
00:46:13,880 --> 00:46:16,719
Speaker 3: a lot more benefit than the smaller companies. And I

915
00:46:16,719 --> 00:46:21,239
Speaker 3: think when it came to the margin recapture cycle, the

916
00:46:21,239 --> 00:46:23,000
Speaker 3: big companies have led the way on that, and a

917
00:46:23,000 --> 00:46:25,080
Speaker 3: lot of small companies are still saying that they're working

918
00:46:25,120 --> 00:46:27,360
Speaker 3: to recapture margins.

919
00:46:27,680 --> 00:46:30,279
Speaker 4: Being able to compete on wages isn't the only edge

920
00:46:30,320 --> 00:46:33,200
Speaker 4: that larger companies have in the current environment. Many of

921
00:46:33,239 --> 00:46:36,640
Speaker 4: them have also been able to refinance their debt. Contrast

922
00:46:36,680 --> 00:46:39,839
Speaker 4: out with the smaller company Carport Central, which told Tom

923
00:46:39,880 --> 00:46:42,480
Speaker 4: that bank lending is becoming a constraint on its business.

924
00:46:43,000 --> 00:46:46,080
Speaker 1: That might be one reason, according to Tom, that economic

925
00:46:46,120 --> 00:46:49,120
Speaker 1: growth has so far defied the gravity of higher interest rates.

926
00:46:49,440 --> 00:46:51,759
Speaker 1: They just haven't flowed through to some parts of the

927
00:46:51,760 --> 00:46:52,880
Speaker 1: economy just yet.

928
00:46:53,000 --> 00:46:55,160
Speaker 3: Well, so, the data that I keep coming back to

929
00:46:55,680 --> 00:46:59,400
Speaker 3: is interest payments is a percent of either personal disposable

930
00:46:59,440 --> 00:47:03,720
Speaker 3: income or or corporate revenue. And those numbers have only

931
00:47:03,760 --> 00:47:06,919
Speaker 3: now finally gotten back to twenty nineteen levels. And that's

932
00:47:06,960 --> 00:47:09,880
Speaker 3: because a lot of individuals pay down their credit cards

933
00:47:09,960 --> 00:47:12,879
Speaker 3: and refinance their mortgages, and a lot of companies paid

934
00:47:12,880 --> 00:47:16,120
Speaker 3: down their debt and refinance their debt. And so the

935
00:47:16,360 --> 00:47:19,759
Speaker 3: inaggregate impact of having the Fed funds rate at five

936
00:47:19,800 --> 00:47:22,520
Speaker 3: and a third versus you know, where it was basically

937
00:47:22,600 --> 00:47:27,439
Speaker 3: at zero hasn't really flown through the aggregate economy. Now,

938
00:47:27,560 --> 00:47:30,719
Speaker 3: it's certainly flown through to individual parts of the economy.

939
00:47:30,920 --> 00:47:34,920
Speaker 3: And you know, the most surprising things to me, you know,

940
00:47:34,960 --> 00:47:38,120
Speaker 3: obviously the residential market, where you've got the three percent

941
00:47:38,160 --> 00:47:40,760
Speaker 3: mortgage holders who don't want to trade into a seven

942
00:47:40,800 --> 00:47:43,960
Speaker 3: percent mortgage and are unwilling to sell their house. But

943
00:47:44,160 --> 00:47:47,160
Speaker 3: behind that is that you know, ninety two percent of

944
00:47:47,160 --> 00:47:51,400
Speaker 3: mortgages are fixed rate. Okay, so that's different than what

945
00:47:51,440 --> 00:47:55,480
Speaker 3: the economy was fifteen years ago. In commercial real estate,

946
00:47:55,600 --> 00:47:58,160
Speaker 3: you know, multifamily, you hear about a set of people

947
00:47:58,200 --> 00:48:01,879
Speaker 3: who really can't develop anymore, want to turn in the keys,

948
00:48:01,880 --> 00:48:04,120
Speaker 3: whatever version of it, and another set of people who

949
00:48:04,120 --> 00:48:06,280
Speaker 3: are owners who are feeling actually just fine.

950
00:48:06,640 --> 00:48:11,000
Speaker 4: And unifies experience underscores that big refinancing trend. They refinanced

951
00:48:11,000 --> 00:48:13,000
Speaker 4: their debt in twenty twenty two and it has since

952
00:48:13,000 --> 00:48:14,480
Speaker 4: been investing in new equipment.

953
00:48:14,800 --> 00:48:16,759
Speaker 5: From a balancing point of view, I feel pretty good

954
00:48:16,760 --> 00:48:20,320
Speaker 5: where we are, but it is impacting us because we

955
00:48:20,360 --> 00:48:21,920
Speaker 5: knew we were going to take on debt with this

956
00:48:22,000 --> 00:48:26,160
Speaker 5: new investment, and the investments based on equipment that was

957
00:48:26,719 --> 00:48:30,720
Speaker 5: really new and really differentiated. It's we'd had a spike

958
00:48:30,760 --> 00:48:33,080
Speaker 5: in capital capex for like three years and it was

959
00:48:33,120 --> 00:48:37,000
Speaker 5: on new equipment that was very, very different from what

960
00:48:37,080 --> 00:48:38,799
Speaker 5: we could have bought a few years earlier. And we've

961
00:48:38,840 --> 00:48:43,400
Speaker 5: been developed it.

962
00:48:53,200 --> 00:48:54,480
Speaker 2: Well, you guys are great to make the time. We

963
00:48:54,520 --> 00:48:55,160
Speaker 2: really appreciate it.

964
00:48:55,480 --> 00:48:56,759
Speaker 5: I just want I'm going to make it since you

965
00:48:56,800 --> 00:48:59,640
Speaker 5: walk out there just seem just look your head out

966
00:48:58,880 --> 00:48:59,400
Speaker 5: of episode.

967
00:49:00,200 --> 00:49:02,920
Speaker 1: UNIFS Factory was the last stop for us, but not

968
00:49:03,000 --> 00:49:05,240
Speaker 1: for Tom. As we made our way to the airport,

969
00:49:05,360 --> 00:49:07,520
Speaker 1: he was already back in the car and on his

970
00:49:07,560 --> 00:49:10,240
Speaker 1: way to Greensboro for the next leg of his listening tour.

971
00:49:10,880 --> 00:49:13,359
Speaker 1: Barkin spends about two to three weeks of every month

972
00:49:13,400 --> 00:49:16,720
Speaker 1: on trips just like this one, which means that most days,

973
00:49:16,840 --> 00:49:19,480
Speaker 1: if he's not getting ready for the next FOMC meeting

974
00:49:19,480 --> 00:49:22,480
Speaker 1: in DC, he's in the car, or at another luncheon,

975
00:49:22,800 --> 00:49:25,880
Speaker 1: or taking one last look at another factory floor back and.

976
00:49:25,880 --> 00:49:28,040
Speaker 5: Automaticly, yeah, all the way again.

977
00:49:32,120 --> 00:49:34,480
Speaker 10: I saw that you wouldn't.

978
00:49:34,400 --> 00:49:35,080
Speaker 9: You have to say it?

979
00:49:35,160 --> 00:49:38,359
Speaker 13: So let's do we make stuff.

980
00:49:39,600 --> 00:49:41,040
Speaker 5: That's what we did. We make crop Star.

981
00:49:41,600 --> 00:49:41,759
Speaker 11: Well.

982
00:49:41,800 --> 00:49:42,200
Speaker 2: I love that.

983
00:49:42,480 --> 00:49:44,200
Speaker 4: So after two days on the road with a Fed

984
00:49:44,280 --> 00:49:46,880
Speaker 4: Bank president, what did we learn? Well, on the one hand,

985
00:49:47,000 --> 00:49:49,000
Speaker 4: there are some businesses that seem to be doing fine

986
00:49:49,000 --> 00:49:52,120
Speaker 4: in this environment. Meanwhile, others are struggling with the impact

987
00:49:52,120 --> 00:49:55,279
Speaker 4: of higher rates and moderating demand. All of these veried

988
00:49:55,400 --> 00:49:59,240
Speaker 4: individual experiences are one reason why it seems particularly challenging

989
00:49:59,320 --> 00:50:01,160
Speaker 4: right now to figuregure out what's going on with the

990
00:50:01,239 --> 00:50:04,280
Speaker 4: larger economy. One of the questions that I think people

991
00:50:04,280 --> 00:50:07,359
Speaker 4: are scratching their head is how did the FED raise

992
00:50:07,440 --> 00:50:09,600
Speaker 4: rate so much and yet the economy hasn't slowed down

993
00:50:09,640 --> 00:50:11,000
Speaker 4: as fast as people expected.

994
00:50:11,160 --> 00:50:13,359
Speaker 3: Well, I've done it intentionally over the last three months,

995
00:50:13,440 --> 00:50:16,560
Speaker 3: probably fifteen different sessions with real commercial real estate groups,

996
00:50:16,760 --> 00:50:20,239
Speaker 3: because they're definitely feeling the impact of rates, and I

997
00:50:20,239 --> 00:50:22,960
Speaker 3: want to hear from those segments. When you talk to banks,

998
00:50:23,360 --> 00:50:25,560
Speaker 3: which I do a good bit, you also hear the

999
00:50:25,600 --> 00:50:29,040
Speaker 3: same thing. I was very interested because in theory, higher

1000
00:50:29,120 --> 00:50:31,760
Speaker 3: rates should you know, hit the whole economy relatively quickly.

1001
00:50:31,800 --> 00:50:36,000
Speaker 3: It starts with intra sensitive sectors like real estate and banking,

1002
00:50:36,040 --> 00:50:40,239
Speaker 3: but historically manufacturings followed pretty closely, and I haven't heard

1003
00:50:40,239 --> 00:50:43,000
Speaker 3: that much on the manufacturer side, So it was very

1004
00:50:43,000 --> 00:50:46,879
Speaker 3: interesting to hear these guys talk about how creat availability

1005
00:50:46,960 --> 00:50:50,160
Speaker 3: was constraining their ability to grow. Now you know they've

1006
00:50:50,160 --> 00:50:52,600
Speaker 3: had some margin challenges, which you know they talked about

1007
00:50:52,640 --> 00:50:55,440
Speaker 3: that could be relevant. And I do think the banks

1008
00:50:55,440 --> 00:50:59,919
Speaker 3: I talked to will talk quite openly about tightening credit,

1009
00:51:00,440 --> 00:51:02,160
Speaker 3: and part of that is just being prudent. You know,

1010
00:51:02,200 --> 00:51:06,120
Speaker 3: in a world of uncertainty, you hear about it, but

1011
00:51:06,160 --> 00:51:08,080
Speaker 3: then you get to see it, right, So now we

1012
00:51:08,160 --> 00:51:10,080
Speaker 3: have in the economy. It's not just what people are

1013
00:51:10,080 --> 00:51:13,640
Speaker 3: saying might happen, there's some evidence that actually is happening.

1014
00:51:14,040 --> 00:51:17,920
Speaker 1: Complicating the whole picture is also the overarching weirdness of

1015
00:51:17,960 --> 00:51:20,960
Speaker 1: the post pandemic business cycle and the long term impact

1016
00:51:21,000 --> 00:51:24,399
Speaker 1: that the pandemic experience may have had on businesses. This

1017
00:51:24,440 --> 00:51:27,120
Speaker 1: is something Tom talks about a lot. I'm curious if

1018
00:51:27,160 --> 00:51:30,879
Speaker 1: there are any lessons that businesses you speak to seem

1019
00:51:30,960 --> 00:51:34,720
Speaker 1: to have internalized from the past few years the post

1020
00:51:34,800 --> 00:51:37,520
Speaker 1: pandemic experience. So we used to talk a lot about

1021
00:51:37,680 --> 00:51:41,200
Speaker 1: the idea of labor hoarding. Everyone was caught short during COVID,

1022
00:51:41,320 --> 00:51:44,280
Speaker 1: so they hired a lot and they're terrified of having

1023
00:51:44,320 --> 00:51:47,600
Speaker 1: to go through, you know, the same scarcity of labor again,

1024
00:51:47,840 --> 00:51:52,800
Speaker 1: or the experience of raising prices and testing that elasticity

1025
00:51:53,000 --> 00:51:56,000
Speaker 1: of demand. Are those things that people seem to have

1026
00:51:56,200 --> 00:51:58,360
Speaker 1: actually internalized in your mind?

1027
00:51:58,719 --> 00:52:02,080
Speaker 3: Yeah, So maybe three things that come to mind supply

1028
00:52:02,160 --> 00:52:05,120
Speaker 3: chain resilience. If you had everything in China before, you

1029
00:52:05,200 --> 00:52:07,239
Speaker 3: have to ask yourself the question how smart that is?

1030
00:52:07,600 --> 00:52:11,439
Speaker 3: And so I see everywhere people diversifying their supply chain

1031
00:52:11,520 --> 00:52:14,920
Speaker 3: more near shoring than onshoing, but still or in certainly

1032
00:52:15,000 --> 00:52:18,080
Speaker 3: Thailand and Vietnam, you know, in Indonesia playing a role too.

1033
00:52:18,560 --> 00:52:21,920
Speaker 3: That's very clear. Second is I think a new respect

1034
00:52:22,280 --> 00:52:24,600
Speaker 3: for the scarcity of labor. We lived in a world

1035
00:52:24,600 --> 00:52:27,160
Speaker 3: where labor was long for a long time. Now it's short.

1036
00:52:27,520 --> 00:52:29,439
Speaker 3: You talked about labor hoarding, but I think it's even

1037
00:52:29,520 --> 00:52:32,359
Speaker 3: more than that. It's about investment and benefits and compensation

1038
00:52:32,920 --> 00:52:35,480
Speaker 3: on a continuous basis. By the way, on the other

1039
00:52:35,520 --> 00:52:37,799
Speaker 3: side of that, there's investment in automation that's going on

1040
00:52:38,040 --> 00:52:40,600
Speaker 3: as well, but new respect for the scarcity of labor.

1041
00:52:40,960 --> 00:52:42,880
Speaker 3: And then I do think on the pricing side. You know,

1042
00:52:42,880 --> 00:52:45,000
Speaker 3: I've been talking about this for a while, but there's

1043
00:52:45,000 --> 00:52:48,200
Speaker 3: a bunch of businesses that before COVID knew they had

1044
00:52:48,239 --> 00:52:53,320
Speaker 3: no chance to increase prices, and then COVID happened, supply

1045
00:52:53,480 --> 00:52:56,120
Speaker 3: chain trunk labor costs increase, they had no choice. They

1046
00:52:56,160 --> 00:52:58,240
Speaker 3: went from having no chance to have a no choice,

1047
00:52:58,400 --> 00:53:01,719
Speaker 3: and when they raise prices there were no squences, right,

1048
00:53:02,000 --> 00:53:04,040
Speaker 3: And so we'd like to be on the other side

1049
00:53:04,080 --> 00:53:06,520
Speaker 3: of that where they really thought there wasn't any chance

1050
00:53:06,600 --> 00:53:10,040
Speaker 3: to raise prices again, but I'm not sure they're done.

1051
00:53:09,760 --> 00:53:12,319
Speaker 3: And if they're not done, part of it is they're

1052
00:53:12,320 --> 00:53:15,680
Speaker 3: trying to recapture margins. Part of it is they're just

1053
00:53:15,760 --> 00:53:19,000
Speaker 3: a little more courageous. I talked to a furniture manufacturer

1054
00:53:19,000 --> 00:53:21,840
Speaker 3: a couple days ago who just said, yeah, you know,

1055
00:53:21,920 --> 00:53:23,960
Speaker 3: I used to just give in, but now I'm just

1056
00:53:24,000 --> 00:53:26,440
Speaker 3: a little bolder. I've had the experience of raising prices.

1057
00:53:26,440 --> 00:53:28,399
Speaker 3: I'm a little bolder, and I think it just takes

1058
00:53:28,400 --> 00:53:31,719
Speaker 3: a while to get from no consequences all the way

1059
00:53:31,760 --> 00:53:33,560
Speaker 3: back to no chance again.

1060
00:53:33,840 --> 00:53:36,439
Speaker 1: And that's ultimately Tom's message. In this part of North

1061
00:53:36,520 --> 00:53:40,479
Speaker 1: Carolina and beyond, economic scars can linger for a long

1062
00:53:40,520 --> 00:53:44,080
Speaker 1: time and play out in unexpected ways. There's still an

1063
00:53:44,160 --> 00:53:47,440
Speaker 1: undersupply of housing in places like Yadkinville and Mount Airy,

1064
00:53:47,800 --> 00:53:50,480
Speaker 1: in part because of the two thousand and eight financial crisis,

1065
00:53:50,800 --> 00:53:54,840
Speaker 1: not just twenty twenty and the higher interest rates after that. Meanwhile,

1066
00:53:55,000 --> 00:53:57,759
Speaker 1: the hollowing out of manufacturing in this area and other

1067
00:53:57,880 --> 00:54:01,400
Speaker 1: parts of the US has been going on for decades. Now,

1068
00:54:01,600 --> 00:54:04,600
Speaker 1: companies might be more aware of supply chain disruptions and

1069
00:54:04,680 --> 00:54:07,560
Speaker 1: labor shortages, and they may be more willing to raise

1070
00:54:07,600 --> 00:54:11,080
Speaker 1: their prices to offset them too, which could add to inflation.

1071
00:54:11,680 --> 00:54:14,160
Speaker 4: All of that creates difficulties for the FED, which is

1072
00:54:14,200 --> 00:54:17,319
Speaker 4: still trying to balance inflation and unemployment in both big

1073
00:54:17,320 --> 00:54:20,279
Speaker 4: and small towns across America. It has its data, and

1074
00:54:20,320 --> 00:54:24,239
Speaker 4: it can attempt to assume some relationship between things like prices,

1075
00:54:24,640 --> 00:54:27,480
Speaker 4: labor market tightness, and so forth, but it's hard to

1076
00:54:27,480 --> 00:54:30,279
Speaker 4: know what that lingering psychological effect of the past few

1077
00:54:30,320 --> 00:54:33,239
Speaker 4: years might be, let alone, what aspects of the economy

1078
00:54:33,320 --> 00:54:35,640
Speaker 4: still have yet to be normalized. And if you think

1079
00:54:35,640 --> 00:54:38,239
Speaker 4: about somewhere like the Richmond FED District, which has both

1080
00:54:38,280 --> 00:54:41,480
Speaker 4: booming cities and deep rural areas, trying to gauge the

1081
00:54:41,520 --> 00:54:44,160
Speaker 4: disparate effects that a given and policy change might have

1082
00:54:44,600 --> 00:55:01,960
Speaker 4: gets even trickier. See after seeing all that, I'm not

1083
00:55:02,000 --> 00:55:05,280
Speaker 4: sure how good we would be at the rate setting

1084
00:55:05,320 --> 00:55:07,480
Speaker 4: part of the job of being a FED president. That

1085
00:55:07,560 --> 00:55:10,320
Speaker 4: seems pretty tough. But I actually think we'd be pretty

1086
00:55:10,320 --> 00:55:12,240
Speaker 4: good at the asking questions of business's part.

1087
00:55:12,640 --> 00:55:15,800
Speaker 1: Yeah, I would not want to be voting on policy moves,

1088
00:55:15,960 --> 00:55:19,560
Speaker 1: but I did like how odd lotsy, let's say, a

1089
00:55:19,600 --> 00:55:22,120
Speaker 1: lot of Tom's questions actually seem to be I feel

1090
00:55:22,120 --> 00:55:24,440
Speaker 1: like we could do that. Shall we leave it there?

1091
00:55:24,520 --> 00:55:25,239
Speaker 10: Let's leave it there.

1092
00:55:25,320 --> 00:55:28,080
Speaker 1: This has been another episode of the All Thoughts podcast.

1093
00:55:28,280 --> 00:55:30,680
Speaker 1: You can follow me at Tracy Alloway and.

1094
00:55:30,640 --> 00:55:33,280
Speaker 4: I'm Joe Wisenthal. You can follow me at the Stalwart.

1095
00:55:33,320 --> 00:55:35,759
Speaker 4: Thank you to Tom Barkin and the Richmond Fed, Jim

1096
00:55:35,800 --> 00:55:38,520
Speaker 4: Strader and Maya Caatello for their help in putting together

1097
00:55:38,560 --> 00:55:42,000
Speaker 4: this episode. You can follow them at Richmond Fed. Follow

1098
00:55:42,040 --> 00:55:45,840
Speaker 4: our producers Carmen Rodriguez at Carmen armand dash O Bennett

1099
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Speaker 4: at Dashbot and Cale Brooks at Cale Brooks. And thank

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Speaker 4: you to our sound engineer Blake Maples.

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Speaker 1: And a special thank you to all the businesses who

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Speaker 1: participated and let us listen in on their conversations with

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Speaker 1: Tom Barkin and let us join their meetings and even

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Speaker 1: ask our own questions. If you enjoyed this episode, if

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Speaker 1: you like it when Joe and I go on the road,

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Speaker 1: then please leave us a positive review on your favorite

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Speaker 1: podcast platform. Thanks for listening.