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AI & The Fed: Is Hiring Changing? · Leaders in Lending

0:04
Speaker 1: Hi everyone, and welcome to Leaders in Lending. I am
0:07
Speaker 1: Lynn Saarbiel, and I'm joining you today from CBA Live
0:11
Speaker 1: with Joseph Mainz from Experience. Joseph, do you want to
0:15
Speaker 1: talk a little bit about your background and your role
0:17
Speaker 1: as chief Economists Experience.
0:18
Speaker 2: Yeah, thank you, Lynn, and thank you for having me back.
0:21
Speaker 2: So yeah, I'm the chief Economists i Experience North America.
0:25
Speaker 2: So just roughly what I do. I spend probably about
0:28
Speaker 2: seventy percent of my time doing external work with our
0:33
Speaker 2: clients and our partners. Give a lot of presentation speak
0:37
Speaker 2: with probably one hundred and twenty organizations a year, all
0:39
Speaker 2: across is kind of the financial system ecosystem, from the
0:42
Speaker 2: largest banks to fintech's credit unions. I also spend the
0:46
Speaker 2: rest of my time I report up to the North
0:49
Speaker 2: America Strategy Team, and so I also do a lot
0:52
Speaker 2: of work working internally with our strategic finance, our finance team,
0:55
Speaker 2: strategy team, thinking about kind of those major pivots in
0:58
Speaker 2: the economy that may be material for our business as well.
1:01
Speaker 3: Well.
1:01
Speaker 1: Great, well, I know we did this conversation last year,
1:03
Speaker 1: so it's great to have you have you back on
1:05
Speaker 1: the podcast. I think you know heading into into your end,
1:10
Speaker 1: felt that the economy was maybe a little more resilient
1:13
Speaker 1: than expected and that you know, term recession concerns were
1:15
Speaker 1: starting to ease. But now I think we're we're certainly
1:19
Speaker 1: seeing some more uncertainty increase, and especially with different things
1:23
Speaker 1: going on in the world. So what indicators are you
1:26
Speaker 1: watching that could signal shifts as we kind of move
1:28
Speaker 1: into twenty twenty five.
1:30
Speaker 3: Yeah, so I think there's a couple of things.
1:32
Speaker 2: So you're absolutely right when we you know, coming out
1:35
Speaker 2: of twenty twenty four, the economy really had had solid momentum.
1:39
Speaker 2: You know, overall economic activity was doing really well, labor
1:43
Speaker 2: market pretty solid, spending pretty solid. But you know, there
1:48
Speaker 2: were some trends and I can talk about them in
1:50
Speaker 2: a little bit, there were some trends that gave some
1:53
Speaker 2: kind of a heads up that we may be entering
1:55
Speaker 2: a little bit of a slower period. And then on
1:57
Speaker 2: top of that, then we got hit with all Now
1:59
Speaker 2: we have a lot of obviously policy uncertainty coming out
2:02
Speaker 2: of DC. Some of that exactly, you know, kind of
2:06
Speaker 2: further perpetuate some of the slowing trends that we did see.
2:09
Speaker 3: But overall, you're right, solid momentum.
2:11
Speaker 2: So what I'm really looking at right now, you know,
2:14
Speaker 2: I think there's a couple of ways to think about it.
2:16
Speaker 2: So top of mind for me at the moment is
2:19
Speaker 2: everything that's going on with trade in tariff policy, and
2:23
Speaker 2: so really I think about it as you know, kind
2:25
Speaker 2: of affecting two different channels. When you have the kind
2:29
Speaker 2: of the inflationary aspect, the impact that it's going to
2:32
Speaker 2: have on the FED, I think, you know, we can
2:33
Speaker 2: hit on that too, But definitely I think higher tariffs
2:38
Speaker 2: are likely to lead to higher prices. One of the
2:41
Speaker 2: questions is how long and how persistent you know that
2:43
Speaker 2: those price changes may be. But either way, it's probably
2:46
Speaker 2: going to cause the FED to be more cautious in
2:48
Speaker 2: the short run. But what I'm honestly a little more
2:51
Speaker 2: concerned at the moment is kind of the uncertainty that
2:56
Speaker 2: this is driving in the broader economy, especially for things
2:59
Speaker 2: like business investment and consumer spending. So that's actually a
3:02
Speaker 2: segment that I'm a little more concerned about at the
3:04
Speaker 2: moment than even the inflationary impacts.
3:07
Speaker 1: Yeah, you do you think, you know, going into kind
3:10
Speaker 1: of what we're seeing, this persistent inflation and higher for
3:13
Speaker 1: longer rates. Do you think the FED has really the
3:16
Speaker 1: right tools to kind of balance the growth and stability, Like,
3:19
Speaker 1: do they have enough kind of dry powder do influence
3:24
Speaker 1: according to their mandate?
3:25
Speaker 3: So the FED is stuck.
3:27
Speaker 2: They're stuck in a little bit between a rock and
3:29
Speaker 2: a hard place at the moment, just because you know,
3:33
Speaker 2: and inflation was already proving to be more stubborn than
3:36
Speaker 2: they would like to see even coming into the end
3:39
Speaker 2: of twenty twenty four, and now you look at the tariffs. Definitely,
3:45
Speaker 2: if it doesn't drive inflation, highers at least going to
3:47
Speaker 2: keep inflation where it is, which is above the Fed's target.
3:50
Speaker 3: I think for longer. I think the FED does have tools.
3:53
Speaker 2: Obviously, they have room in the federal funds rate to
3:56
Speaker 2: drop it phiry substantially if they if they need to.
4:00
Speaker 2: But it's definitely going to be a challenge, and I
4:02
Speaker 2: do think that this year they may have to make
4:05
Speaker 2: that choice if push comes to shove, what are you
4:09
Speaker 2: going to support You're going to try to make sure
4:12
Speaker 2: you keep inflation inder control, or you're going to try
4:14
Speaker 2: to support the labor market. My personal view is that
4:17
Speaker 2: they they'll support the labor market.
4:19
Speaker 1: So interesting, Yeah, I think that, you know, the certainly
4:23
Speaker 1: policy uncertainty and political changes are having a big impact.
4:27
Speaker 1: And I'm a big Twitter fan and write a fan
4:31
Speaker 1: as well, and I think everyone's an expert on tariffs
4:34
Speaker 1: right now after being experts and other things earlier this year.
4:38
Speaker 1: So you know, as you think about building forecasts for
4:41
Speaker 1: twenty twenty five, with so much uncertainty happening, and particularly
4:45
Speaker 1: like regulatory uncertainty and policy uncertainty, how do you think
4:48
Speaker 1: about factoring that into your forecasts of what you are
4:53
Speaker 1: projecting in it experience?
4:54
Speaker 2: Yeah, so you know, it is very difficult at the
4:58
Speaker 2: moment when you look at kind of of the I
5:01
Speaker 2: don't think you can just pick out one policy aspect
5:03
Speaker 2: at a time when it's just tariffs or immigration or
5:06
Speaker 2: spending cuts or you know, tax cuts or deregulation.
5:09
Speaker 3: It's really the package deal. But how I am thinking
5:12
Speaker 3: about it is you have the short run impacts. So
5:16
Speaker 3: you know, we have tariffs, we're.
5:18
Speaker 2: Having, you know, shifts in immigration policy, You're having you know,
5:22
Speaker 2: federal government layoffs, you have some some spending cutbacks, and
5:25
Speaker 2: so I think I think about really in the short
5:28
Speaker 2: term those things are very those things way heavy in
5:31
Speaker 2: the next six to twelve months, and then I think
5:33
Speaker 2: the tax cuts and the the deregulation, those impacts will
5:37
Speaker 2: probably come later. So really, when I'm looking at the forecast,
5:40
Speaker 2: I'm looking at that tariffs, you know, job cuts, those
5:44
Speaker 2: things in the short run, and I think if you
5:46
Speaker 2: look at the short run, it's it's clear that it's
5:50
Speaker 2: likely going to weigh on growth, likely going to weigh
5:52
Speaker 2: on the labor markets.
5:53
Speaker 3: And I do think that that's.
5:56
Speaker 2: One reason why you know, the market in general, if
6:00
Speaker 2: you you know, if you go back to December, the
6:02
Speaker 2: FED was projecting two rate cuts this year. I actually
6:07
Speaker 2: think that's a pretty good baseline. I know, recently there's
6:10
Speaker 2: been kind of a split, you know, some economists saying, oh, look,
6:13
Speaker 2: we got it. The Fed's gonna be very focused on
6:15
Speaker 2: the inflationary picture because the tariff's going to keep them.
6:17
Speaker 3: Cautious for longer.
6:18
Speaker 2: We may get one cut, we may get no cuts.
6:21
Speaker 2: On the other side of the thing, you look at,
6:22
Speaker 2: you know, market pricing of rate cuts this year.
6:24
Speaker 3: Now they're up to maybe like three cuts.
6:26
Speaker 2: My general view at the moment is if we look
6:29
Speaker 2: at that, we think about kind of the near term risks.
6:32
Speaker 2: You know, if I were to take a bet whether
6:33
Speaker 2: the Fed's going to cut more than twice or less
6:35
Speaker 2: than twice. I think they may cut more than twice
6:38
Speaker 2: this year, and we can talk about maybe in a
6:40
Speaker 2: little bit, but some of the with the weaknesses and
6:42
Speaker 2: I think in the labor market that may may be
6:44
Speaker 2: showing up more readily for them.
6:45
Speaker 1: Yeah, that's definitely. It's going to be an interesting, interesting time.
6:48
Speaker 1: And you know, every time I guess is unprecedented. But
6:52
Speaker 1: you know, I think the one thing we've seen though
6:54
Speaker 1: is consumer spending has remained pretty strong, and even though
6:56
Speaker 1: we've seen some dips and consumer confidence, you see spending
6:59
Speaker 1: is and reflecting that, Like what do you what do
7:02
Speaker 1: you think is driving that? And do you think with
7:04
Speaker 1: some of the changes to federal employees, cuts to federal agencies,
7:07
Speaker 1: do you think that that's going to then trickle down
7:10
Speaker 1: into really how consumers are spending their dollars.
7:14
Speaker 2: Yeah, so I think there's a there's a couple of
7:15
Speaker 2: things there when I think about the strength of the consumer.
7:19
Speaker 2: So I've been generally and when I joined you last time,
7:23
Speaker 2: I've been more optimistic over the past couple of years
7:26
Speaker 2: than most economists, and that's just because I had you know,
7:31
Speaker 2: conviction that the consumer was both able and willing to
7:35
Speaker 2: continue to spend. But some of those dynamics that that
7:39
Speaker 2: drove me to that conviction have really been kind of
7:42
Speaker 2: fading over the past year.
7:44
Speaker 3: So one of one of the.
7:45
Speaker 2: Biggest drivers, you know, twenty twenty three, early twenty twenty four,
7:49
Speaker 2: really strong personal income growth when adjusted for inflation, rising
7:55
Speaker 2: at a solid pace. That is really that was really
7:59
Speaker 2: sort of spending. What you've really seen over especially the
8:03
Speaker 2: back half of twenty twenty four is a softening an
8:06
Speaker 2: overall income growth.
8:08
Speaker 3: So it's now.
8:09
Speaker 2: Running below the average that you saw prior to the pandemic,
8:12
Speaker 2: which now gives me some pause that you know how,
8:15
Speaker 2: I do think consumers will spend this year, but I
8:17
Speaker 2: don't think they'll have the quite as much ability to
8:21
Speaker 2: do so.
8:21
Speaker 3: But what you did see, though.
8:23
Speaker 2: In spite of even having incomes kind of fade a
8:27
Speaker 2: little bit into the back of the year, you did
8:29
Speaker 2: see spending growth remain very robust, honestly, And I think,
8:33
Speaker 2: what so this is kind of the second piece. One
8:36
Speaker 2: is that again, like I said, the income I think
8:38
Speaker 2: is softening a little more concerned about that. But the
8:40
Speaker 2: other piece is you have to think why was it
8:43
Speaker 2: that consumers were willing to, even in the face of
8:46
Speaker 2: their income growth softening a bit, they kept up spending growth. Actually,
8:50
Speaker 2: spending growth really was very solid through twenty twenty four,
8:54
Speaker 2: and spending growth.
8:55
Speaker 3: Was rising faster than income growth. You can't have that
8:58
Speaker 3: happen forever. But the question is why that happen.
9:01
Speaker 2: My view, it has very much to do with the
9:03
Speaker 2: you know, the net worth impact we've seen over the
9:05
Speaker 2: past couple of years. You know, your your home value
9:08
Speaker 2: goes up forty percent, your form K goes up forty percent,
9:10
Speaker 2: you feel more comfortable spending a.
9:13
Speaker 3: Larger portion of your income every month.
9:15
Speaker 2: But what we've seen recently, and I think especially since
9:18
Speaker 2: the you know, whether you want to call this a
9:20
Speaker 2: new trade war and extension of the prior trade war,
9:22
Speaker 2: but either way, all this uncertainty, you've definitely seen more
9:25
Speaker 2: of an impact. I think the sp five hundred entered
9:27
Speaker 2: a correction, and I think you're you're seeing more people
9:30
Speaker 2: probably cognizant now, well, maybe those things that have supported
9:34
Speaker 2: my spending of the past two years, maybe they're not
9:36
Speaker 2: doing so well. Maybe I may be cut back a
9:38
Speaker 2: little more now.
9:38
Speaker 1: Yeah, I think that's probably a good a good point
9:41
Speaker 1: that if you if you think you're going to make
9:42
Speaker 1: more next year, and if you keep seeing your investment
9:44
Speaker 1: balances go up, you may feel a little more confident,
9:46
Speaker 1: like yes I'll book that trip, Yes I'll buy that thing,
9:48
Speaker 1: Yes I'll start this home improvement project. So you know,
9:52
Speaker 1: as you think about then how that relates to lending,
9:55
Speaker 1: the credit environment, credit markets. I think we may have
9:58
Speaker 1: talked last year a little bit about real estate, and
10:01
Speaker 1: you know, rates had been super low for so long,
10:03
Speaker 1: and so this idea that people weren't going to, you know, move,
10:06
Speaker 1: you're not going to sell and walk away from a
10:09
Speaker 1: three percent or two percent mortgage, and that people were
10:12
Speaker 1: going to do more home improvements. And so now that
10:15
Speaker 1: rates have increased rather substantially and seemed to be pretty
10:19
Speaker 1: sticky both on the on the mortgage side, where do
10:23
Speaker 1: you see the opportunities maybe for lending or the credit markets,
10:26
Speaker 1: or what may be the kind of products or asset
10:30
Speaker 1: classes that are coming into favor in the current environment.
10:32
Speaker 2: Yeah, I think it's kind of interesting because, like we
10:35
Speaker 2: mentioned earlier, like the economy really came into twenty twenty
10:37
Speaker 2: five in a good place, and I think you can
10:40
Speaker 2: generally say that as well when looking at the credit environment.
10:44
Speaker 2: So you know you had seen really over the past
10:47
Speaker 2: since you know, late twenty twenty two, lending standards has
10:50
Speaker 2: tightened very substantially. Interest rates were high, but coming into
10:53
Speaker 2: the back end of twenty twenty four, you know, lending
10:56
Speaker 2: sentans were generally, at least for banks and the broader
10:59
Speaker 2: market were still tighting, but not tightly nearly.
11:03
Speaker 3: At the pace.
11:03
Speaker 2: And you did see some You did see some loosening,
11:06
Speaker 2: you know, large banks loosening, and autos you sell some
11:08
Speaker 2: loosening helocks. And I think what you can see like
11:11
Speaker 2: the pickup in lending and FinTechs. You know, we don't
11:14
Speaker 2: have an exact measure of linding standard tightness for FinTechs
11:17
Speaker 2: like we do with banks when the Senior Loan Off
11:19
Speaker 2: Survey comes out, but fintech's generally tightened lending standards earlier.
11:24
Speaker 2: I think maybe got a head of some of their
11:25
Speaker 2: delinquencies earlier. I mean I was listening to you, like
11:28
Speaker 2: I said, your earnings call. I think your CFO said
11:31
Speaker 2: peak defaultiness was early twenty twenty four, and that's what
11:34
Speaker 2: I hear from most most FinTechs. So I think coming
11:37
Speaker 2: into the back end of twenty twenty four, the credit
11:38
Speaker 2: environment was stabilizing into where you had more people, more
11:42
Speaker 2: market participants, starting thinking maybe I can step my toes
11:46
Speaker 2: in the water a little bit here Now as we
11:47
Speaker 2: enter twenty twenty five, obviously the uncertainty is challenging. But
11:52
Speaker 2: what I do think about some opportunities. You know, obviously
11:56
Speaker 2: there's there's a fog of uncertainty, so there's risk this
11:59
Speaker 2: year for sure. But when I think about opportunities, I
12:01
Speaker 2: think about some of the constraints that some lending segments have. Like,
12:05
Speaker 2: for instance, you can see it in the lending data
12:08
Speaker 2: of credit unions. You know, early on credit unions and
12:10
Speaker 2: during the pandemic, you know, they're big auto lender, made
12:13
Speaker 2: a lot of auto loans. Some of those auto loans
12:15
Speaker 2: are not performing I think as well as they expected,
12:19
Speaker 2: and so credit unions have pulled back from the auto
12:21
Speaker 2: lending space. We can see in our origination data. You
12:24
Speaker 2: can see it in the balance sheets of credit unions,
12:28
Speaker 2: and so that constraint started. Findex have started moving to auto.
12:33
Speaker 2: They're not huge in there, but they're starting to move in.
12:35
Speaker 2: And like I said earlier, big banks have it loosened.
12:38
Speaker 2: I think maybe three quarters in a row, lending standards
12:40
Speaker 2: for autos maybe moving a little more in there. So
12:42
Speaker 2: I think about opportunities like that, but using that kind
12:45
Speaker 2: of framework that some constraints that happened during the pandemic
12:48
Speaker 2: may open the door to other entrants. This year, I
12:51
Speaker 2: think about the same thing with business lending. So my
12:56
Speaker 2: general view this year is that the uncertainty may be
13:01
Speaker 2: most impactful to business lending. And the reason why I
13:05
Speaker 2: say that is if you look in the twenty eighteen
13:08
Speaker 2: twenty nineteen period, research shows that the rise and trade
13:15
Speaker 2: uncertainty caused banks to pull back from lending, not just
13:20
Speaker 2: to those firms that were impacted by tariffs, like, obviously
13:23
Speaker 2: you're going to be cautious if your manufacturer that you
13:25
Speaker 2: do business away with now their input costs on by
13:27
Speaker 2: fifty percent, are they going to be able to survive?
13:30
Speaker 2: Not only cautious there, but they raise interest rates. So
13:32
Speaker 2: it kind of basically in essence, just reduced the supply
13:37
Speaker 2: of lending that they were doing, but also businesses themselves
13:40
Speaker 2: pull back out of caution. But anyway, so banks pulled
13:43
Speaker 2: back in twenty seventeen, twenty eighteen, twenty nineteen because.
13:47
Speaker 3: Of the prior trade war. Uncertainty now is higher than
13:50
Speaker 3: it was then. But the other thing is that banks
13:53
Speaker 3: during the pandemic era, when had all these deposits they
13:57
Speaker 3: didn't really have, they didn't know what to do with them,
13:59
Speaker 3: and so they bought a lot of longer dad securities,
14:02
Speaker 3: you know, a lot of mortgage backed securities, you know,
14:03
Speaker 3: tenue treasuries, those kind of things. As interest rates have
14:06
Speaker 3: risen in recent years, right the bond value goes down,
14:10
Speaker 3: and so now they have large kind of unrealized losses
14:12
Speaker 3: on their balance sheets. A lot of regional banks are
14:15
Speaker 3: still working through some of the commercial real estate portfolios
14:18
Speaker 3: that aren't performing really well, and so those constraints they're
14:22
Speaker 3: not like, I don't necessarily think them and themselves are
14:25
Speaker 3: not a risk at the moment. As long as interests,
14:29
Speaker 3: it's more of a function of interest rates. As long
14:31
Speaker 3: as interest rates remain high, it causes though a little
14:34
Speaker 3: bit of I don't know, additional caution on the balance sheet.
14:37
Speaker 3: Researcher does show that large unrealized losses, you know, other
14:41
Speaker 3: concerns on the balance sheet will cause institutions to pull
14:45
Speaker 3: back from lending or at least remain extra cautious in
14:48
Speaker 3: an environment of uncertainty, which is what you have now
14:50
Speaker 3: you so you have higher uncertainty to you now you
14:53
Speaker 3: have some of these balance she challenges at banks that
14:56
Speaker 3: may make them extra cautious. At the same time, business
14:59
Speaker 3: loan delinquent see is rising quite a bit faster than
15:02
Speaker 3: consumer delinquency, which again I think will cause that a
15:06
Speaker 3: little bit of a pullback.
15:07
Speaker 2: But what that means in terms of opportunity is so
15:10
Speaker 2: like right now, we were creating you know, north of
15:12
Speaker 2: four hundred thousand. Uh we have north of four hundred
15:16
Speaker 2: thousand new business starts or filings every month prior to
15:21
Speaker 2: the pandemic is like two hundred and eight thousand, So
15:23
Speaker 2: a significant more new businesses are being created, and many
15:26
Speaker 2: of them are very young businesses. And so that when
15:28
Speaker 2: I think about opportunities FinTechs, I think FinTechs are moving
15:31
Speaker 2: more into that space you lend, you know, have a
15:34
Speaker 2: lot of technology, a lot of data to lend to
15:36
Speaker 2: those kind of thin file new businesses. So I think, like,
15:39
Speaker 2: when I think about opportunities, I think about that where
15:41
Speaker 2: are some maybe market participants who has some constraints coming
15:44
Speaker 2: into this year may hold back be more cautious and
15:47
Speaker 2: what does that open the door for.
15:48
Speaker 3: Other market segments?
15:50
Speaker 1: Now? I think that you know, we did a a
15:53
Speaker 1: kind of small pilot into the small business lending space
15:57
Speaker 1: kind of early in the pandemic, and then for a
16:00
Speaker 1: variety of market reasons, decided to suspend that for a
16:03
Speaker 1: period and and have not had reopened our business lending.
16:07
Speaker 1: But we are seeing growth in in the auto space, uh,
16:10
Speaker 1: in the auto business, particularly in REFI at the moment,
16:15
Speaker 1: you know, certainly as you're talking about that as just
16:17
Speaker 1: thinking about just the sher complexity of the global environment
16:20
Speaker 1: and the even the political and economic environment just in
16:23
Speaker 1: the US, and as you think about you know, the
16:26
Speaker 1: maybe the regional banks, the community banks, the smaller lenders,
16:29
Speaker 1: and the credit unions, you know what, how do you know,
16:33
Speaker 1: what what would you suggest they do to to think
16:37
Speaker 1: about just all of these different levers that are moving
16:40
Speaker 1: in the market, and how to think about managing their
16:42
Speaker 1: portfolios and managing their business strategy, Like how how can
16:47
Speaker 1: they be at least most effective in understanding what may
16:51
Speaker 1: be happening out there and how it relates to their business.
16:54
Speaker 1: I think it's certainly a challenge, and so I don't
16:55
Speaker 1: know if there's a great answer.
16:56
Speaker 2: Yeah, I don't know if if there's there's definitely not
16:59
Speaker 2: a one size fits all. You know, when you start
17:01
Speaker 2: zooming into community banks and you know, credit those those
17:06
Speaker 2: organizations to operate more regionally, you know, those are very
17:09
Speaker 2: much Obviously there's a lot of different shifts happening right now,
17:12
Speaker 2: and I think, no doubt labor market is key to watch,
17:15
Speaker 2: but especially regentally, Like if you operate in the DC market,
17:18
Speaker 2: you're gonna have a little more stress now or are
17:20
Speaker 2: those markets that have large concentrations of uh, federal employees.
17:24
Speaker 3: That's that's definitely something to watch. Yeah.
17:26
Speaker 1: So you know, we talked a little bit about fintech
17:29
Speaker 1: and the opportunities for for FinTechs to kind of come
17:32
Speaker 1: into some of the spaces. You know, I think it
17:34
Speaker 1: is true that you know, and I've said this as
17:36
Speaker 1: somebody who used to work in banking before I worked
17:38
Speaker 1: in fintech, you you don't get fired for uh not
17:42
Speaker 1: taking risk in a bank. Uh that's it's a safe
17:46
Speaker 1: place to be unless you're on the trading side, and
17:48
Speaker 1: then then you could potentially lose your job for not
17:50
Speaker 1: taking risk. But you are incentivized to be more more
17:53
Speaker 1: risk averse, and on the fintech side you can be
17:54
Speaker 1: a little more uh more forward. Are there any other
17:58
Speaker 1: kind of technological in or maybe even changing consumer behaviors
18:03
Speaker 1: that you think that banks need to monitor closely as
18:07
Speaker 1: they're going into twenty twenty.
18:09
Speaker 3: Five, Well, one area, I do think.
18:13
Speaker 2: So one dynamic that's playing out in the economy right
18:16
Speaker 2: now is that really over the last year is you've
18:20
Speaker 2: seen one just a general weakness in hiring. So the
18:25
Speaker 2: overall hires rate is very low, and outside of the pandemic,
18:28
Speaker 2: it's near a decade low, and that just means that
18:31
Speaker 2: the labor market is.
18:34
Speaker 3: Not fast to absorb people who are looking for work.
18:36
Speaker 2: So whether you get laid off or you're coming off
18:40
Speaker 2: the sidelines looking for work, whether you're graduating college and
18:43
Speaker 2: now you're looking for work, so on and so forth,
18:45
Speaker 2: and that lack of absorption is actually the cause of
18:50
Speaker 2: most of the rise and overall unemployment, not necessarily layoffs.
18:55
Speaker 2: So when I think about technological change, I think specifically
18:59
Speaker 2: this dynamic, this low hiring rate is also happening a
19:03
Speaker 2: lot in the white collar, higher income segments. So you
19:06
Speaker 2: can see in the higher rate for those kind of industries.
19:09
Speaker 2: You can see it in people with bachelor's degree who are
19:12
Speaker 2: moving from unemployed to employ That rate is very, very low,
19:18
Speaker 2: and so it's okay if you have a job, not
19:19
Speaker 2: so great if you're looking for a job. So when
19:20
Speaker 2: I think technological advancement, I think about things like, Okay,
19:23
Speaker 2: what's going to play out in AI? How are companies
19:26
Speaker 2: going to take this up? And then my general view
19:29
Speaker 2: this year is that we could see the hiring rate
19:31
Speaker 2: remain generally fairly low this year, and then you have
19:35
Speaker 2: companies who are cautious about the environment, maybe saying, hey,
19:38
Speaker 2: instead of hiring the software engineer, let's see what we
19:41
Speaker 2: can do with AI here, and that perpetuates I think
19:43
Speaker 2: that could perpetuate a kind of labor market that's not
19:47
Speaker 2: great at absorbing people.
19:48
Speaker 3: But that's problem.
19:49
Speaker 2: That's one reason why I do think the FED may
19:52
Speaker 2: cut more than twice this year, because they realize that
19:55
Speaker 2: an environment that the labor market's not absorbing workers very quickly,
19:59
Speaker 2: that a large pick the layoffs could result in a
20:01
Speaker 2: very fast uptick in unemployment.
20:03
Speaker 1: No, I think, and we certainly see that. You know,
20:06
Speaker 1: in the teams that I manage, not that we are
20:10
Speaker 1: you know, we we can hire, and we are hiring
20:12
Speaker 1: as a company, but we're also saying, how can we
20:14
Speaker 1: use AI to be better and more efficient, more scalable
20:17
Speaker 1: the things that we're doing, and we're you know, I'm
20:20
Speaker 1: implementing a couple different AI solutions and how we do
20:23
Speaker 1: diligence and how we do B to B customer support
20:26
Speaker 1: as we think about accelerating both the self serve capabilities,
20:30
Speaker 1: the accuracy, the efficiency and scalability. So I think that's
20:35
Speaker 1: definitely playing out across not just technology companies, but but
20:39
Speaker 1: a lot of kind of more legacy businesses that don't
20:43
Speaker 1: just want to keep keep growing on the on headcount. So,
20:47
Speaker 1: you know, as we look through into twenty twenty five,
20:50
Speaker 1: you know, we're already a quarter in to the year,
20:52
Speaker 1: so we've got three quarters left. You know, what what
20:57
Speaker 1: piece of advice would you offer to either lenders financial
21:00
Speaker 1: institutions to think about navigating what's ahead this year?
21:03
Speaker 2: Yeah, I mean I think this year in particular, all
21:06
Speaker 2: I would say and is the advice that I try
21:08
Speaker 2: to take myself all the time, which is stay humble
21:12
Speaker 2: because and don't cling too strictly to your assumptions, because
21:16
Speaker 2: I think in this kind of environment, things can change
21:19
Speaker 2: very rapidly in one direction another, either for the negative
21:22
Speaker 2: or for the positive.
21:23
Speaker 3: Even great.
21:24
Speaker 1: Yeah, and I think we even saw that reflected in
21:26
Speaker 1: the questions we'd prepared for this session, where had a
21:30
Speaker 1: much more robust Jago economy and now it's a little
21:33
Speaker 1: more uncertainty coming into the year. Well, anyways, Joseph really
21:36
Speaker 1: appreciate you having on the podcast again. Thanks for taking
21:39
Speaker 1: time to share your insights with us as thank you.
21:42
Speaker 2: Lane