Marketplace - Could AI be the next HR?

Episode Date: February 7, 2024

Artificial intelligence is still in its early stages, and most Americans don’t use it at work — yet. But a new survey shows 70% of workers are “very” or “somewhat” concerned about employers using AI in human resources decision-making, like hiring, firing and promotions. In this episode, we’ll dig into some AI job fears. Plus, New York Community Bank stock takes a wild ride after Moody’s dings its credit rating, and Ford’s electric vehicle sales are down, but its savings on emissions fines are up.

Today on the show, banking deja vu, a not-so-depressing housing story, and chocolate from American Public Media. This is Marketplace. In Baltimore, I'm Amy Scott, in for Kai Risdahl. It's Wednesday, February 7th. Good to have you with us. It's hard not to read or hear the news about the struggles at New York Community Bank Corp. Without a little flashback to last year's regional banking turmoil, NYCB's stock has been on a wild ride over the past 24 hours after Moody's downgraded the bank's credit rating to junk status. Meanwhile, in an earnings call last week, the bank reported $252 million in losses last quarter, citing troubles in commercial real estate. Quick refresher, NYCB took over Signature Bank's assets a little less than a year ago after Signature failed amidst a wave of concerns about the health of regional banks.

Marketplace's Kristen Schwab looks at just how much deja vu we should be feeling. When New York Community Bank Corp. acquired Signature Bank last year, it took on just under $40 billion in assets overnight. Mayra Rodriguez-Valladares is managing principal at MRV Associates, a financial risk consultancy. I say this to my clients all the time, do not get excited about growth because you don't know what's in there. What's in there means anything from what kinds of bonds and loans the bank has to what kind of software it uses. There was no time whatsoever for NYCB to do good due diligence on signature. A corporate bigwig might say any acquisition comes with growing pains.

That is, until the core of its business and a sizable piece of the acquired business, real estate loans, sours. Chris Katowski is a bank analyst at Oppenheimer. And so if you think about it, right, well, what kind of real estate assets do we have in the New York metro area? The office vacancy rate in New York City at the end of last year was 17 percent, a record high, according to JLL, a commercial real estate firm. Chicago, San Francisco, and Houston are seeing similar trends,

which means commercial real estate could threaten other regional banks, which Katowski says tend to take on these loans. It really points up the structural weaknesses of the small regional bank business model. They just can't get the diversity that they need on the asset side of the equation. They just can't get the diversity that they need on the asset side of the equation. None of these factors are a clear sign that NYCB will fail, says Alinda Kiss, a finance professor at the University of Maryland. What we want to concern ourselves with more than anything else is, is there sufficient liquidity? Will they lose a lot of deposits? As of an investor call this morning, NYCB says it's seen, quote, virtually no deposit outflow. I'm Kristen Schwab for Marketplace. On Wall Street today, NYCB who? We'll have the details when we do the numbers. The first commercial solar panels were created in the United States.

But today, and for a long time now, most solar production, about 80 percent, happens in China. The U.S. government wants to change that. It's using funds from the Inflation Reduction Act to subsidize panel factories here. Thing is, some of that money isn't going to domestic companies, but, you guessed it, to Chinese companies. Fred Dvorak reported on this at the Wall Street Journal. She joins us now. Good to have you. Hi, pleasure to be here. So as I said, China has long dominated the solar panel business,

but they're starting to build factories here in the U.S. Why is that? There's a carrot reason and a stick reason. So the stick reason would be tariffs and anti-dumping duties that the U.S. has levied for years on Chinese solar panels. And it's getting harder and harder for companies that manufacture mainly in China to export their panels to the U.S. So that's the stick.

The carrot reason is the IRA, as you just mentioned, and very generous production subsidies for companies that actually set up manufacturing in the U.S. And so they're responding to both of those. Now, the IRA funds were intended to really set up a domestic solar panel industry, right? Is this a problem if some of the beneficiaries are not American companies? Well, when you look at the solar industry, although a lot of the technology was developed in the States, all the manufacturing pretty much is done outside of it. So you wouldn't be able to probably stand up

domestic solar manufacturing in the U.S. without the help of companies that aren't from the U.S. When you're talking about China in particular, it could be very good for local economies and jobs to have companies come to the U.S. and manufacture here. Doesn't really matter whether it's a Chinese company or not a Chinese company. But there are other objections that people have raised to Chinese companies in particular. What are some of those objections? I mean, given that, as you mentioned,

the U.S. has been imposing tariffs for a long time on these same companies. Well, one is that if you have companies that are already dominant and already strong, that control such a big percentage of manufacturing, and you give them subsidies to help set up somewhere new, you're just cementing their dominance. Another example, and particularly because, you know, China and the U.S., the geopolitical tensions between the two are increasing, it could be an energy security or national security threat. And how does the U.S. government respond to that? The U.S. government, well, on the national security side, they say that the government has ways of looking at all foreign investment

to see whether or not they do present a national security threat. That's the CFIUS committee that looks at those investments. And on the other side, they say it's a good thing to have investments in manufacturing in the U.S. that bring clean energy and the ability to build clean energy here. You cover the energy transition. Obviously, we need solar panels. We need more of them. energy transition. Obviously, we need solar panels. We need more of them. How close do these IRA subsidies get us to getting there, whether it's Chinese companies receiving them or American

companies? The subsidies are very important to helping close the gap between how much it costs to build this stuff, whether it's solar panels or wind turbines in the U.S. and how much it has been costing overseas. And so if you want the domestic industry, the IRA subsidies are crucial to helping companies make that financial decision to come here and locate here. Fred Dvorak wrote about Chinese companies setting up solar panel factories here in the U.S. and receiving some subsidies to do so. Thank you so much for joining us. Thank you. Another big piece of the energy transition is, of course, the shift to electric vehicles. And yesterday, Ford gave us some insight into that process in its fourth quarter earnings call. While the carmaker expects to make more than $10 billion in profit this year, the company also said it could lose about $5 billion on its push

to make and sell more electric vehicles. But well into that earnings call, the company's CFO noted something else about its EVs. For every electric Ford F-150 the company sells, it can sell up to 12 of the gas-guzzling versions and still comply with emissions regulations. Which, I don't know, kind of seems to defeat the purpose? Marketplace's Henry Epp reports. Ever since the energy crises of the 1970s, the federal government has required car companies to make vehicles increasingly fuel efficient through regulations known as CAFE standards. Corporate Average Fuel Economy. Stephanie Brindley, an associate director at S&P Global Mobility, says the average in that acronym is crucial because the government is considering the fuel economy of all of a company's vehicles

put together. You've got electric vehicles and plug-in hybrids and hybrid vehicles that are more efficient than gasoline vehicles and therefore offset what the gasoline vehicle is emitting. And if companies don't meet emission standards, they get fined. So even though Ford is losing a lot of money right now on its EV business, selling an EV like the F-150 Lightning allows it to sell more gas-powered cars and trucks, and those make a lot more money. Chris Douglas, a professor of economics at the University of Michigan, Flint, says if it didn't have to meet those emissions standards... I think it'd be a very open question if it would continue producing these electric pickup trucks,

or if it would cease production to focus on something more profitable. In the early days, you wanted to encourage the legacy automakers to switch to electric vehicles. Ethan Elkind is director of the climate program at UC Berkeley's Center for Law, Energy, and the Environment. He says the current regulations basically give companies extra emissions credit for EVs, and they were written before most car companies were producing any electric vehicles. But now that they are... The problem is that at a certain point, it becomes an excuse for them not to do more. That's why the Biden administration has proposed taking that extra credit away,

essentially forcing car companies to sell a lot more EVs in order to avoid fines, Elkind says. But those regulations haven't been finalized yet. There is a pretty long regulatory administrative process. Bottom line, he says, the outcome of the presidential election could determine whether those new rules actually take effect. I'm Henry Epp for Marketplace. We've got a podcast all about climate solutions, how we survive. You can download season four on the platform of your choice. Coming up. It's a very last-minute kind of holiday.

Valentine's Day. Consider this your reminder. But first, let's do the numbers. The Dow Jones Industrial Average rose 156 points, 4 tenths percent, to land at 38,677. The NASDAQ added 147 points, 0.9%, to close at 15,756. And the S&P 500 grew 40 points, or 0.8%, to finish at 49.95. CVS Health rallied 3.1% on better-than-expected revenue and earnings in the fourth quarter. The pharmacy chain said it had seen strong performance in its health services business. Walgreens Boots Alliance dipped one and three tenths percent. Albertsons was down two tenths percent. Bond prices fell. The yield on the 10-year T-note rose to 4.11 percent. You're listening to Marketplace.

This is Marketplace. I'm Amy Scott. We talk a lot on the show about the ongoing housing shortage. Moody's recently estimated that even if 2024 is a strong year for building, we'll still be as many as 2 million units short of the housing we need. That's the national story. Texas, though, has seen a rebound in listings. According to data platform ReVenture, the number of homes for sale in the state has more than doubled from its low during the pandemic. So we thought we'd check back in with Letitia Grant. She's executive managing broker at Tass Realty Group in Houston, Texas. Letitia, great to have you back on the show.

Thank you so much for having me again. It's always a pleasure to be here. So how is the market in Houston these days? You know, it's funny. I was talking to one of my loan officers yesterday and I was like, this market is just really wacky right now. It's up in some areas, down in some, but overall, it's a very healthy market right now, I will say. Healthy? I mean, the rest of the country can hardly be described that way. What is going on in Houston that makes it healthy? Well, you know, Houston is one of those areas that people are moving to from other areas, number one. Number two, we have adopted something that the rest of the country has known for years, and it's called that duplex. And the duplexes are just absolutely fine off of the shelves. Wow. So some markets are, you know, of course, doing better than others. But overall, that's why I will say it's pretty healthy. Huh. So largely speaking, the country has been facing

a housing shortage. There just aren't enough homes for sale. But Texas has had a little bit of a different story with a lot of building in the past few years. Do you feel like you have enough supply there? I'll say we have sufficient supply because specifically in Houston, we have a lot of vacant land. So what's been happening is we have noticed a lot of our vacant land has been converted into housing, which is great for those that are in need of housing, but not so great for those that, you know, understand the need for green space. Right. A lot of that green space is disappearing. It absolutely is. And it seems like it just happens overnight where there are no longer any trees left, no green space. And it just happens so quickly. Wow. Well, mortgage rates have gone up and prices overall are much higher than they were even a few years ago. than they were even a few years ago.

What kinds of conversations are you having with first-time homebuyers about whether this is a good time to get into the market or if maybe they should wait until rates come down a little bit? Yeah, so home ownership is needs-based. So often we connect home ownership to making an investment. And yes, home ownership is absolutely an investment. But at the same time, if you have a growing family,

you're outgrowing that apartment, which is happening to many of my first time homebuyers, homeownership is needs base. So even though the interest rates are a little bit higher, it's still less than 100%, which is what you're paying in interest rates where you're renting it currently. So the conversations that we have is what do you need? What are you looking for? And does your current living space provide you with the opportunity for what you're seeking? If it does, then remain. But if it doesn't, then that's something that we need to do, which is look for a home. And I'll say the interest rates lately have not been a deterrence, but when they were reaching seven, that was a major

deterrence. You know, now that they're coming down, so many of our buyers are jumping back into the market. What about sellers who've been holding on to these low, low mortgage rates and not super willing to part with that? Are more of them starting to put their houses on the market? Or do you expect that to happen if the Fed does start cutting rates? I do expect it to happen if it starts cutting rates.

I will tell you that the majority of my sellers have been investors lately. So they were just unleashing what they didn't want anymore. Does that provide a little bit of an opportunity for some people who want to live in homes to buy them, not just the investors with cash? It does. It provided a great opportunity because, again, many of my investors, they may have owned duplexes. And I'll tell you, one of my recent transactions, it's two roommates, they're buying a duplex. So that's being sold by one of my investors who would have historically rented it out, but now he's going to go ahead and sell it.

Well, anything else you want to tell us about the market in Houston before I let you go? Well, you know, one thing that I'm going to say is it used to be a refuge. You know, people were escaping from the high prices of California and the high prices of New York. And, you know, I'll tell you, Houston is starting to compete. We're getting up there in price. So, you know, this is probably no longer a place to run to for cheap homes. All right. Well, maybe that'll settle things down a little bit. Exactly. Yes, ma'am. Letitia Grant, Executive Managing Broker at Tass Realty Group in Houston, Texas. Thanks so much.

Anytime. Thank you, guys. Y'all have a great one. One other housing tidbit I spotted today, consumer confidence in the U.S. housing market, as measured in'all have a great one. One other housing tidbit I spotted today. Consumer confidence in the U.S. housing market, as measured in a monthly survey from Fannie Mae, was up last month to the highest level in almost two years, thanks to the strong job market and the expectation that the Fed will start cutting interest rates this year. There's a word that gets thrown around so much in the business world, it's become almost meaningless, disruptive. But it's hard to imagine a more disruptive technology than generative AI. It seems like every day we hear something new about how artificial intelligence will revolutionize health care, manufacturing, customer service. But the warnings are loud, too, that it'll be used to write college admissions essays or reproduce actors' voices

or take over jobs now done by human workers. Meanwhile, those workers are forming their own opinions about how AI could impact them. And so new research says mostly what they're doing is worrying about it. Marketplace's Mitchell Hartman has more. Seven in 10 U.S. workers say they're very or somewhat concerned about employers using AI in HR decision making. Three in 10 are worried about their job being eliminated by AI. Those findings are from a new report by Rutgers University's Heldrick Center for Workforce Development,

which has been surveying Americans for decades about the impact of new technology. Carl Van Horn directs the center and says workers are most worried about AI's role in hiring, firing, performance evaluation, and promotion. I'm concerned about the hidden hand out there, that I'm not going to get a chance to really discuss my virtues with a hiring officer or with my boss. Instead, there'll be some algorithm that tells me whether I stay or go. Lower income and minority workers are the most worried, says Van Horn. They're more vulnerable in general. They often hold precarious jobs in the first place. And so any disruption, they feel I'm also going to be harmed by that. So far, most Americans just know AI from news coverage or playing with apps like

chat GPT rather than using it at work, says Chris Jackson at polling firm Ipsos. Not a lot of people actually have direct firsthand experience with it. So what we're actually seeing is actually just people's views of the economic system at large. So if people think the system is rigged, they think the system is unfair, they think AI is just going to add to that. So that's workers. What about the folks who will be making decisions about AI? The conference board recently asked global business leaders about their top economic concerns. The first two were recession slash downturn and inflation. The third one was rapidly advancing AI technology. Chief Economist Dana Peterson says most CEOs see it as an

opportunity to increase worker productivity and sales and to employ fewer workers. They were divided on it. Fifty two percent felt that it might displace labor. Meaning 48% think AI won't eliminate jobs. I'm Mitchell Hartman for Marketplace. In case you haven't noticed from all the ads and store displays, Valentine's Day is a week away. And for those in the business of selling chocolate, cards, flowers, and so on, it's the first big busy season of the year. The credit card giant Capital One figures last year Americans spent just under $26 billion on Valentine's Day, and the overwhelming gift of choice was candy. With that in mind, we called up one of our regulars, Kristen Talheimer Bingham. She and her husband run Dean's Sweets, a chocolate business in Portland, Maine. We are very much in the thick of things as we head into this final week before Valentine's Day.

The next few days will be some of the busiest of our entire year. I've never worked in a restaurant, but to me, what we're doing right now sort of feels something like that. I might yell back to Dean, we need more dark salt caramels, or can we possibly get more double dark truffles? And we'll just keep going like that for hours as we fill boxes and put together website orders and help customers. put together website orders, and help customers. We are currently looking to add one more person to the team because really now is the time to do it so they can learn all the big and little things that go into this business. It's crazy to say, but we need to train someone now

so they'll be up and really ready for the busy, busy months next fall. It's interesting to me anyway to think about and meet candidates who may or may not fit with the personality of our business. Hiring this next person is, in my opinion, the most important decision we'll make all year. A good fit means productivity will increase, the fun will increase, and we'll have this kind of great upward spiral for all of us. The biggest challenge for the next four days is making packaging and shipping all the chocolate we need to fill website orders that are coming in for Valentine's Day. And then after all the boxes are shipped, we'll have the next wonderful challenge of keeping up with demand as customers

come into our two stores to buy their heart-shaped boxes and chocolate Valentines. It's a very last-minute kind of holiday. After Valentine's Day, I hate to tell you, but we pivot immediately to Easter. Easter's early this year, so while we're making chocolate hearts now, we've already started working on making chocolate bunnies, too. Kristen Thalheimer Bingham, making chocolate at Dean's Sweets in Portland, Maine. This final note on the way out today, some economic context for the immigration battles playing out on Capitol Hill. The nonpartisan Congressional Budget Office said today that

the national deficit will reach $2.6 trillion in the next decade, but that's less than it would have been partly because of immigration. The CBO says growth in the labor force will add about a trillion dollars to federal revenue in the coming decade and about $7 trillion to U.S. economic growth. Our media production team includes Brian Allison, Jake Cherry, Jessen Duller, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Dorado, and Becca Weinman. Jeff Peters is the manager of media production. I'm Amy Scott. We will be back tomorrow. This is APM. Calling for a renewed focus on literacy. We have gotten this wrong in New York and all across the nation. And it's happening because of a podcast. I think your podcast has changed my life.

And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.