Chicago Fed Contact Experiences in 2024

THOMAS WALSTRUM: All right. Well, thanks, Rick. I hope, as usual, that I can live up to your very kind compliments. So Rick gave a good-- so I'm the MC for today. I've organized this event largely with, of course, as Rick said, with the help of a bunch of other people, but I'm going to be kind of guiding you through the day. And we're going to start with this session that we-- this is the 38th year. We've done a lot of things over 30 years, but we haven't done this before, as far as I know. I wasn't here at the first one.

So we have a new kind of session, where we're going to hear directly from some of our all-star contacts. So these are folks that-- I see some other all stars in the room too, but I picked folks that are both all stars and ended up being kind of representative of our five district states. So I think we've got someone from everywhere but Wisconsin. And we've got a Wisconsin person later, so very good. And we've got a nice range of sectors.

So what we're going to be doing here is kind of a mini round table that's open to the public, where we're going to hear from some people who have very specialized knowledge on a particular area, and they're going to tell us what they're seeing and what they're hearing about.

This is what we do. And I'm actually going to sit here too, and we're going to all kind of experience together what a typical roundtable might feel like here at the Fed when we bring people in to learn about what's going on in the economy from experts who are actually active in the economy.

So normally, it would be me moderating or one of my colleagues who's in the room, but I'm grateful to our external affairs team for helping us land some NPR celebrities. So we've got an NPR celebrity who's going to be moderating for us today. It's Wailin Wong from The Indicator podcast. And so I'm going to invite Wailin up, along with our four roundtable participants, Harold, Megan, Ianna, and David.

And as I said, I'm going to sit here for Wailin to quiz me about the process-- part of the process we do in learning about the economy through talking to people. So I'll sit right there, and then-- I'll also note that-- so I think you all see the QR codes on the sheets in front of you. That's the way we're going to have you submit questions.

So we're going to try to leave some time for questions at the end here. And while you're listening, feel free to go in there and see if you can figure out how to submit a question. And I'm going to-- I think I've heard-- let's see if someone can figure out how to submit a question before we get started here. It's called pigeonhole. Everyone seeing that?

All right. Great. So I'm going to-- actually, we'll get started, and I'll interrupt at some point if we're not seeing any questions. Obviously, you shouldn't have any questions yet but-- so we'll get started, and thanks, everyone for being here. OK. We got a first question. How excellent is this? All right. Very excellent. So go ahead, Wailin.

WAILIN WONG: Well, good morning, everyone. Thank you so much to Tom and the Chicago Fed for having us. I am delighted to be here. We are huge Beige Book and Federal Reserve nerds over at The Indicator at Planet Money. So very excited to be here with this panel. I think first off, we'll just go down the line and have folks introduce themselves and say what their names are, what they do, and we'll take it from there.

DAVID ROBB: All right. Well, first off, thank you for having me, Tom and Wailin. Looking forward to the conversation this morning. I'm David Robb. I'm from Grand Rapids, Michigan. I'm actually the co-owner and managing partner of three different firms. One is a traditional staffing agency, helping with light industrial, skilled trades, and administrative placements. That's express employment professionals.

Also, a specialized recruiting group, which is a professional search firm and executive search firm. And then, we also have a training and development company called Frontline Training Solutions, which is geared towards helping employers train leaders and also provide HR consultancy solutions.

So between those three companies have a team of about 35 team members. On the placement side, we're working very locally in the Grand Rapids area, and each year serving probably 300 clients and helping connect anywhere from 3,000 to 4,000 people with a job.

And then, on the training development side, we really do work across the state and across the whole country. So for us, we're working with clients, anything to do with talent, with recruitment, with employee engagement, retention, and development. So anything in that space is really what we're focused on.

MEGAN WEILER GREEN: Good morning. Megan Weiler Green. I am with Weiler. We are a heavy equipment manufacturer based in Knoxville, Iowa. So we manufacture equipment for the asphalt paving industry and the mining industry. And then, we have a separate company down in Georgia that manufactures logging equipment. So between those two industries, we have about 1,000 employees. And I am CFO and general counsel.

IANNA KACHORIS: Good morning, everyone. I'm Ianna Kachoris. I am with the Chicago Community Trust and part of our community impact team. We are the community foundation for the Chicago region, primarily Chicago and Cook County, and we are fortunate to help individuals channel their philanthropic giving, as well as have an endowment from which we can make grants to nonprofits, who are doing great work in service of the community here in the Chicago area.

As a community foundation, a primary role that we play is helping to meet critical needs in the community as we see them emerge, but we also have, as our animating vision, to close the racial and ethnic wealth gap in Chicago, which, for anyone who is in Chicago or knows Chicago is, there are significant inequities that we have in our region. And they cut across multiple issues.

So if we can increase the ability of folks to build wealth and have family sustaining wages, we think we can all be better off. If our neighbors do better, we all do better. We are really focused on how we can help increase homeownership and build home equity for folks, as is an important vehicle for wealth building, and improve income and assets for folks so that they have a stable foundation in life.

HAROLD FORCE: Well, good morning. My name is Harold Force. I am chairman of Force Construction Company in Columbus, Indiana, the very south edge of the boundary of the Chicago Fed. I am chairman of the company and second generation in what is an 80-year-old, now employee-owned company that is still family managed.

We are self-performing general contractor involved in heavy civil construction, building instruction, commercial, industrial, institutional, and also professional design services. Our business is traditionally a lagging industry, although I have to tell you, I'm not sure what lagging means today.

Our territory for our civil work is mostly in the state of Indiana, but our building construction customers are throughout the Midwest and in the mid south. Lots of challenges. Lots of opportunities. Appreciate the opportunity to be here to learn and to share what I can with you all.

WAILIN WONG: Fantastic. Well, just to give you a little bit of a roadmap of where we're going in the discussion, we're going to have the folks here reflect on some big themes for 2024, and then we'll look ahead to 2025 and talk about expectations and hopes and dreams. So we're going to start with a look back at 2024.

And I wanted to start with Ianna and kind of the critical needs that you identified in the community over the last year. I feel like the organizations that you work with are kind of intimately connected with how people are-everyday, people are experiencing the economy. And so what were the critical needs that you focused on over the last year, and how did you see those needs change?

IANNA KACHORIS: So thanks for the question. I think there are multiple intersecting needs that we've seen emerge over the last year, that include food insecurity, housing affordability, and homelessness, access to health and mental health care in our region.

Homelessness, for folks who may know, is on the rise. It intersects with the issue of new arrivals in the Chicago region. In addition to the ongoing crisis of homelessness, we're all also seeking to meet the needs of new Chicago residents. It's estimated that in Chicago, there's about 140,000 units, shortage of affordable housing in the region. And so that's a structural issue. It's not just a matchmaking issue.

And so we are thinking both about, how do we meet those needs directly in providing grant support to shelter organizations, homelessness-serving organizations, but also, what are the barriers we need to reduce at the local level around the development of affordable housing in our communities?

Food insecurity has been a huge issue that we've seen on the rise, with increasing food prices and demand for food bank services. And many Chicago communities, because of disinvestment and underinvestment, lack access to grocery stores, healthy food options.

We are really fortunate that we have mechanisms where we can raise funds quickly to deploy these resources, but I think it's really important to note that philanthropy alone isn't going to be able to meet the challenges that folks are facing. And so we really think that it's important to think about a multi-sector approach, what the role of government is, as well as employers in making sure that we are providing family sustaining wages.

WAILIN WONG: Great. Thank you. And then, for the others here, I would love it if you could talk about shifts that you've seen in 2024 in terms of your customer base. We're talking about sales and what kind of sales growth you might have seen.

So who are your customers this year? What are they buying? Who's buying? And did you see any changes this year? David, you might have a slightly different view on this since you don't have customers per se. You do have some, but you can talk about the folks that you were working with this year.

DAVID ROBB: Definitely. Want me start off?

WAILIN WONG: Sure.

DAVID ROBB: All right. Perfect. So it's been a little bit of a wild ride being in the staffing industry, staffing space, especially since 2020. So coming out of 2020, we saw tremendous demand for our services across quite a wide variety of industries, as that talent shortage was so pronounced. So we've definitely seen that softening over the last two years.

So the staffing industry in general as a whole, looking at the whole country, has come down about 20% from a peak in 2022 to where we are in 2024. So we definitely felt that softening, which is kind of mirrored, what's been happening in the labor market.

So on the staffing side of our business, we've definitely seen that softening in demand. On our training and consulting side, we actually are seeing a big uptick over the last two years. That's for us increased about 20% to 30% each year over year.

So a big uptick there is we do see employers investing significantly in retention resources for their teams. So retention, leadership development, coming out of that talent crisis, they're really doubling down on becoming a better place to work, being an employer of choice, investing in their teams. So we're really encouraged by that, by that trend.

Back on the staffing side of the business, where we've seen probably the biggest slowdown is with our manufacturing or warehouse and distribution clientele. So definitely seeing that really lay down in demand. And where we're seeing it particularly is more in the light industrial, what we call light industrial, which would be more entry level or general labor, semi-skilled to unskilled labor. That's where we've seen the largest slowdown.

Still, a lot of demand with skilled trades. That shortage continues. And on our professional placement and administrative placement, that's kind of held steady. But where we're seeing the biggest softness is more on the light industrial side, so--

WAILIN WONG: And we're going to talk about employment and jobs a little bit later. So we'll put a pin in some of those interesting things you brought up. And if you want to talk about your sales over the last year.

MEGAN WEILER GREEN: Sounds good. 2024 was a very strong year for us, for sales. Obviously, with the supply chain dynamic of the last several years, our lead times are out significantly longer than what we're used to in pre-COVID days. And that's great, because demand is strong, and it's great because customers who are having to wait are willing to wait.

It also changes the dynamic a little bit because their rotation of replacing equipment with new, it's off now. So they're having to keep a piece of equipment longer, which means they're buying more parts. So that also helps our sales dynamic.

I think the saving grace for our industry is that everyone's kind of in the same position. So if you want our machine or you want our competitor's machine, the lead time is about the same. So we hope you pick ours. So that has been good. Most of our customers are contractors, either government contractors or independent paving teams.

Logging groups are generally family owned, small operations. So the equipment that they buy from us is the most expensive piece of equipment that they need for their operation, and it is a significant investment. So we can talk later about how interest rates play into all of that, but demand is really strong for us.

< p="" />WAILIN WONG: Thank you.

HAROLD FORCE: In the construction industry, at least the markets that we are in, 2024 has been a good year, an improving year from the standpoint of lead times for major items, fabricated structural steel, things like that. Electrical power componentry have stopped being extended and have come back towards a little bit more normal lead times. I'm not sure what the new normal is, but it's still longer than it ought to be. So that has helped.

Inflation in terms of material cost has been a difficult thing to manage. Certainly, there was a significant spike in inflation. Normally, inflated costs and extended lead times go hand in hand. I'm not sure that they're coming back at the same rate today. That is to say, we don't see a lot of reversal in pricing. We see some moderation in the rise in pricing of our major material inputs and our machinery inputs.

The machinery input side has been tempered by a lot of construction equipment in North America coming from offshore locations, Japanese, Korean, and in some cases Chinese. So there are factors that are tempering that. I'm not sure if those factors will continue in the new year like they have been thus far.

So we're trying to get a handle on where our costs are going to go. And as a company that many times has to price work, that is a year or a year and a half in the future, we wear out our upholstery by squirming and trying to figure out what that future is likely to be.

WAILIN WONG: And I mean, obviously, inflation, huge topic has been for the last few years. I don't know if, Ianna, you want to jump in on inflation? You talked about food prices earlier, and maybe we could spend a little bit of time talking about what you've seen, everyone's seen on the cost side in the last year.

IANNA KACHORIS: Yeah. I think we're definitely seeing that family costs, and that includes both food prices and housing. I think is a big chunk of what people-- the burden that they bear. And that's an area where it's not a quick fix without increasing availability of subsidies for folks who are stretched.

We're really concerned mostly about folks who are making less than the area median income. And so that's an area where we know we need to do more. And we're looking at innovative models to help incent the investment in affordable housing. But those costs are still prohibitive in actually developing more affordable housing.

So we're seeing it play out in how we are effectively able to meet the needs that are in communities, but I think that's probably the strongest area where we've seen the challenges in our communities that we're trying to serve.

WAILIN WONG: And then, Megan, how have you seen inflation play out in your business over the last year? You mentioned you have logging customers, so I feel like you get interesting visibility into a lot of different commodity costs.

MEGAN WEILER GREEN: So the logging space is very difficult right now. And that's just due to the mills having capacity constraints. And so the mills set what the capacity is that they will accept from each logger that they contract with. And so that's why it's critically important for our equipment to be very reliable. Because if our equipment breaks down and they can't make that day's quota for what the mill will accept from them, that quota goes away. The next day, they have the same number. It doesn't roll over.

So it's an interesting industry and an interesting dynamic. Certainly, on the construction side, there's a lot more grace for timelines being pushed. And that's not the case on the logging side.

In terms of inflation, we're starting to get 2025 price increases for our components from our suppliers. We're very vertically integrated. So there's not a lot that we cannot do in-house. But there are some things, and those things are generally the expensive things, like engines and gearboxes and some of the technology on our equipment.

Those price increases are coming in 3%, 4%, 5%, 6%. That's what we would expect in normal years. So that's comforting. We're not seeing the 2025 30% price increases, and that just gives us a lot more confidence in setting our 2025 pricing that we don't think things are going to be grossly out of whack.

WAILIN WONG: [INAUDIBLE] And then, do you hear anything about inflation from your-- I suppose on your side, it's going to be mostly on wages.

DAVID ROBB: On the wages, which I can touch on that. We've definitely seen the wage inflation over the last several years, although it has cooled down significantly this year. So we look at a lot of our own data, placing 3,000, 4,000 people a year and the wages they're making across all of our client companies. In 2020, 2021, up to 2023, those wages, especially for entry level workers, were increasing anywhere from 8% to 10% a year.

We were advising our clients, you've got to be looking at your wages almost on a quarterly basis to remain competitive because really, if you fell behind the increasing wages, it was really hard to catch up and then have the workforce you needed. So that was up until 2023, up to 8% to 10% a year on wage increases.

This year, looking at our data right before I came here, 2% increase on wages so far this year. So it's really leveled off this year. And we're not seeing employers have to increase those wages at the same places they were previously.

WAILIN WONG: That's really interesting. I wanted to bring it back to Ianna because I feel like you're this interesting bridge, where it's like we hear about big wage increases in previous years, but we also know that prices have also been going up. And even with wage increases, do the kind of folks that your organization serve, do those people feel like whatever gains they're getting on the wage side is just immediately consumed by higher prices in there as they just go and try to live their lives?

IANNA KACHORIS: I would say yes, and then I would also say, this also impacts the nonprofit organizations themselves, who have a significant workforce. I think the nonprofit sector accounts for about 11% of the workforce here in Illinois. And so they're also trying to meet the demands and competition for labor.

And not always being able to pay their workers more because of their own inability to raise more money quickly, to be able to do the things that they do or the government contracts that they have limit the amount that they can actually pay certain types of workers that are doing work under different contracts.

And so they're really constrained in a lot of ways. And so oftentimes, the same people who these organizations are serving are the people who are working for them. And so that's a challenge that they're seeing on a daily basis. We hear that a lot from our grant recipients and partners.

WAILIN WONG: And I think that's a nice segue into talking about employment, which is another huge theme of the last year. I was wondering if Megan and Harold you could talk about whether it was harder or easier to find workers in this last year. And I know maybe some of it would relate back to what David was saying about which roles and which kinds of jobs have been shifting around in terms of demand.

HAROLD FORCE: I would say, during the last year, identifying and bringing on board workers was a little less difficult than in the previous year or two, but not for the right reasons. I think that the greater difficulty in bringing people on board before this current year was in part some of the assistance that was being provided by the federal government, which is an unfortunate disincentive for people going into the workplace.

The fact that the demand is still pretty strong, but perhaps not quite as strong, let some of the artificial factors in employee interest in work maybe wear themselves out and go away a little bit.

I think that the regulatory carnival ride, I will call it, that we're looking at in terms of the availability of workers that are entering the workforce, many of them US nationals, many of them not, will bring some strange pressures to bear, I think, in the year that we're looking at. I think that we have put more effort than ever into employee engagement. In fact, we have an officer of our company who's manager of employee engagement.

We would have not even imagined what that was like 20 years ago. And their responsibilities apply to our manual field employees, most of whom are members of trade unions, as well as our salaried professional employees. Because, as someone said a minute ago, being an employer of choice is not just a trick phrase. It's the reality. And there is so much opportunity out there if a person has a skill that's desired.

So making them be a part of your organization and feel like your tribe is the tribe that they want to be on is really important. And so that's a challenge in our industry, which is itinerant by nature. The day a job starts, we're trying to work our way out of it. So that alone is a hurdle even in traditional times. It's a precipice today, and we're trying to scale it.

WAILIN WONG: So you're one of these employers that David was talking about that's been very focused on retention and kind of trying some new strategies around retention in this economy?

HAROLD FORCE: Absolutely.

WAILIN WONG: What are some fun things that you're doing on the engagement side, things that you never imagined you would have done 20 years ago?

HAROLD FORCE: Outside of our office, in our shop building, we have cornhole boards. And during the noon hour we have informal cornhole tournaments. We have days when we have a salad pitch in. There's 50 people in our office, and some days, it's a fish fry. We will take grills to a job site, and there may be hundreds people on the job site, and we line them up for hamburgers once in a while.

We make sure that they have a nice-looking company hat. We make sure that we help them access the benefits they have available, even if they're under a union trade benefit program, so that they look to us as their source for assistance, and not necessarily the people in the office of the laborers union.

Not that that isn't important, but again, we're trying to make them part of our tribe, because we know that the most expensive employees are the newest employees. That's where the accidents occur. That's where the failed work occurs. And so the less turnover you have in any position, generally speaking, the more efficient you can operate and the better your work product will be.

So it gets into all the nooks and crannies of our business. And it's as simple as a recognition pin. It's as simple as maybe having a country party in the second week of July when the Christmas torpor is in the past. So these are the kinds of things to make them want to be a part of your tribe because you care for them and you demonstrate it in large and small ways.

WAILIN WONG: I have to say a cornhole tournament is like the most Midwestern thing. Megan, do you also have-- is cornholing a big part of the benefits that you offer at your--

MEGAN WEILER GREEN: It is not. I mean, it might be now, but [INAUDIBLE]. We have done a lot of things in the last three to four years in response to not only retention and-- or attraction and retention but also just in response to some of the bigger things happening in the economy.

In, I think it was 2021, maybe when the summer that gas prices were so high. I've blocked it from my memory. But that summer, we have employees who drive a great distance to get to our facility, which I think is a testament to the fact that we're doing something right, if they're willing to do that.

But the gas prices were really creating a burden for our employees. So we made a commitment to the employees that we would go to 4 by 10 workdays. And if our customers could not tell the difference, we would keep it. And we have kept it.

We have also added a 3 by 12 shift. Friday, Saturday, Sunday and Saturday, Sunday, Monday are your options on that. And that allows us to keep very expensive equipment running now seven days a week instead of five. And I thought, when we opened these weekend shifts, that people would say, well, that's great but not for me. They are full instantly. Every time we open a new spot, they are full.

We have had people come to us and say, my spouse is on 4 by 10, I'm on 3 by 12. We no longer need childcare for our kids. As someone who is paying for childcare, that is a significant raise if you can get by without it. We have farmers who are farming four days a week and working for us three days a week for health care. So it's really been very impressive, the people that we've been able to attract and retain, just by being a little bit creative on some of those things.

Obviously, something that you might be thinking about-- so 80% of our employees are on the production floor. One thing that we were really laser focused in on is, are we going to see an increase in safety incidents in those last couple of hours of the day? And we have seen no increase.

And when we're talking to our employees, they're like, when I get here in the morning, I'm just working. Like, it doesn't really matter I'm here for eight hours or 12 hours. You're just kind of in the zone. So that's been very encouraging. Obviously, that would have made us backtrack if we were seeing that we were increasing the risk to our employees but extremely popular, something that no one else that we're competing for talent is doing. And it's been a really big benefit.

I'll also throw out, overtime is a big deal in manufacturing. So now if there's mandatory overtime, it's on a Friday instead of a Saturday. So we have a lot of happy employees and happy families at home that they're not missing Saturday morning activities. So--

WAILIN WONG: So I was going to ask if you're a bit of a pioneer in your industry in terms of-- you're basically doing like a four day work week. You're offering a four day workweek, which is something we've heard about maybe in more kind of an office setting, but you're doing it in a manufacturing setting.

MEGAN WEILER GREEN: Yes. And actually, I should say that 4 by 10 and 3 by 12 is only for production. Office, it is not available to you. And that is because of our philosophy that our office employees are in support of production. It's not the other way around. So we say the money is made outside and spent inside. So they work 5 by 8 or 8 by 5.

DAVID ROBB: I'll echo on that. We've seen a lot of companies shift to schedules like that or do more creative things with scheduling, especially to combat the talent crisis over the last couple of years, even creative things, where they might create a parent shift, where the shift works with getting your kids to school and back to school. Maybe it's a part time schedule or doing a split 12 hour shift. So a lot of creativity around there just to tap into a wider pocket of the workforce.

WAILIN WONG GREEN: And then, Ianna, I don't know if the organizations that you work with, if they do a lot around job placement and training, but what are some of the needs that you're hearing from your end?

IANNA KACHORIS: We do support a lot of organizations that are doing workforce development, job placement, training, credentialing, and focusing on, how do we get folks into career pathways that have growth potential? So a lot of them are doing really amazing work, but they're seeing a lot of barriers that folks are facing and come with a lot of different challenges.

I think childcare is a big issue, both for folks who are trying to pursue additional training or credentialing or education and folks who are in the workforce. That some of the jobs that are available to them don't pay enough to make it worthwhile to have to then pay for childcare. And so that's a huge barrier that folks are seeing across the board.

For folks who are participating in training programs, really needing an income at the same time they're doing that training. The persistence in that training is not-- it doesn't stick if folks are not able to also make ends meet at the same time. And so making sure that there's that connection to actually a wage at the same time.

For certain folks, there are other barriers of folks with criminal records or disabilities and really being able to be nimble and address those barriers for folks. For some, it's transportation, where a highly served transit region, hopefully that holds, given the financial fiscal crisis that we're facing but being able to afford the gas to get to the job or have a car. And sometimes, if you have an asset, it also doesn't mean that you'll then be able to tap into some of the other supports that we were talking about.

So one structural barrier that we're also seeing is that, as people are moving up in career pathways or they're able to get to that next level of wage, it means that they are facing a benefits cliff, which means that they may not be able to then qualify for supplemental nutrition assistance or a child care subsidy or rent support.

And so we're really trying to work with employers. And these organizations are trying to work with employers to understand, yes, we want to see an increase in benefits, but what that might mean for the folks, that additional $2 to $5 of a wage may mean that they lose this whole other valuable asset. So we're really needing to address that from a policy perspective but also how we think about the benefits of a quality job at the same time.

WAILIN WONG: And are there any particular roles that you're hiring for in this last year that stood out?

MEGAN WEILER GREEN: I can take that. So I would say nonskilled or semi-skilled labor, we have not had any problem filling those positions this year, which-- even at two years ago, that was an issue. It is our more advanced machinist type roles that we have a hard time with.

I guess we've always said, we could take a good person who's willing to show up for work and train them to do anything. And that is still true, except for these advanced machinists. We're looking for people to do things that we don't know how to do. That's why we're trying to hire them. And so, I mean, we can give you a YouTube subscription in the manual, but we don't know how to run this thing either.

So some of those are really great opportunities for the right people, but we're not as much help as we used to be on some of these more advanced robotics and some of our lasers that load and unload their own steel and things like that. So that's been an interesting dynamic for us.

WAILIN WONG: Harold, what about you?

HAROLD FORCE: In terms of-

WAILIN WONG: Which roles you were hiring for and if you're seeing some of the same issues.

HAROLD FORCE: We end up, at all times, hiring across the board because we're always trying to fill our worker ranks based upon new jobs or changes in projects. At what I would call the entry level, we're always looking for people who know how to work efficiently, safely, that have basic skills. And I would tell you that we rely heavily upon the construction apprenticeship programs in most areas where we are.

There is historically and currently a big difference between the environment for an industrial union and for construction and trade unions. They tend to serve very different purposes. On the construction side, we're looking for certainly the skills training and the experience, but we're looking for portability.

So if we work our way out of a job and we have a competitor who has a job, they can move, they can have a job in their skill set, and have their pension and their hospitalization and other things go with them. And the reverse is true.

There's also a lot of continuing journeyman education, both in the manual trades and in the advanced manual trades. Some of the greatest automation advancements we've had in the last 10 years relate to digital terrain models, GPS informing-- or not GPS control, the GPS as a part of machine operation in the field.

I think we are on the cusp of true robotization of some construction practices, which will require more employer knowledge and more employee knowledge. So in our industry, unions are not the existential threat that they might seem to be in more traditional industrial operations. We need that resource. We need the training, and we have to supplement it with our own. So it goes across the board.

To take what we do in engineering, computer-based engineering, 5, and what's called fifth and sixth dimension of engineering, that includes scheduling and includes time and physical clash detection, and to translate that to field operations in an effective way, both in terms of getting the work done and having a very good record of the works in place.

And there's a lot of discussion that's behind that, but it's broad spectrum. It goes across the board. And what we want are people who are upwardly mobile to give them an opportunity and to take their manual skills, perhaps, and to make them into some of our best project managers. And historically, that's what we do, but it's not easy.

WAILIN WONG: I wanted to maybe transition out of employment and tackle a huge topic that we've all been talking about for the last couple of years, which is interest rates. I was wondering if you could talk about how you've been impacted by high interest rates over the last year and whether there was any impact from the rate cuts that we started to see.

MEGAN WEILER GREEN: So our equipment is sold exclusively through the Caterpillar dealer network. So Caterpillar, obviously a very big company with their own finance arm. And so most of our customers get financing directly through Cat finance.

Obviously, they are competitive with interest rates, but they're certainly not a bargain. And so we have seen some customers say, I think I'm going to hold on to this machine another year and just wait it out, both because lead times are long so they can't get it immediately anyway and because they're hoping that the interest rate will drop.

We have not seen or heard any conversation about availability of funds or that they're really tightening their guidelines for who can get financing. It's just that those interest rates can be unattainable for some smaller groups. So--

WAILIN WONG: Harold.

HAROLD FORCE: Our customers depend less on borrowed funds for their capital expenditures than they typically did 30 and 40 years ago. Most of our customers are better off financially. Some of their older CFOs have a strong memory of what happened in the late '70s through the mid 1980s in terms of how that affected their ability to operate. So I think for legacy companies, there is more caution and more conservatism. For customers who are more interest dependent, they quickly leave the scene when rates rise as much as they have.

I think that, generally speaking, we were complacent after a very long period of low interest rates, which allowed the financing of projects that might not be as viable under today's rate scenario, which quite honestly aren't that far out of line, so much better than it was in '78 to 1982 or '3, as some of you might remember. So there's interest rate sensitivity, but it's a good sensitivity. That's separate than some of the-- are off.

We have a lot of customers who are involved with foreign direct investment, manufacturing companies, many of them automotive, that are in active in the Midwest but have their headquarters offshore. They are less sensitive to those interest rates, but they are super sensitive to market shifts, demands for their product or for their customers, product and regulatory changes or shifts in focus in automotive content, internal combustion versus battery, for example.

WAILIN WONG: Interesting. And then Ianna, you talked a lot about home ownership, and so obviously, interest rates play a huge role in that. What are you seeing in terms of your clients?

IANNA KACHORIS: I think what we're-- if we have this goal to increase homeownership and home equity, particularly for Black and Latino households who are less likely to own a home or have as much home equity in their home as white households, we're seeing that folks are feeling like that home ownership is less likely to be attainable and a longer lead time for folks to be prepared and able to afford the homes that are available, or to tap into their home equity to do the home repairs, that it just adds to the cost burden that folks are facing.

So we hope that shifts soon because we do see that as an important way for folks to invest in their communities and invest in their families and the development of intergenerational wealth, to be able to transfer from one generation to the next. So we're not backing off our commitment to helping to increase that homeownership, but it certainly has made it a lot harder for us to see more homeowners succeed on that journey.

WAILIN WONG: And I kind of wanted to shift to talking about 2025 and looking ahead, since we need time for questions as well. So I want to be mindful of that. I wanted to ask about some big topics that are on people's minds and have been getting a lot of press coverage as we move into the new year. And I wanted to start with immigration.

I think, Harold, you alluded to this a little bit, perhaps earlier as well. I wonder, maybe we could start with David this time, and talk about if there's changes in immigration policies, more restrictive immigration policies, how do you think that might play out in your business?

DAVID ROBB: Well, it's definitely going to impact the workforce and the labor force, which will have a big impact for our clientele. We've been advising clients that, really, at the beginning of this, year, we saw, OK, the labor market is softening some. We probably have maybe 12 to 24 month window where the talent market is going to be a little softer. And now's a good time to upskill your team. If you've got some B players, let's replace them With a players. But that's not going to be the long term.

We definitely see that really tight talent market returning, maybe not as bad as it was in 2021 or 2022, but definitely returning for two reasons. One, the immigration point, because definitely, immigration, that's really one reason the talent crisis has eased over the last couple of years, because we got a lot more immigration than we maybe were projecting. So if those policies tighten, which it seems like they will, that's definitely going to impact the workforce and probably go increase that shortage more.

The other thing is just the long-term demographic trends, which that we don't have a lot of control over. And we know more people are going to be exiting the workforce than entering it through native-born individuals. So if that immigration isn't there to make it up, that talent shortage or crisis might return. But

HAROLD FORCE: I think that it's going to be tough. I think that the exiting or the unavailability of entry-level workers to come into the workforce, be they citizens or not, is going to create a ripple throughout the entire workforce spectrum. And I think also, the misalignment between some federal and state regulations on employment of some of those people is a further complication.

And that extends to substance abuse issues and so forth that we try to screen for, which, quite honestly, 9 out of 10 of the people that we might try to bring into our company on the manual side may not be able to pass that test. So workforce availability across the spectrum but especially on the entry side, I think is headed for a train wreck.

IANNA KACHORIS: Wailin, can I jump in as well? So I think for what we're seeing in communities, I think, here in Chicago, we're very concerned about the need that's going to be created because of the fear about what actions may be coming. And that tension between what our state and local policies are around we're a sanctuary city, we're a welcoming city, and the folks that are maybe concerned about their own status and how that will have a sort of a chilling effect on the services that they seek health care.

Are they going to send their kids to school? Things like that that we're really concerned about. That whether or not the regulatory changes happen or the laws change, that it's going to create more need and more stress in communities. And so we're trying to understand, what do we need to be prepared for in the social sector to be able to serve those families and communities?

I think we're seeing a lot of increased need already for legal services and just people knowing what their rights are. And so we're trying to help support those organizations that have been doing this work for a long time. And I think there'll be-- a lot remains to be seen, but there's a lot of challenges, I think, that are ahead of us, just purely based on fear.

WAILIN WONG: Do you want to turn it over to questions?

THOMAS WALSTRUM: Sure. Yes, we've got a few minutes here before we're done. We have nine questions, and there's actually one that-- oh, we've got 10 now, but we've got one that got a vote. So I'm going to read that one. All the others have zero votes, so-- not that they're bad. So the one that got one vote was, "During the COVID era, many highlyexperienced employees decided to retire early. Are companies like yourselves still dealing with the effects of these workers leaving and if so how?"

MEGAN WEILER GREEN: That was not a major issue for us. I think our workforce trends fairly young. I can think of a handful of people who left the workforce because they were close to retirement age and maybe had some health issues that made COVID more of a risk for them, but it's not been a significant factor for us.

DAVID ROBB: I would say for us it's been, one of the reasons that the skilled trade workforce is still in such demand in West Michigan, we're heavily manufacturing. 19% of our workforce is manufacturing. And if you look at the average maintenance department at a manufacturer, the average age is probably 55. So they're kind of waking up to that a little bit right now. And we've seen a big investment in apprenticeship programs, a big investment in succession planning because that was such a shock in 2020.

THOMAS WALSTRUM: OK. All right. We've got one with two votes now. All right. So we'll go for that one. "What do you see driving the slowdown in manufacturing for employees? Do they have what they need?" Does that make sense to you?

MEGAN WEILER GREEN: Yes. We're not seeing a slowdown in demand. Maybe they're talking more about the g side, which is seeing a significant slowdown, both because it's just tough in ag right now. Their equipment is expensive. Interest rates are high. Crop rates are low. Yields are good, but pricing is low. And there's just been a really significant number of layoffs, particularly in Iowa between John Deere and [INAUDIBLE] and some of the really big players who are seeing a lot of change in their workforce.

THOMAS WALSTRUM: I think it was demand for-- the slowdown in demand for manufacturing employees, I think. Like what's the story for that?

MEGAN WEILER GREEN: Oh, I see. [INAUDIBLE] in demand for employees not for product?

THOMAS WALSTRUM: Yeah. I mean, I think it would be slow down in manufacturing demand generally from what you're seeing.

DAVID ROBB: So for us, I would say automotive has definitely been slow this year. Us being in Michigan, that's a huge driver there. So automotive really kind of tapered off after the strikes a little over a year ago and hasn't quite come back. A lot of that might be the EV transition and different uncertainties.

And the other thing we're hearing from our clients, manufacturing clients is, all of their clients were in such a mode of shortages and supply chain issues that they were really building up inventories back pre-2024, and then now their demand has kind of softened and leveled off. And they have that inventory. So they're working through that inventory.

So their orders to manufacturers have decreased some. So we're not seeing anything super negative with manufacturers, but we're not seeing that same growth that we've seen in the last several years, which is obviously impacting their hiring needs.

THOMAS WALSTRUM: Great. OK. I think we've got time for one more question. And it's a nice, hot topic question, which is, let's hear about how AI is affecting your organization in whatever way that it is. And not affecting it is also inappropriate answers. Go ahead.

HAROLD FORCE: Oh. That's a great question, and I'm not sure I have an answer, other than I can give you how we're dealing with it in our company. AI has the potential to be transformative in our professional design services, our engineering and architecture and so forth. I think that could lead to some great efficiencies in terms of how we do a power supply plan for new manufacturing plant, or how we design reinforcing steel for complex foundations.

What we still have to be able to do is the person managing that design has to have a nose, has to have a sense for what's reasonable and what's not reasonable. I think we've all seen within our companies how mechanization or computerization may provide efficiencies, but where's the common sense knowledge and the reality check that you put on stuff like that? I think AI could make that a runaway condition, but we have to keep that from happening.

I think that AI has the potential promise of helping us solve some otherwise intractable problems. Hopefully, this is not too ethereal but not just carbon sequestration but carbon dioxide conversion and some things that are ultimately life or death issues, I think, if taken to the extreme. And designing and managing modular power systems that will intrinsically help distribute power sources and make our planet more efficient, reduce transmission losses and all the other things that go along with that. I think AI holds that promise.

And I think it'll also help us to mechanize, on the construction side, processes which are difficult to replace. That's hands and eyes and knowledge. But it's out there. There are robotic reinforcing steel tires. There are three dimensional printing or material deposition printing of concrete walls and things like that. And the use of robots to do work in very hazardous locations, be they high, be they deep, be they underwater or whatever the case might be. So therein, I think AI has some promise that is amazing.

On the funny side, our IT director gave an AI program instructions to use our company slogans and logos and to give it a country vibe and to use a certain deceased country singer's voice, and it came up with a two-minute song that I think would chart if we released it.

THOMAS WALSTRUM: Anyone else want to weigh in on anything?

MEGAN WEILER GREEN: Just talk briefly about it. So I mean, we do have people using AI for things like drafting communications, drafting letters, things like that. We had our technical writing team do an AI kind of pilot program. So those technical writers are the ones who write our 300, 400, 500, 600 page owners manuals, operators manuals for our equipment. It is tedious work, but it's incredibly important work. It has to be accurate. It's important for the safety of the operator and the equipment.

And so we fed in some of our manuals and asked it to change everything to metric and asked it to make these certain updates. And so first of all, it did an excellent job with that, which is great. I mean, that's a lot of maybe not super value add work to have somebody with a browser up on one side transferring to metric and then putting that number in, but the response from our technical writers was, I am exhausted. Now, all the work that I have to do all day is very deep thought work.

There's not this break of, OK, now I'm going to spend an hour doing this. And so it'll just be interesting to see how that-- because if all that humans are left doing is the really deep, critical thought work, that is tiring work. So we'll see what happens with it, but it is interesting how quickly it can make work of what could be a week long project otherwise. So--

THOMAS WALSTRUM: It will work fewer hours per week.

MEGAN WEILER GREEN: Yes, maybe that's all we'll need.

THOMAS WALSTRUM: Anyone else?

DAVID ROBB: For us, I would say we're real involved with the workforce development groups and education institutions talking about what are the in-demand careers right now? What are the in-demand jobs of the future? So it's really made us question, OK, what are going to be those in-demand jobs of the future? A couple of years ago, being a software developer, that seemed like a really good idea. Now, is that going to be the same thing? Because AI can probably do a lot of that legwork.

So it's making us question and rethink, what are those jobs of the future that might get replaced by AI? What are the ones that might look a lot different because of AI? Maybe all of our blue collar jobs won't change as much. So I think it does have a lot of implications, I would think, for younger individuals who maybe are starting to chart their career path. I would be real sensitive to that, chart it in a direction where it has a low sensitivity to AI replacing it.

THOMAS WALSTRUM: All right. Well, Ianna, it's 9:30. So if you want to--

IANNA KACHORIS: I'll take a pass.

THOMAS WALSTRUM: --pass. All right. Great. So wow. Well, thanks, everyone, so much. This has been fantastic. And it's been a really great view into the kinds of conversations that we have a lot around here with our contacts. And so it's really appreciative to everyone else on the stage with me. And we're going to take a very short break, I think, to reconfigure the stage so that Austin and Scott can come up. So let's give everyone around of applause.