The End of Office Centricity

You can tell things are slowly returning to “normal” as demonstrated by tension rising between the U.S. and China over trade, while protests in Hong Kong return amid rhetoric out of China.  Things are picking back up right where they left off before the pandemic.  One new development is the transition from primary season to presidential campaigning.  The good news is that deaths from the coronavirus are slowing, the curve has been flattened, and hopes for a vaccine are at an all-time high.  The market did an about face after last week’s dismal news to find solace in the hope and optimism that newly abounds.

Since we’re heading into a holiday weekend, I’ll make this week’s commentary a bit shorter (for my sake and yours!). I don’t know if you’ve noticed, but there is a certain jubilation in the air. Stores are reopening, restaurants are making accommodations, and people are going outside once more. Some industries are at the beginning of a recovery, including the energy sector which underpins a good deal of our economy. Oil, which had been as low as $12 per barrel not that long ago, has recovered to a better level of $35. While this is still historically low, it is not so low that it threatens the bankruptcy of a large swathe of the industry. Pent up demand is also found in the automobile industry and among home buyers. With the short supply of homes available for sale, home prices have begun to move higher, especially as people look to move out of higher density cities toward suburban lifestyles (particularly in the Northeast).

One thing I’d caution against is putting too much into the economic data being released. Much of that data is from April, which understandably is pretty grim. What we’ve seen of data from May has been significantly better with expectations that the data will continue to improve with time. Please note, the unemployment numbers are still bleak and not expected to bottom until mid-June. Additionally, the Congressional Budget Office (CBO) expects second quarter GDP to fall 38%. As dire as that sounds, the market already expects it. In fact, the latest news I’ve come across suggests the third quarter will see the fastest economic growth in American history, possibly rising 30%. Much as the shutdown was calculated and intentional, a cautious reopening will lead us out of the chasm we’re in. We anticipate another month or two of poor economic data before the numbers begin to lift off.

One major change we may see is employees working from home. For generations, it has been the norm to leave home each day, spend the majority of one’s waking hours in an office, only to return home at the end of the day. Those days may be numbered. One thing we’ve learned from the stay-at-home orders is that many employees can, in fact, work from home. The cost savings to employers is significant and could be the impetus to move in this direction. Companies such as Visa, Mastercard, American Express, Spotify, Google, and Facebook are on record stating employees will continue to work from home for the rest of this year. Others, including Twitter and Square went one step further saying they are making plans to permanently have their employees work from home. Facebook expects fifty percent of its workforce to remain at home. The CEO of Shopify put it best when he said, “office centricty is over.” Aside from cost savings, another silver lining is the ability to hire employees who otherwise may not have joined the company due to location. Our children may look back on the golden age of working in an office as a quaint anachronism of a bygone era.

With that, I hope you have a great Memorial Day weekend.  With any luck, we’ll have a respite from the rain and be able to spend a little time outdoors.  Enjoy the holiday weekend!

Bruce J. Mason, MBA