Americans are flowing back to their pre-pandemic offices, but most facilities are still mostly empty. And that’s changing local economics in a significant way.
Commuting is beneficial to the economy. You pay subway engineers’ salaries with your train ticket. The dry cleaner by the office and the coffee shop nearby all count on employees who have been mostly vacant for almost a year and a half.
In 2020, the number of people operating from home increased to 42% of America’s workforce, according to the Bureau of Labor Statistics.
And, yes, many workers prefer that setup, yet staying home is likely to prevent the return of the requisite office-adjacent economy.
According to economists from Goldman Sachs (GS), office attendance in large US cities is only about one-third of pre-pandemic levels. That’s a lot of employees who are still working remotely and not spending cash on items like train tickets or lattes — the kind of economic activity is essential in America’s consumer spending and service-driven economy.
For example, in New York — one of cities hit hardest at the start of the outbreak — subway ridership is still not even half of what it was pre-pandemic, according to data from the Metropolitan Transportation Authority.
To put the aforementioned in view, New York’s public transportation system is the largest in the country and at the center of the city’s financial power. Before Covid, it brought in nearly $17 billion in revenue. But with riders still at home, revenue forecasts have been severed to pennies, too. The Metropolitan Transit Authority earned nearly $4 billion in government funding through the CARES Act, but fare and toll revenues aren’t expected to come back to their former levels until 2023, according to a report from the Office of the New York State Comptroller earlier this year.
Other businesses that workers patronize on their way to the office are also finding it hard to stay above water.
Take Starbucks (SBUX), The loss of that daily consumer is pulling down on the bottom line. Last quarter, the coffee chain’s average in-store transactions were at 90% of pre-pandemic levels.
“We certainly have the ability to bring more customers in, but our opportunity is the frequency of those customers,” Starbucks CFO Rachel Ruggeri said on an earnings call.
As a global beverage monster, Starbucks has a staying influence that more modest, local coffee shops don’t.
Drag on the recovery
But the targeted September reinstatement to the office is in limbo for many businesses. The speedy spread of the more dangerous Covid-19 Delta variant is a new obstacle to in-person work.
Tech titans Apple (AAPL) and Google (GOOG) have already pushed back the dates for the official return.
Further hindering the return to the office, the Centers for Disease Control and Prevention reversed its mask guidance last week, prompting even vaccinated Americans in high-transmission regions to use masks inside — another development that could hamper the return to in-person work and relax the pace of the wider economic recovery.
No matter when it really happens, the way we work has forever changed for many businesses: Remote work and hybrid in-office models are here to stay. One big change the pandemic will be remembered for in 100 years.
This is bad news for the urban areas and states that massively rely on the services division, whether through workers or visitors, including Hawaii, Las Vegas and New York. Those areas are lagging back in recovery.
Even those summoned back may not be willing or able to go back full-time, citing problems like child care difficulties or living with at-risk household members.
The job market is adjusting to that, too.
“Job ads increasingly offer remote work and surveys indicate that both workers and employers expect work from home to remain much more common than before the pandemic,” Goldman Sachs economists said in a letter to its clients.