We’ll return to the office in 2023 but not to stores



Certain events change the course of history, or at least the trajectory of the global economy. To name a few: the Black Death, the invention of the steam engine and World War II, and now the scourge of Covid-19. It’s been nearly three years since the World Health Organization declared a global pandemic that changed the world as we knew it. You can’t pause economic and social activity for more than a year and go back to normal. It’s hard to know in the moment, or even a decade later, what will change for good. In 2020 people thought they might never go to the office again, or leave home without a mask, or that they’d finally maintain their sourdough starter. Now many of our pre-pandemic behaviours have returned, but we’re also starting to see what’s unlikely to ever go back to the way it was.
Lingering changes that probably won’t last longer
Some of our habits are still different from before the pandemic, but they may eventually revert. For example, Americans and Brits aren’t eating in restaurants as much as they did in 2019. That may because they still fear disease, or inflation has made it too expensive, or people have just rediscovered the joys of home cooking. But eating out, which had been trending upward over the years, will probably come back. People enjoy it too much to stop.
How we work also is still different. Americans have never had so much power in the labor market. Between the great resignation and quiet quitting and an ongoing labor shortage, workers are demanding more, including more flexibility in where they do their jobs. Moving so many people out of the office to their homes during the pandemic did change work. Before Covid about 5% of workdays were at home, during the pandemic it shot up to 60% and it’s now leveled off to 30%. In the fall of 2022 about 29.2% of all full-time employees were working from home part of the time, and 13.3% were fully remote. Right now this seems to be a permanent change. Maybe even as monumental as when workers moved off the home farm and to the factory — a change that had a major impact on our society, culture and economy. So in some ways it seems natural that we are moving work back home.

BloombergBut many bosses don’t love the idea. They’ve built company culture and training regimes that are dependent on personal interaction. Their preferences are going up against workers who are putting a big premium on flexibility and demanding more of it. And this tension is why work from home may not stick around once the labor market tightens in the next few years and workers have less power.
Longer term, as technology begins to do more of our jobs — even white-collar ones — the premium put on in-person, high-touch skills will be even higher. If you can do your job at home, not only can someone probably do it in another country for cheaper, odds are soon that a computer will be able to do it, too. Showing up in the office and contributing in other ways, like mentoring less-experienced staffers, will matter even more. The result will increase pressure to be in the office, and the more often you show up the better. One change that may be permanent is that your boss will have more tolerance for people working from home when they need to — to be present for a repairman, for example, or when they need to be home to care for a sick child.
Changes that will be with us for a long time
We buy more online. E-commerce has been trending up for years, but before the pandemic it accounted for only about 11.9% of total sales. It jumped to 16.4% in 2020 and has only fallen to 14.8% since then. Many people have become accustomed to the convenience of online shopping, where more goods are available. Even as shipping rates rise, odds are this habit will stick, and that eventually will mean no more drugstores on every corner and less brick-and-mortar retail.

Another major change is inflation. The pandemic awoke inflation and it will be very hard to get rid of it. The rate of inflation is starting to fall, and in the next year it will probably drop further. But there is a good chance the sub-2% inflation we’ve taken for granted for years won’t be back for a long time. People are now getting used to higher inflation, which means they’ve started to include it in their behaviour and expectations. Longer term, the world’s population is aging and countries are less open to trade, and both of those trends will put upward pressure on inflation. That some economists are now arguing 4% is a better target for the Federal Reserve suggests we’re already giving up on a 2% inflation world.

BloombergHigher inflation and less trade following the pandemic also mean higher interest rates. The Fed only has so much control over interest rates; longer-term rates are set in the global market. A pullback on globalisation would mean foreigners will buy fewer US bonds to manage their currencies, reducing demand and increasing rates. And a period of higher inflation with more uncertainty around the future will also increase rates, because fixed-income investors need to be compensated for inflation and inflation risk. This all adds up to higher rates, so say goodbye to cheap mortgages and very cheap financing on the goods we buy.
Many pandemic effects remain to be seen, including how much wages and equality will be hurt from depriving so many children of proper schooling for so long. Past evidence suggests it may mean lower wages well into adulthood, especially for poor children.
One more big change is our awareness of risk. Americans have spent the last 40 years in blissful ignorance. Pandemics were something from medieval times, monetary policy could engineer low, stable inflation and interest rates, and even if the stock market fell, it would always recover within a year or two. Anything we wanted to buy at the store was always available. Now we face a different future: one where we understand that risk is ever-present in our lives, and that the economy is constantly changing and offers no guarantees.