The COVID-related product shortages that just won’t go away.

(Photo: CNS)

This past February I ordered an 18,000 BTU window air conditioning unit through the local GE dealer in the town where I live. It’s the largest such window unit you can buy, and there aren’t very many alternative options available from competitors.

Not surprisingly, the particular unit I ordered is manufactured in China (I am not aware of any similar models that are made in the United States). At the time I placed my order, I was informed that due to COVID-related disruptions of global deliveries, the earliest I could expect my unit to be received and installed was in April.

I wasn’t very surprised at this news, and figured that the delay would be perfectly fine for getting the AC unit installed and working in our home before the onset of the notoriously hot and humid summer months where we live here on Maryland’s Eastern Shore.

Since then, we’ve had several more pushbacks in the anticipated product delivery – first June … then August. And now the latest schedule I’m being told is for an October delivery – and even that date is “iffy.”

I think my situation isn’t unusual in these COVID-crazy times. Considering that the pandemic began towards the end of 2020, we are now 20 months later and the ripple effects are still being felt all throughout the global movement of products.

In fact, the recent coronavirus outbreaks that have occurred in Chinese port cities just this past month have caused even greater shipping delays than what had been encountered during 2020; they’re actually the worst shipping delays seen in 20 years. It means that the impacts will likely be felt all the way to the holiday shopping season at the end of this year — at a minimum.

As a related consequence of the COVID pandemic, the demand for shipping containers and shipping boxes has never been higher, even as some containers have been marooned on ships attempting to travel through the Suez Canal (which was shut down for a period of weeks earlier this year) as well as bottlenecks in certain port cities where labor shortages have been particularly acute.

Among the myriad of products and supplies that have been seriously affected are:

  • Appliances
  • Batteries
  • Food products
  • Furniture
  • Hospital, dental and surgical equipment/supplies
  • Measuring instruments
  • Plastic materials
  • Printed circuit boards
  • Semiconductor processing equipment

… and these are just some of the most notable examples.

With the Delta variant apparently causing a COVID-pandemic redux, it’s pretty impossible to gauge just how long it will take to work through the product shortages that have with us for so long already.

But what’s quite clear is that all of the initial estimates were woefully off the mark … so why would we expect anything different now?

What sort of product shortages have you experienced in the past few months, “thanks” to COVID – either in your business or at home?  Please share your experiences (surprisingly good or unsurprisingly bad) with other readers here.

In a twist, “working from home” benefits big tech in big ways.

Remote work has turned each new hire into a national competition.

Historically, one of the challenges faced by smaller urban markets was their ability to hang on to talent. Younger workers often found it more financially lucrative following their education to relocate to major metropolitan areas in order to snag higher paying positions with the companies based there.

In time, however, the high cost of living in the large metro markets, coupled with the desire to ditch the unbearable congestion in those areas, led to the formation of new businesses outside the major tech centers that found it easier to compete with the major urban areas for talent. 

Established companies found the same dynamics at work, too. The rise of markets like Charlotte, Salt Lake City, Pittsburgh and Boise underscored that the spread of the “new economy” had migrated to places beyond the traditional hubs of Boston, Washington, New York City, San Francisco/Silicon Valley, Los Angeles and others.

Then the COVID pandemic came along. Suddenly, it didn’t matter where employees lived as companies quickly figured out ways to have, in some cases, nearly their entire workforce working remotely. 

It didn’t take long for employees in some of the market hardest-hit by COVID to flee to far-flung regions. New York City residents moved to the Hudson River Valley, South Florida and other locations. For California residents it was off to Nevada, Montana or Idaho. Boston-based workers decamped for Vermont or Maine.

It soon became apparent that for many tech jobs, the need to be clustered together in offices simply wasn’t that critical. And in an ironic twist, smaller-city startups and other firms are now starting to feel the effects of the establishment biggies poaching their own employees.

It’s particularly ironic; whereas before, companies that couldn’t compete with Silicon Valley heavyweights on salary could offer a whole lot of lifestyle to even the playing field.  Now they’re finding that “work from anywhere” policies have nullified whatever advantages they had. 

Those big-city salaries can be used to purchase a lot of house in whatever kind of environment desired — even if it’s a lakeside cabin in the middle of nowhere. 

It also means that, all of a sudden, everyone’s competing with companies all over the country for talent — and hanging on to the existing talent is that much more difficult. When people are being offered 20% higher salary with no requirement to relocate, that’s a proposition many people are going to consider.

Another interesting consequence is that tech labor force is probably geographically more evenly distributed than it’s ever been — and the workers residing outside the traditional tech hubs are benefiting accordingly — At least in the short-term. 

In the longer term, companies based in the smaller markets hope that they’ll have access to those same new tech migrants if work-from-home policies change yet again.  But that’s a big “if” …

Not so neat: The rise of the NEET generation.

Millions of Americans age 20 to 24 fall into the NEET category: “Not in Employment, Education or Training.”

The COVID-19 pandemic has exposed some interesting fault-lines in the socio-economic fabric of  the United States.  One of these relates to young adults — those between the ages of 20 and 25. What we find paints a potentially disturbing picture of an economic and employment situation that may not be easily fixable.

A recently issued economic report published by the Center for Economic and Policy Research (CEPR) focuses on the so-called “NEET rate“– young Americans who are not employed, not in school, and not in training.

As of the First Quarter of 2021, the NEET category represented nearly 4 million Americans between the ages of 20 and 24. This eye-popping statistic goes well beyond the particular circumstances of the pandemic and may turn out to be an economically devastating trend with a myriad of adverse ripple effects related to it.

Look at any business newspaper or website these days and you’ll see reports regularly about worker shortages across many sectors — including unfilled jobs at the lower end of the pay scale which offer employment opportunities that fit well with the capabilities of lower skilled workers newly coming into the workplace.

At this moment, pretty much anyone who is willing to look around can easily find employment, schooling, or training of various kinds.  But for millions of Americans in the 20-24 age cohort, the  job opportunities appear to be falling on deaf ears. Bloomberg/Quint‘s reaction to the CEPT study certainly hits home:

“Inactive youth is a worrying sign for the future of the [U.S.] economy, as they don’t gain critical job skills to help realize their future earnings potential.  Further, high NEET rates may foster environments that are fertile for social unrest.”

… Daily urban strife in Portland, Minneapolis and Seattle, anyone?

It doesn’t much help that younger Americans appear to be less enamored with the basic economic foundations of the country than are their older compatriots.  A recent poll by Axios/Momentive has found that while nearly 60% of Americans hold positive views of capitalism, those sentiments are share by a only little more than 40% of those in the 18-24 age category. 

Moreover, more than 50% of the younger group view socialism positively compared to only around 40% of all Americans that feel the same way.

The coronavirus pandemic may have laid bare these trends, but it would be foolish to think that the issues weren’t percolating well before the first U.S. businesses began to lock down in March 2020. 

And more fundamentally, one could question just how much government can do to reverse the trend; perhaps the best thing to do is to stop “helping” so much … ?

More information about the CEPR report can be viewed here.  What are your thoughts on this issue?  Please share your views with other readers here. 

A second look at the prospects for persistent price inflation in our future.

The blog post I published this past week about reports of recent price hikes and what this might portend for the future has sparked some interesting feedback and comments.  Based on that feedback, it appears that feelings are mixed on whether we’re poised to  be entering a period of prolonged inflation. 

Responses from two people in particular are worth highlighting for the “countervailing views” that they espouse.  I think both have merit.

The first response came from my brother, Nelson Nones, who has lived and worked outside the United States for decades.  His perspectives are interesting because, while fully understanding domestic events and policies, he also brings an international orientation to the discussion due to his own personal circumstances.  Nelson is looking to history for his perspectives on the inflation issue, offering these comments:

The chart below shows annual U.S. CPI percentage change for the past 106 years:

Note:  See https://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/ for source data.

Projecting the latest (April 2021) Consumer Price Index forward to an entire year suggests that the U.S. will experience a 3.1% inflation rate in 2021.  That would be higher than in any year since 2011, which was a bounce-back year following the Great Recession.  Otherwise, the generic inflation trend has been consistently down since 1982 (nearly 40 years).

If the historical trends are any guide, and if we are indeed entering a persistent inflationary phase, it would take another decade before inflation growth approaches the levels seen during the 1970s.

But I think the likeliest scenario is experiencing a sharp uptick this year due to pent-up demand following the COVID-19 pandemic that will causie spot shortages, followed by resumption of a downward trend over the following ten years or so.

That’s similar to the pattern you can observe in the chart [above] during the years following the end of World War II, which had also created massive pent-up consumer demand.

Consider that the coronavirus pandemic hasn’t really altered the underlying economic fundamentals. The past 40 years has witnessed an explosion of manufacturing capacity in China and other developing countries, and that hasn’t gone away.  Meanwhile, dependency on oil — a key driver of inflation in the 1970s — has shrunk due to improved energy efficiency and aggressive exploitation of renewable energy resources, which for all practical purposes are in infinite supply.

Another factor, which doesn’t get as much attention as it probably should, is declining birth rates and aging of the population on a global scale, leading to a slower rate of population growth in the future that may constrain demand for consumer products in comparison to the past century. Let’s face it — we old farts just don’t consume as much as growing families do!

So yes, we should keep an eye on inflation — but I don’t think we’re in for a repeat performance of the horrible 1970s.

Echoing Nelson’s thoughts are the perspectives of another business veteran — an editor and publisher who has been intimately involved in the commercial/B-to-B field for decades.  Here is what he wrote to me:

I don’t want to get into a public debate with the inflationistas because I will never convince them that this is likely not a replay of the 1970s and early 80s inflationary period pre-[Paul] Volcker.  (Speaking personally, I didn’t own a house until I was 42 for the very reasons you cited in your blog post, and I was just a lowly editor back then.)

What we’re seeing today is simply the price shock of suddenly soaring demand, aggravated in the case of some commodities such as steel by Trump-era tariffs.

All commodities are tied to the price of crude oil, the most volatile of all commodities, which is long-denominated in U.S. dollars. WTI crude pricing is now at around $63 per bbl. — about where it was in early 2020 before the pandemic hit. It went negative for a time during the worst period of the crash in worldwide demand that was brought about by the pandemic. Tanks couldn’t be found into which to put the excess crude coming out of the ground from U.S. fracking. Traders freaked out, as they sometimes do.

So naturally, the percentage changes today look jaw-dropping. I can go through all the other commodities mentioned in your post and provide simple explanations as to why each is currently on the rise. Logistical bottlenecks are a big problem with everything — but as with oil, most of the issue is the sudden surge in demand as the pandemic winds down even as production and logistics aren’t yet prepared to fulfill the need.

In other words, the situation has very little to do with government spending — especially since most of the infrastructure money isn’t even allocated, let alone spent. Also, the Biden administration has yet to raise a single tax. It can’t. Only the House Ways and Means Committee can initiate tax changes, and those must then go through the Senate to become law. Senate Minority Leader McConnell and his allies have made sure nothing has gotten through.  

Of course, it never hurts to keep an eye on things — especially with structural inflation as you noted in your article.  But it’s important to look also at other, broader data. The Producer Price Index in April did reflect the increase in commodities prices, but the Consumer Price Index, even though it had a month of robust increases, remains below 3% annualized. And the Personal Consumption Expenditure Price Index, which is what the Fed pays attention to the most, is still tracking under 2% on an annualized basis. (A little inflation can be a good thing, actually.)

On the income side, average wage rates aren’t rising; they’re more likely to be falling in the future as low-wage service workers, including those in foodservice, re-enter the market.

So in my view the things people see with inflation are most likely short-term issues. Let’s look at it again in six months to a year. I’d also suggest that people read economist Paul Krugman’s columns in the New York Times for a bit of perspective that’s counter to the views of the inflationistas, if only for balance. The monetarists have been wrong since Volcker squeezed out the inflationary spiral. It was painful, though — so we’ll want to keep an eye on things.

Considering the views put forward above, I think it’s fair to conclude that “the jury’s out” on whether we’re actually entering a prolonged inflationary period.  If you have additional thoughts or perspectives to share on either side of the issue, I’m sure other readers would be interested to hear them.  Feel free to leave a comment below.

That 70s Show: Inflation is back.

The rise in lumber prices has received a certain degree of coverage in the news in recent weeks and months.  For anyone who used the “pandemic period” to engage in home remodeling or renovation projects – perhaps moving away from “open concept everything” to reintroduce the designated spaces of yesteryear – the eye-popping price of lumber has come as something of a shock.

As for explaining the sharp increase, it’s logical to think that prices are directly correlated to the increased demand for the product.  But this explanation is incomplete; the steep price rise in a wide range of commodities well beyond just lumber tells us that inflation isn’t relegated to just a few high-demand product categories.  It’s the closest thing to “across the board” that we’ve seen in over 40 years — and the issue seemed to come out of nowhere.

Price inflation has been such a non-factor for so many decades, most consumers don’t even have personal memories of it.  But those of us “of a certain age” remember well how difficult it was to navigate an “inflation-everywhere” environment where annual salary increases could never keep pace with rising prices. 

It was difficult on people with fixed incomes, of course, but perhaps worse for young consumers who found that struggling to save for a down payment on a house purchase was a losing proposition as the gap widened rather than narrowed year over year.  Living like a monk while scrimping and saving for a house gets old when you realize that your efforts aren’t getting you anywhere near where you’re attempting to go … 

As for the situation now, the inflation warning signs are all around us if we dare to look. According to a report published in the May 21, 2021 issue of The Wall Street Journal, lumber may exhibit the most visible spike in prices, but consider what futures prices are showing for a whole range of commodities when compared to just one year ago:

  • Gold:  +7%
  • Platinum:  +29%
  • Wheat:  +31%
  • Cotton:  +40%
  • Coffee:  +42%
  • Sugar:  +52%
  • Silver:  +56%
  • Natural gas:  +65%
  • Soybeans:  +81%
  • Crude oil:  +85%
  • Cooper:  +86%
  • Gasoline:  +96%
  • Corn:  +108%
  • Lumber:  +278%

It doesn’t take a degree in economics to know that these sorts of trends are pretty alarming.  Whenever it has an opportunity to take hold, inflation is one of the most insidious of economic problems – and one that’s extremely difficult to reverse.  Inflation is also very debilitating for the personal budgets of the large majority of consumers, and it causes the most harm to those on the lower rungs of the economic ladder.

The next few months will tell us if this particular inflation is going to be a temporary phenomenon or not.  How much of the commodity price increases are attributable to transitory events that will ease as the world’s economies move further from lockdown?

But if this inflation turns out to be something more structural or more directly correlated to the massive increase in government spending paid for by the expanded money supply, expect the economic (and political) climate to begin to look vastly different in the coming months. 

Inflation will be uncharted territory for most people.  But a few of us veterans will be around to provide context and counsel — and perhaps engage in a bit of “Sister Toldja” commentary while we’re at it …

The predictable — and unexpected — economic consequences of COVID.

As the United States emerges from the COVID crisis, the shape of the American economy is coming into clearer view.  Part of that picture is the growing realization that lockdown policies, vaccination rollouts and government stimulus actions have created imbalances in many sectors — imbalances that will time to return to equilibrium.

Everyone knows the business sectors that have been hammered “thanks” to COVID:  hospitality and foodservice, travel and tourism, the performing arts, sports and recreation, commercial real estate. 

At the same time, other corners of the economy have blossomed — home remodeling, consumer electronics … and the public sector.  This last one isn’t a function of any kind of increased demand, but rather pandemic-long guaranteed continuing income to workers on the public payroll.

As we emerge, factories and the building trades are finding it difficult to ramp up their operations to meet growing demand, hampered in part by supply chain issues and shortages of raw materials and parts sourced from offshore suppliers.  As of now, most economists believe that such shortages won’t turn out to be long-term problems — but we shall see over time if this is actually the case.

Another imbalance is what’s been happening to the labor force.  Government stimulus checks and unemployment benefits have been sufficiently robust so as to depress the number of workers seeking a return to employment in certain sectors — particularly in the service industries.  As just one example, restaurants everywhere are finding it more than a little difficult to staff their reopened locations.

The latest forecasts are for the U.S. economy to grow at a blistering pace during the balance of 2021 — perhaps as high as an 8% or 9% seasonally adjusted rate of growth.  That would be historic.  But not everyone is going to benefit.

In a recent Wall Street Journal article, David Lefkowitz of UBS Global Wealth Management points out that “the very sudden stop to the economy and then the very quick restart has created a lot of havoc — a lot of businesses have gotten caught flat-footed.”  But beyond this is the very real likelihood that inflation will emerge as a key factor in the economy, for the first time in more than 40 years. 

Viewed holistically, the situation in which we find ourselves is one where many new and unusual “ingredients” have gone into the economy over the past year, resulting in an economic brew that is just as unusual — and perhaps even unique in our history. 

An artificially depressed economy due to government fiat … followed by massive economic stimulus paid for by expanding the money supply … coupled with sudden demand propelling certain industries over others due to government-driven dictates: for sure it’s a new mix of factors.  Considering this, I’m not at all sure that very many people inside or outside of government have a clear handle on what the next 18 months will actually bring.

But that doesn’t mean we can’t speculate about it, right?  In the comment section below, please share your perspectives on what’s in store for the U.S. economy.  I’m sure others will be interested in reading your thoughts.

Robots become humans – at least in the eyes of the law.

It had to happen:  New state laws are now classifying robots as humans – specifically when it comes to traffic laws.

With the proliferation of delivery robots in quite a few urban areas, the issue was bound to arise.  Car and Driver magazine reports that the state of Pennsylvania now defines delivery robots as “pedestrians” under a newly implemented law.

More specifically, the Pennsylvania legislative measures stipulate that “autonomous delivery robots” can lawfully maneuver on sidewalks, roadways and pathways.  They’re allowed to carry cargo loads as heavy as 550 lbs. at speeds up to 25 mph. on roadways.  (On pedestrian pathways and sidewalks, their speeds are capped at 12 mph.)

Pennsylvania is just the latest state to pass new laws regulating autonomous driving and flying technologies.  Indeed, there are now a dozen states that allow delivery robots access to roads as well as pedestrian pathways.

A gita and its owner out for a stroll.

The new laws raise some interesting questions.  Undeniably, delivery robots are a popular option for businesses and logistics companies; in a relatively short period of time their deployment has evolved well-past that of being merely a “novelty factor.”  “The sidewalk is the new hot debated space that the aerial drones were maybe three or five years ago,” reports Greg Lynn, CEO of Piaggio Fast Forward, a robotics design firm that offers a suitcase-sized robot called gita that follows its owner around.

But deploying robots onto street- and sidewalk-grids that were mapped out decades ago – when there were no expectations of the sci-fi scenarios of autonomous vehicles – can be quite problematic from a safety standpoint.

Of course, we’ve faced this issue before – and not so very long ago – with the emergence of the Segway “people mover.”  Those contraptions have caused more than a few problems (accidents and injuries) in urban centers around the world, leading some European center-cities to effectively ban their use — such as in Budapest and Barcelona

And in the city of San Francisco – no technology backwater – delivery robots have been prohibited from operating on most city streets.  Municipal leaders have cited potential safety concerns.  Moreover, the National Association of City Transportation Officials (NACTO) has gone on record stating that robots “should be severely restricted, if not banned outright.”

One thing’s for sure:  With the fast-growing phenomenon of delivery robots and other autonomous vehicles, the whole notion of “sharing the road” has taken on an additional dimension. 

Do you have any interesting reports to share from what you may have encountered in your own town or region?  Please share your observations with other readers.

The consequences of COVID on office space leasing.

One of the many ripple-effects of the COVID-19 pandemic is the effect it’s had on the demand for commercial office space. 

In a word, it’s been pretty devastating. 

The numbers are stark.  According to an estimate published by Dallas-based commercial real estate services and investment firm CBRE Group, Inc., as of the end of 2020, nearly 140 million sq. ft. of office space was available for sublease across America. 

That’s a 40% jump from the previous year.  Not only that, it’s the highest sublease availability figure since 2003, which means the situation is worse than even during the Great Recession of 2008.

Of course, it isn’t surprising to expect that more sublet space would become available during periods of economic downturn, when many businesses naturally look for ways to cut costs.  But those dynamics typically reverse when the economy picks up again.  This time around, it’s very possible – even probable – that the changes are permanent.

The reason?  Many companies that reduced their office space footprint in 2020 didn’t doing so because they we’re suffering financially.  It was because of government-mandated lockdowns.  And now they’re expecting many of those employees to continue working from home, either part-time or full-time, after the pandemic subsides. 

Employee surveys have shown that many workers prefer to work from home where they can avoid the hassle and expense of daily commuting.  It’s understandable that they don’t want that to change back again.  In many business sectors which don’t actually need their workforce be onsite to produce revenue, companies are simply ratifying a reality that’s already happened.  Accordingly, they’ve changed their expectations about employee attendance at the office going forward.

Commercial landlords are now feeling the long-term effects of this shift in thinking.  Rents for prime office space fell an average of 13% across the United States over the past year.  In places like New York and San Francisco the drop has been even steeper — as much as a 20% contraction.

For many of the lessees, it’s less onerous to sublease space to others rather than attempt to undertake the messy business of renegotiating long-term lease contracts with landlords.  Still, there’s pain involved; sublease space historically comes with a significant discount — around 25% — but with the amount of sublet space that’s been coming onstream, those discounts may well go even deeper due to the lack of demand.

The cumulative effect of these leasing dynamics is to put even more downward pressure on broader rental rates, as the deeply discounted space that’s available to sublet puts more pressure on the price of “regular” office space.  It’s a classic downward spiral.

Is there a natural bottom?  Most likely, yes.  But we haven’t reached it yet, and it’ll be interesting to see when — and at what level — things finally even out.  In the meantime, it isn’t a very pretty picture.

What are you witnessing with regards to office space dynamics within your own firm, or other companies in your business community?  Please share your thoughts below.

Have we finally reached “peak oil”?

Likely not in crude oil consumption, but the IEA is now projecting that demand for gasoline will never return to its pre-COVID level.

This past week the International Energy Agency (IEA) issued an intriguing forecast about future of gasoline consumption.  If true, it means that the world will have reached its peak demand for gasoline back in 2019, and won’t ever again return to that level.

Of course, with the advent of electric vehicles, the day when gasoline demand would begin to decline was bound to come sooner or later.  But the COVID-19 pandemic has hastened the event. 

During the widespread restrictions on work and travel imposed by most governments in 2020, daily gasoline demand dropped by more than 10%. Some of that demand is expected to return, but the global shift towards electric vehicles — not to mention continuing improvements in fuel efficiency in conventional gasoline-powered vehicles themselves — means that any growth in demand for gasoline within developing countries will be more than offset by these other forces.

In 2019, only around 7 million electric vehicles were sold worldwide, but that number is expected to grow steadily, reaching 60 million annually just five years from now.  Several major car manufacturers have committed to selling electric vehicles exclusively in future years, including Volvo (committed to all-electric vehicle sales by 2030) and GM (by 2035).

As for the demand for crude oil, it is expected to rebound from 2020’s dip to reach as much as 104 million barrels per day by 2026, which would be around 4% higher than the usage that was recorded in 2019.  Asian countries – particularly China and India – will be responsible for all of that increase and more, even as some developed nations are expected to see a drop in their demand for crude.

The implications of these forecasts are far-reaching – as are the questions they raise.  How well will the legacy car companies perform in comparison to the new all-electric car company upstarts?  Can they remake themselves quickly enough to preserve their market position vitality? 

What will the effects of lower demand for gasoline – and a lower pace of growth in demand for crude – be on global climate change?  Dramatic? … or only minimal?

What do the prospects of lessening demand for crude do to the economies (and politics) of countries like Saudi Arabia, Iran, Venezuela and other key OPEC nations?  Will lowered demand lessen geopolitical tensions? … or contribute to even bigger ones?

If you have thoughts or perspectives on these points, please share them in the comment section below.

Changing the “work-live location paradigm” in the wake of the coronavirus pandemic.

As the COVID-19 pandemic grinds on, its long-term implications on how we will live and work in the future are becoming clearer. 

Along those lines, a feature article written by urban studies theorist Richard Florida and economist Adam Ozimek that appeared in this past weekend’s Wall Street Journal explores how remote working has the potential to reshape America’s urban geography in very fundamental ways.

Just before the first lockdowns began in April 2020, fewer than 10% of the U.S. labor force worked remotely full-time.  But barely a month later, around half of the labor was working remotely.  And now, even after the slow easing of workplace restrictions that began to take effect in the summer of 2020, most of the workers who were working remotely have continued to do so.

The longer-term forecast is that perhaps 25% of the labor force will continue to work fully remote, even after life returns to “normal” in the post-COVID era.

For clues as to why the “new normal” will be so different from the “old” one, we can start with worker productivity data.  Stanford University economist Nicholas Bloom has studied such productivity trends in the wake of the coronavirus and finds evidence that the productivity boost from remote work could be as high as 2.5%. 

Sure, there may be more instances of personal work being done on company time, but counterbalancing that is the decline of commuting time, as well as the end of time-suck distractions that characterized daily life at the office.

As Florida and Ozimek explain further in their WSJ article:

“Major companies … have already announced that employees working from home may continue to do so permanently.  They have embraced remote work not only because it saves them money on office space, but because it gives them greater access to talent, since they don’t have to relocate new hires.”

The shift to remote working severs the traditional connection between where people live and where they work.  The impact of that change promises to be significant for quite a few cities, towns and regions.  For smaller urban areas especially, they can now build their local economies based on remote workers and thus compete more easily against the big-city, high-tech coastal business centers that have dominated the employment landscape for so long.

Whereas metro areas like Boston, San Francisco, Washington DC and New York had become prohibitively expensive from a cost-of-living standpoint, today smaller metro areas such as Austin, Charlotte, Nashville and Denver are able to use their more attractive cost-of-living characteristics to attract newly mobile professionals who wish to keep more of their hard-earned incomes. 

For smaller urban areas and regions such as Tulsa, OK, Bozeman, MT, Door County, WI and the Hudson Valley of New York it’s a similar scenario, as they become magnets for newly mobile workers whose work relies on digital tools, not physical location.

Pew Research has found that the number of people moving spiked in the months following the onset of the coronavirus pandemic – who suddenly were relocating at double the pre-pandemic rate.  As for the reasons why, more than half of newly remote workers who are looking to relocate say that they would like a significantly less expensive house. The locational choices they have are far more numerous than before, because they can select a place that best meets their own personal or family needs without worrying about how much they can earn in the local business market.

For many cities and regions, economic development initiatives are likely to morph from luring companies with special tax incentives or other financial perks, and more towards luring a workforce through civic services and amenities:  better schools, safer streets, and more parks and green spaces. 

There’s no question that the “big city” will continue to hold attraction for certain segments of the populace.  Younger workers without children will be drawn to the excitement and edginess of urban living without having to regard for things like quality schools.  Those with a love for the arts will continue to value the kind of convenient access to museums, theatres and the symphony that only a large city can provide.  And sports fanatics will never want to be too far away from attending the games of their favorite teams.

But for families with children, or for people who wish to have a less “city” environment, their options are broader than ever before.  Those people will likely be attracted to small cities, high-end suburbs, exurban environments or rural regions that offer attractive amenities including recreation. 

Getting the short end of the stick will be older suburbs or other run-of-the-mill localities with little to offer but tract housing – or anything else that’s even remotely “unique.”

They’re interesting future prospects we’re looking at – and on balance probably a good one for the country and our society as it’s enabling us to smooth out some of the stark regional disparities that had developed over the past several decades.

What are your thoughts on these trends?  Please share your perspectives with other readers.