Remote Working Limited The Economic Fallout In 2020, And Its Reversal Would Spur Growth in 2021
Updated: Jan 14, 2021
In December, payroll employment fell 140,000, the first monthly decline since April. The job loss would have been much larger if it were not for the ability of a large number of businesses to offer their employees the ability to work remotely. I missed the speed and scale of the shift to teleworking in 2020. Teleworking limited economic fallout while contributing to huge business gains for firms involved in technology and digital infrastructure.
2021 starts with a more flexible workforce. That's positive. But remote working has limits. And I would argue that a drop in the numbers of people working remotely would be a signal of increased mobility, a more open economy, paving the way for faster growth in 2021.
The Scale of Teleworking
According to the Bureau of Labor Statistics (BLS), roughly one in four workers worked remotely in December. That figure has been between mid-20% and mid-30% since March. Based on the level of household employment, approximately 50 million people have been working remotely every month since the start of the pandemic.
Those figures do not include the number of people who regularly work remotely from home before the pandemic; surveys showed that about 3% of the entire workforce had worked remotely before the pandemic hit in March.
The percentage of people teleworking differed greatly based on education, occupation, and age. According to BLS surveys, nearly half of those with a bachelor's degree or higher worked remotely, while less than 5% with those with a high school degree or less. Also, roughly half of people in management, finance, and business operations worked remotely, while a small number (5% or less) in production, construction, accommodations, recreation, food service, and transportation did so. Older workers were twice as likely to work remotely than younger workers (ages 16 to 24).
BLS also found that employment losses and unemployment rates were two or three times higher in occupations where remote working was not feasible compared to other occupations.
In March, I warned investors to expect a large decline in GDP due to the closing of businesses and the restrictions placed on travel, entertainment, recreation, and social gatherings. I was right and wrong.
The economy posted its largest quarterly decline in history only to roar back with the largest quarterly gain. A lot of credit for the economic rebound is given to the record amount of fiscal support. But the adaptability of companies and workers is under-appreciated.
An economy dependent on workers being physically present to produce and conduct commerce would have performed a lot worse. Even a decade ago, the US economy probably could not have adapted and adjusted as quickly as it did in 2020.
But even though the rapid shift to remote working enabled the economy to perform better than expected, that doesn't guarantee future success. Most companies still see a huge value when people are working together, face to face. Also, the majority of people miss aspects of the office environment and are eager to return.
A shift back to office work would be a positive sign that companies and workers feel confident that the workplace environment is safe. And greater labor mobility will spur growth in the economy. The number of people working remotely could well become an important indicator in the coming months. It will illustrate the shift back to a more normal workplace and a broader and faster advance in economic activity. Stay tuned.