If Corporate America was hoping Fed Chair Jay Powell would provide ammunition in the ongoing battle to end the scourge of remote work, it instead got friendly fire.
Three years after the rollout of life-saving Covid vaccines and the gradual end of pandemic-era lockdowns, the central bank governor said the economy has changed dramatically due to working from home.
“We see that it looks like it’s going to be a persistent thing,” he told the weekly news outlet 60 minutes Sunday.
In the immediate aftermath of the pandemic, many CEOs who were struggling to counteract the effects of the Big Resignations vowed that remote work would remain an option. This has pushed many workers to leave cities like San Francisco and New York for more convenient locations far from the confines of daily commutes.
Some of these employees now face a dilemma amid a concerted push by employers to gradually reduce some, if not all, WFH flexibility, with CEOs such as Elon Musk and Goldman Sachs’ David Solomon among the biggest naysayers. turned on.
Earlier this year, an Internet company also had enough of workforce flexibility, releasing a video that made headlines for its tone-deaf messaging. “We’re not asking or negotiating at this point, we’re informing,” Bob Brisco, CEO of Internet Brands, said in the video, curiously accompanied by the upbeat music track “Iko Iko.”
Programmers at SAP, an enterprise software provider that competes with Salesforce and Oracle, have meanwhile helped lead a full-blown rebellion against management’s attempt to restore pandemic-era policies.
But employers don’t back down so easily. To enforce their will, many are actively monitoring turnstile data to judge how often and, more importantly, how long their employees stay, suspecting that some are only coming into the office for the shortest period possible.
A recent BetterUp survey indicated that the number of primarily remote roles has since been cut in half. For the average American employee, returning to the office means spending $561 a month to meet the additional costs of transportation, child care and other obligations — the equivalent of the average monthly grocery bill for a family of two.
Against this backdrop, Powell acknowledged growing efforts to crack down on work-from-home privileges, but remained skeptical that Americans would ever embrace a full return to the status quo ante.
“It’s not yet clear how frequent this will be or how prevalent it will be,” he said 60 minutes.
Powell is “happy” to admit that the Fed was wrong not to tighten sooner
An often-cited argument in defense of returning to office is the detrimental economic impact of expensive office buildings that remain largely vacant. This leads to ripple effects as even businesses that depend on their employees for customers, such as downtown cafes and food courts, suffer from lower foot traffic.
Importantly, Powell dismissed fears that the US banking system faces a systemic problem stemming from commercial real estate lending.
“There are some smaller, regional banks that have concentrated exposures in these problem areas, and we are working with them,” he said, suggesting that only smaller lenders should be closed or merged with healthier ones.
In the wide-ranging interview, Powell also acknowledged that the Fed acted too late to counter inflationary pressures in 2021, believing it was largely a transitory effect of supply chain issues stemming from the pandemic.
“The data was pretty favorable to that assessment, to that hypothesis, up until the point where it wasn’t,” he said. “In hindsight, it would have been better to tighten the policy earlier. I’m happy to say it.
Powell added that higher prices for basic goods are a primary factor making Americans feel “relatively dissatisfied with what is otherwise a pretty good economy.”
He also warned that it is “past time to return to an adult conversation” about the unsustainable fiscal path of the U.S. federal government, whose debt is expanding at a faster rate than the country’s gross domestic product.