(Bloomberg) -- Working from home for more than a year may revolutionize some parts of business, but the impact on municipal credits is likely to be muted and highly concentrated. I think most people will be back at their desks in September.
Let’s talk numbers. Of the 150 million or so people who were employed in March, 31.6 million telecommuted, according to the U.S. Bureau of Labor Statistics, or about 21% of the pie. I refer specifically to the BLS’s “Supplemental Data Measuring the Effects of the Coronavirus Pandemic on the Labor Market.”
Some analysts and bond issuers fear that these people, having experienced the joy of not commuting or living in more-spacious digs in more-pleasant climes, will never return to the office, or will return only two or three days a week. This will have an impact on small businesses, rents, sales taxes, transit systems, toll roads and, ultimately, tax bases. Just how big an impact depends upon how many days a week these people remain out of the office.
These fears seem justified, even logical, but the very first thing you find out when asking about the number of days people will return to the office is, no one knows. Many big cities are just now relaxing restrictions on how many people can re-occupy office space, and employers have been very diplomatic in their demands, many couching their desires as “invitations” to return to office.
“There is much uncertainty,” Patrick Luby, senior municipal strategist at CreditSights Inc. put it to me in an email. “Will bosses really allow more WFH? Will employees really take advantage, or if everyone is at the office, do they feel like they need to be there, too?” He said a lot depends upon the big guys. “If Jamie Dimon says everyone comes back, then that’s going to ripple far and wide.”
Jamie Dimon, chief executive officer at JPMorgan Chase & Co., last week said he expected all U.S.-based employees to be back in the office by early July, on a consistent rotational basis due to federal social-distancing guidelines. His memo to employees, reported by Bloomberg, also said “with this time frame in mind you should start making any needed arrangements to help with your successful return.”
I took this to mean, in other words, no, you can’t work from your beach house in Maine.
Many employers, however, seem willing to give employees one more commute-free summer.
Witness, for example, Bill Stromberg, chief executive officer of T. Rowe Price Group Inc., who last week said the firm planned to bring back its workforce in September. But note how conciliatory he sounded: “We’re coming back with a commitment to additional workplace flexibility, more than we’ve had in the past,” Stromberg said. “Some jobs really do function better in the office than others, and some can be more independent than others. We’re in the process of working that out, job-by-job, right now,” Bloomberg’s Annie Massa reported.
We’ve never gone through a period of almost two years where a solid 20% of the workforce did all or most of its work from home. This has to have a profound change on the workplace, and on the municipality where the workplace is located.
Or does it? Let’s take a closer look at the numbers, and keep in mind that in May of 2020, 48.7 million of the 137.5 million people employed were working from home, or 35.4%. So this number has been declining over time.
Of the 31.6 million people working from home two months ago, 6.2 million are in the occupational category the BLS calls management. This isn’t something you can do well, typically, from your patio, or even with Zoom calls. It’s far more efficient in person. So I think these people will return to the office, and more likely than not, on a full-time basis.
Then there’s the category, “Sales/Office.” The 6 million people collected here include everyone from securities salespeople to retail help to models. When the office, wherever it is, reopens, I have a feeling that most of these people will go back to it.
The next biggest grouping is the 4.6 million in business/finance. This includes accountants, personal financial advisers, loan officers and financial analysts, among others. This category would seem to lend itself to working more from home, with so much of their effort relying on analysis, which thrives in isolation. But this doesn’t suggest they’d all work from home.
There are two more major categories to consider. The first is education, where 3.1 million telecommuted in March. There may be exceptions, but I gather the reaction to remote learning is that it’s a bust, and that not only students, but also teachers, and parents, are eager for this group to return to the classroom.
The last big group we should consider is “computer/math,” where 3.5 million worked from home. This presumably includes all the techies everyone in San Francisco is so worried about. This seems to me to be the only one where concern is legitimate. The companies employing these people, nervous that talent will walk, may be more accommodating and flexible about the WFH phenomenon.
San Francisco is forecasting that its property tax base will decline for the first time in 25 years. As my colleague Romy Varghese wrote, “It’s those techies -- from companies such as Uber and Salesforce and Twitter -- that may make San Francisco more vulnerable to a prolonged pandemic downturn than perhaps every other major city in the country.”
For the near term, CreditSights’ Luby noted that cities have the ability to raise taxes and make adjustments for office/commuter behavioral changes. But a permanent decrease in the number of days worked in the office could lead to a reduction in financial flexibility for some cities, local governments and certain revenue bond issuers.
I’m not certain we’re there. One word missing in the Working From Home/Return to Office conversation is volition. Perhaps it makes people uncomfortable to even suggest it, but most employees don’t possess it. It’s not up to them to decide when they’ll return to the office; it’s up to their bosses.
Perhaps the days of the unforgiving workplace run by crazy tyrants are over. But this doesn’t mean that the ship is going to be run by the crew.
(Joe Mysak is a municipal market columnist who writes for Bloomberg. His opinions do not necessarily reflect those of Bloomberg LP and its owner, and his observations are not intended as investment advice.)
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