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Two ways workplace productivity may have changed forever: Morning Brief

Monday, December 28, 2020

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Expect fewer business trips and less time in the office

As the COVID-19 vaccines get administered around the world, much of the economy will gradually return back to the pre-pandemic normal.

But some changes are likely here to stay, even after it’s safe to move freely again.

In a research note published last week, Goldman Sachs economists identified two ways many businesses will have changed permanently.

“First, travel and entertainment spending is likely to remain lower,” Goldman Sachs’ Spencer Hill said. “China hotel revenue per room remains 15% below 2019 levels despite 5% higher GDP, and an Atlanta Fed survey in the U.S. found that business travel may remain 29% lower in the post-pandemic economy.

“Second, Work-from-Home will likely be more common,” he added. “This would mobilize part of the household capital stock (home offices and computers) for business purposes—much like what Uber and Airbnb did with cars and second homes. If service-sector employees work from home one day per week on average, it would free up 15% of office real estate for alternative uses.”

The full economic implications of these changes will be complicated. For starters, a reduction in travel and entertainment spending is bad news for the travel and entertainment sectors. Meanwhile, more working from home is likely bad news for commercial real estate and good news for residential real estate, while having a relatively neutral effect on the sectors supplying the equipment needed to conduct business.

“Based on the 2019 input-output tables, we identify $2.6tn of upstream business inputs that could be disrupted or disintermediated by these two changes,“ Hill estimated.

All told, employers implementing these changes are likely to be winners.

“In our high-end estimate, a 15% decline would free up nearly $400bn of resources, boosting the level of productivity in the business sector by 2.4% over the medium term,” Hill said.

Shrinking expenses means fatter profit margins, and the resulting operating leverage that comes as revenue recovers means accelerating profit growth for these companies.

By Sam Ro, managing editor. Follow him at @SamRo


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  • 10:30 a.m. ET: Dallas Fed Manufacturing Activity Index, December (10.2 expected, 12.0 in November)


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