What stays and what goes
Richmond Fed CEO Tom Barkin weighs in on economic recovery
With renewed hopes stemming from vaccine distribution, economists and business leaders are looking ahead toward recovery, including pandemic-induced changes that will stay and ways we’ll return to “normalcy.”
While it’s evident that the technology sector’s upward trend will continue, Federal Reserve Bank of Richmond President and CEO Tom Barkin isn’t sure that telework will become the post-pandemic new norm.
“I’m not convinced that what we’re doing today will be forever,” Barkin said Friday during an event hosted by the Virginia Chamber of Commerce and Virginia Business. “I’m pretty convinced we’re going to move to some hybrid model of working, which will have more flexibility, which I applaud.”
While flexibility for some may prove to be a positive, remote working has fundamentally changed the way in which we interact with our colleagues. And, “if we believe in collaboration culture, inculcation of values, integration of new people,” Barkin says, “then I believe … that in-person is going to matter.”
With a hybrid model, business leaders will need to establish new rituals and protocols that reflect both the value of in-person interaction, as well as the flexibility employees have enjoyed during the pandemic to work from home.
This tension is something that Barkin sees as one of the clear and lasting outcomes of the COVID-19 pandemic — a fraying tie between employers and employees. “I’m not sure we’re going to be better off if all of our work relationships are remote,” he says. “I think that’s a problem we’re going to be trying to solve.”
Adjacent to the changes in work environment is where people are choosing to live. With the added freedom of working from home, the U.S. has witnessed a booming housing market as people choose to leave cities where they had a short commute to move to suburbs with more elbow room. Barkin warns, however, that this new trend will fuel competition among small towns seeking more residents.
The need for remote meetings will also likely change the way in which future business conferences are held, and it’s not entirely clear whether we’ll return to the same level of business travel, Barkin has heard from hospitality industry leaders. From an economic perspective, a chief financial officer of a company may not be as inclined to invest in business travel after the pandemic, Barkin says, but from a social perspective, employees may be ready to return to big conferences to alleviate pandemic cabin fever.
Referencing the nation’s previous pandemic crisis, Barkin said: “Part of me wants to go back to 1918 and say, ‘What came out of that experience? Was it the Roaring Twenties or prohibition?’”
Aside from work environment adjustments, the economy has also been affected by changes in demand for certain goods and services. Federal stimulus checks have kept some people above water through challenges such as unemployment during the pandemic, but for others, the cash sits idle in saving accounts.
While it may seem apparent that people will jump at service-oriented spending such as going to restaurants following the pandemic after being cooped up for a year, Barkin thinks there’s more “pent-up demand for goods than we think.” Furniture, golf club, gun, ATV and boat sales have “skyrocketed,” he says, as a result of people being stuck in their homes with extra money to spend on goods.
With roughly 40% of jobs lost from COVID-19 occurring in the hospitality sector, Barkin says reskilling will be important to get people back into the workforce in other capacities. The challenge, however, will be finding good industry matches for those workers who may “self-select” to work in hospitality based on a need for flexible work hours.
And while some jobs have been recovered, Barkin says he doesn’t think that 100% of leisure and hospitality jobs will return, at least not immediately.
“This has been a much more targeted event, sadly, at the bottom of the wage market,” Barkin says, comparing the challenges from the pandemic to those of the Great Recession. “That will be our challenge. A lot of finance professionals found their way back relatively quickly. A lot of the folks who have been targeted this time are the last group into the workforce.”