Remember how gravely we pondered upon the “new normal”? How the economy will never return to its old ways? Well, as it looks now we are still not back to any normal old or new as Covid rages on, developing ever more virus variants down the Greek alphabet. We have reached delta now, leaving the road wide open to omega. Summer feels like last year’s: as countries have warily opened to tourists and people cautiously started to travel again, new waves of infections rear their head.
People who refuse to get vaccinated and to exercise caution pose the greatest risk to continuing growth. They are too numerous for comfort. While only a month ago we fretted about insatiable demand growth, supply bottlenecks and inflation returning for good, we realise that however astonishing the leap back from the biggest slump in peacetime, recovery begins to slow. Going from 90 per cent to 99 per cent of economic activity happened fast. Growing back to 100 per cent will take longer.
We investors seem to have misinterpreted the forces of reopening. We feared labour gaining the upper hand in setting wages, thus adding to the inflationary impact of rising commodity prices, higher housing costs and alarming invoices from timber merchants, car rentals and aviation companies. As demand pressures ease, the labour market is split into a return to normal with moderate wage demands in most sectors and segments which are clearly dysfunctional. In the hospitality business even generous pay offers cannot clear the market. It seems that old hands refuse to come back, no matter how much they are offered. To me, as I have written before, this does not look like too a generous out-of-work support by governments. It rather reflects the wisdom of the many who have just heard enough of the old nursery rhyme “and the doors of the bus go open and shut, open and shut, open and shut”.
There is a growing consensus that wagering on industries that thrive in an inflationary environment, like materials, mining or banking is somewhat yesterday. Big tech looks yet again as the safer bet, and to gamble on crypto, meme stocks and the bright future of cash-burning start-ups is perhaps fun when incarcerated at home but looks somewhat wasteful when we may have to rely on our lockdown savings for longer. As it looks, consumers sitting on cushions stuffed with furlough money may perhaps think twice before they go drunk on the shopping spree of the century.
We do not know how long the journey will take to return to where we set off. At the moment investors seem to believe that inflationary pressures are indeed “transitory”, that growth will moderate and that central banks will keep the taps open for longer. The conviction prevails that when the time is right they will find ways to reduce liquidity with measure. At least this is the verdict of the world’s bond markets: US 10-year treasuries are yielding close to 1.2 per cent at the time of writing and German bunds have started to sink deeper into negative territory. Neither junk-bond-issuing borrowers, nor emerging market debtors feel pressured to offer more generous terms.
As vaccination manufacturers are testing their inoculations against new variants and have started clinical trials for booster shots in the autumn, we can assume that one day soon the pandemic will have lost its immediate threat. We will live with Sars-Cov-19 as we do with the annual flu. Gradually we will realise that talks about the “new normal” will be overblown. We will behave, work and trade pretty much the same way we did before.
What will bring people back into the office is not the need of invaluable personal contact, but the necessity to suck up to superiors
We tend to ignore the fact that trends like the increased use of credit cards, online communication and internet shopping, on-demand-entertainment or home deliveries, were already well under way before the pandemic struck. Yes, we embraced these techniques more wholeheartedly, but we have now merely arrived a little faster at the point we would have come to anyhow. I do not see the early death of crowded bars, discotheques, pubs or mass events though. I do not see us content with smaller weddings and take-away meals for ever. We will hug, kiss and hopefully have more babies soon. We humans are gregarious, storytelling animals. We need to hang out together. No pandemic in the past has changed that and neither will COVID.
But we will not return to the office the way we did before, I hear you say. The ‘Pret Index’, a funny, real-time display of customer footfall as experienced by the UK-based sandwich chain Pret-A-Manger Ltd paints a telling picture. While outlets in suburbs and small towns are thriving, with business well in excess of pre-pandemic levels, city centres from London to Manchester idle, not even reaching half of their erstwhile turnover. Is this the knell for the office block? Will we henceforth all work from home and only go to town to party? Will office towers turn into apartments?
WFH (work from home) has proven to function better that we could have anticipated. People clocked long hours, worked diligently and communicated via Zoom as efficiently as if they had seen their co-workers and customers face to face. Sort of: most customer services performed worse than we had thought possible. Call centres of consumer-facing businesses, cost-consciously located in the Ukraine, India or the Philippines acted even more clueless than before. If anyone picked up the phone, that is: “Due to the Corona virus you may experience longer waiting times.” Why, exactly?
The attendance clock is certainly a thing of the past. Bosses have realised their employees are more trustworthy than tradition had it. But flexible working time is hardly an idea born in lockdown. It was well under way before the pandemic, the only difference being that during lockdowns workers were borrowing from a deposit of personal contacts that will not last. One day we will have to see faces for real.
A lot is said about the creativity fermented by coffee breaks, or in gatherings around the water fountain. We hear how sitting in an office the young could learn from their elders. Indeed? I think these effects, as pleasant as they may be, are overrated.
What will bring people back into the office is not the need of invaluable personal contact, but the necessity to suck up to superiors. Offices are not very effective establishments. Fifty per cent of office time is consumed by scheming for one’s own advancement. Without that we will remain hovering in front of our computers at the same position for ever. And before long, our convenient WFH will turn into not working at all as our labour will be outsourced to cheaper homes abroad.
The purpose of this column is to broaden readers’ general financial knowledge and it should not be interpreted as presenting investment advice, or advice on the buying and selling of financial products.
andreas.weitzer@timesofmalta.com
Andreas Weitzer, independent journalist based in Malta