A Return-to-Office is Coming

As I sit to write this month’s column, the Dow Jones Industrial Average has touched 40,000. Only the weeks ahead will determine if the average pushes through and trades up into the 40s permanently, or if profit-taking results in continued trading in the 39,000s, or even lower.

Remember, this stands in stark contrast to the average’s 20-year low we experienced in March 2009, when the Great Recession gripped sentiment and the average traded down to 6,469. This is a remarkable recovery, representing a six-fold increase in the average over 15 years, and speaks volumes to the strength and global leadership of the U.S. economy.

Counterbalancing. Having said that, recent news is reflecting a counterbalancing of the economic strength we have witnessed for years now, especially during the pandemic when the artificial stimulus created by Congress pumped copious amounts of money into our system, offsetting any possible economic downturn in the economy.

The Fed and Congress had learned from the mishandling of the financial crisis in 2008 that sent the economy plunging for years, as our industry witnessed – and suffered through. They took a page from that handbook of mismanagement and stepped up to soften the blow of the pandemic.

So now, despite a strong stock market and an economy buzzing along at historically higher levels of GDP, some segments of the economy that benefitted from the pandemic are coming back to earth, and employees are starting to feel it.

The recent news from Walmart is a symbolic example. Like Amazon and other consumer businesses that flourished during the lockdown and the economic stimulus that softened its financial impact, they were staffed to the gills, and had to accommodate the Work-From-Home culture the lockdown created, and stuck, long after COVID was in the rear-view mirror. But now, the winds are shifting, and strongly. The company is axing hundreds of corporate jobs and asking most remote workers to return to offices.

Employees in smaller offices in Dallas, Atlanta and Toronto are being asked to switch to bigger hubs. Most relocations will be to the retail giant’s corporate headquarters in Bentonville, Ark., where Walmart is building a 350-acre campus. But some employees will be able to work from offices in the San Francisco Bay area or in Hoboken, N.J. Staff will still be allowed to do their jobs remotely and part-time as long as they are in offices the majority of the time.

This action is a bid to drive collaboration, a key piece of the successful operation of any business that Work-From-Home has negatively impacted. The “chief people officer” at Walmart stated that being together, in person, makes them better and helps them to collaborate, innovate and move even faster. The company also believes it helps strengthen their culture as well as grow and develop their employee base.

Amen. This is a big move by Walmart, and reflects what we are witnessing as companies around the world are encouraging employees, whose commutes were reshaped by the pandemic, to return to offices. Walmart, the world’s biggest retailer, is also the largest private employer in the U.S. and operates some 4,600 stores domestically. The action follows a strong directive by Jamie Dimon, the CEO of JP Morgan Chase, who instructed employees to get back into the office months ago. His leadership in Return-to-Office has been emulated by companies and CEOs around the globe.

Note the layoffs at Walmart are all in white-collar jobs and does not reach down into the rank-and-file. And if I look into my crystal ball, I believe the trend toward Return-to-Office will only grow over time, and employers will use the fear of layoffs to spur this movement.

For those that like Work-From-Home, the idea that their job might be eliminated by a layoff will be a significant motivator in re-populating offices and spurring workers toward greater collaboration, which has certainly suffered in the WFH culture.

I remain steadfast in my belief the economy will remain positive for years to come, but the cooling brought about by higher interest rates will prove that WFH was a failed experiment.

AVP Pulse Index. The Index remains flat once again this month, with a small, +0.7% increase following last’s months small gain as well. More significantly, the +5.5% year-over-year increase and +10.7% over the last 36 months reflects a slowing in the overall construction economy as the Fed’s tightening takes hold in its fight against inflation. But a strong showing by the Dodge Momentum Index and strong housing starts bodes well for the months ahead, as well as the Construction Backlog Indicator. Like last month, the Index reflects a steady construction economy.

Pierre Villere

Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers and acquisitions. He has a career spanning almost five decades, and volunteers his time to educate the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at [email protected]. Follow him on Twitter @allenvillere.

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