Pretending to work from home is not very productive

One of the enduring mysteries of coronapanic is how the economy stayed so apparently healthy for so long. Unless gathering people together in an office was worthless, people working from home in 2020/2021 should not have been as productive as they had been in 2019. Unless education is worthless from an economic point of view, Americans in lockdown states who missed 1-2 years of education shouldn’t have been as productive as their counterparts in 2019.

“U.S. Productivity Falls for Second Straight Quarter” (Wall Street Journal, today):

U.S. labor productivity declined for the second consecutive quarter as overall economic output contracted and employers spent more on labor as they added workers.

U.S. nonfarm labor productivity—a measure of goods and services produced in the U.S. per hour worked—fell at a seasonally adjusted annual rate of 4.6% in the second quarter from the prior quarter, the Labor Department said Tuesday. Economists surveyed by The Wall Street Journal had estimated a drop of 5%.

On a per-hour basis, in other words, Americans generated less value.

Unit labor costs, a measure of worker compensation and productivity, increased at a 10.8% pace in the second quarter from the prior quarter, Labor said. Economists had expected a 9.5% increase.

“The trend in productivity growth has worsened compared to prior to the pandemic, and the surge in unit labor costs makes the Fed’s challenge of getting inflation back down to its 2% target all the more challenging,” Wells Fargo economist Sarah House said in a research note.

In other words, the cost of getting Americans off their sofas and into a productive situation, from an employer’s point of view, is higher.

The bond market does not expect high inflation over the next 10 years. The breakeven inflation rate on 10-year TIPS versus Treasuries is only 2.5 percent per year:

The only thing that I hate more than intolerance and hate is saying that markets are wrong, but I don’t understand how the bond market can be right in this case. If it costs companies more to produce everything, how do prices go up only 2.5 percent per year?


31 thoughts on “Pretending to work from home is not very productive

  1. It is a mystery. Certainly historic breakeven inflation rate on 10-year TIPS versus Treasuries did not forecast current inflation rate. Given that real inflation has been no less then 3% for past several decades and that to bring it to this level for ten years that include 2021 and 2022 serious deflation is required it is not clear what this statistics forecasts. Economic collapse followed by deflation?

    • perplexed: That’s a great point. The bond market was right about inflation… until it was wrong.

      We should be shorting inflation right now, maybe via the swap market (available only to hedge funds and similar), because Congress and Joe Biden are going to give us the Inflation Reduction Act and, therefore, inflation is guaranteed to be whipped. says to buy car companies and renewable energy scammers. The same CNBC folks say that we should sell all of the S&P 500 companies that are legitimately profitable without taxpayer subsidies because they’re going to be a world of tax hurt.

    • philg, I would not equate US Treasuries with bond market. US Treasuries is a whole different story from corporate bonds or credit-backed securities. They are used as a benchmark of course but the way they are traded is different from regular bonds, some large players receive preferential treatment.
      I also not sure what kind of large investor considers TIPS as inflation protection. Maybe for someone who is planning to buy future not yet developed neural interface VR headsets in bulk and forget about real estate.
      I mostly into equities nowadays and it is sad that equity markets are going to be depressed for a while, maybe for good.

    • perplexed: I think the reason that TIPS and Treasuries are compared is that they both have the same credit risk (i.e., no credit risk at all because the US government can simply print money to pay bondholders). If you mix in corporate bonds then you have to make all kinds of assumptions about the risk that companies will run out of money and fail to pay bondholders.

      You do raise a good point about TIPS, i.e., that they track the fictitious CPI from which everything expensive and desirable has been excluded. Someone who put the cost of a house in a walkable neighborhood with decent schools into TIPS 20 years ago would not be able to buy a house in a walkable neighborhood with decent schools today by selling those TIPS.

    • Philip, in the inflationary word Treasuries have risk = (Real Inflation Rate – Treasury Nominal Yield) * Purchase Price/1000 assuming $1000 nominal, or something similar to that. Basically Real Inflation Rate – Treasury Real Yield

    • Yeah, like you said the Fed’s target rate is for AVERAGE inflation to equal 2%. Right now everything seems to be directed at bringing it back down towards 2%, but a ton of deflation would be necessary to get it back to an average of 2 after years of much much higher rates.

  2. “””
    One of the enduring mysteries of coronapanic is how the economy stayed so apparently healthy for so long. Unless gathering people together in an office was worthless, people working from home should not have been as productive as they had been in 2019.

    I will float a theory: People with experience can be productive working from home. People without experience can not, because they can’t learn from experienced people.

    In the first year of work-from-wherever, most people had the experience to do their jobs. New grads were unproductive, but new grads are always unproductive in the first year.

    In the third year of work-from-wherever, there are now three years of new grads who don’t have experience. The people who graduated three years ago are far less productive than they would have been if they had been in an office.

    If this is the case, the cost of work-from-wherever will only be felt many years after it starts.

    • @Cordinal Lax: This one strikes me as very true. People who could easily do work-from-home were all experienced (more or less) when it began. Bringing new people that and expecting them to perform well without direct interaction with others is a flawed idea.

      My father (who has been involved with computers and not just writing software but at the “individual circuit hardware” level since the early 1960s tells me that he does not learn well by the Internet alone, and it’s not just old age, because I notice the difference myself.

      There are some realties that I don’t think J.C.R. Licklider anticipated, gifted as he was.

    • And I have to add that in my experience, it’s been true as well. There’s a HUGE amount of good information out there on the Internet, but I really think only a certain cohort of people adapt well to reading complex information off a screen and internalizing it well enough to produce good work. I know that I started off with the microcomputer revolution on a TRS-80 Model 1. There was no Internet to guide me, but there were some very good, well-printed manuals. We don’t do that anymore.

      Some people seem to think that technology can solve all our problems, but I think a lot of people are just not adapted well when it comes to learning complex subjects off a screen, no matter how high resolution it is. It’s a different experience, and we’re engaging in a very big experiment.

    • @Cordinal Lax: By the way, despite all of the languages he’s learned and (partially) forgotten, my Dad’s favorite right now is Delphi, especially the latest 64-bit complier Lazarus environment.

      That makes him something of a dinosaur throwback but he loves programming in Delphi, and even at his advanced age (late 70s) he’s an efficient and elegant programmer with it. That all started in the 1980s when he could first begin to process mail sort data using his own programs on an IBM PC working in Turbo Pascal (remember Phillippe Kahn?) He did most of his prior work in IBM System 360/370/4300 Assembly.

      He learned Turbo Pascal the old-fashioned way, by RTFM and making “Hello World” programs and then kept going from there.

      I’m rambling a little, but I think your main point is valid. Not only do people learn in different ways, that kind of human interaction where someone learns from another person is important. I don’t have a Ph.D. to get a grant, spend Other People’s Money and measure it, but I think you’re on to something.

    • @CL: Finally: Working from home is a very very different kind of job than working in an office where you get up each day, take a shower (well, sometimes) and interact with others. Human beings are social beings. That does not mean “social” in the sense that we have recently come to think of it. Sitting in front of a screen (even with Zoom) is not social, it’s antisocial.

      We have all these “social networks” and tons of new antisocial problems. It’s not good!

    • “I think a lot of people are just not adapted well when it comes to learning complex subjects off a screen, no matter how high resolution it is. It’s a different experience, and we’re engaging in a very big experiment.”

      I’ve had a sense since junior high school that learning from computers was subpar to traditional paper and pencil, so I wince at seeing my kids using chromebooks instead of textbooks, and I cringe when my gf’s CRNP patient physical exam test is her clicking and typing from home instead of actually examining a person in the flesh.

    • @Sam: I feel a little bit of guilt because of this, it’s a long story, but I basically agree. It’s gone too far and has been pushed relentlessly in that direction for a wide range of reasons.

    • Great answer. I would add two things – for those who knew how to do their job their workday expanded every day, because there was no wasted time on transit, listening to unproductive work talk, leaving early for small errands etc. If the employee shared even a few hours of this new time with the employer then production should increase. The second point is that “the cost of work-from-wherever will only be felt many years after it starts” is only true for those who still rely on the in office apprentice model of education, those org’s that have adapted their methods to bring people up to speed remotely will benefit forever.

  3. > how do prices go up only 2.5 percent per year?

    Shrinkflation? Frozen chicken I regularly buy in $10 packages used to weigh 1.4kg, but now its only 1.13kg (multiply by 2.2x to convert to freedom units).

  4. from NY times article
    On a recent Monday morning, shortly after arriving at work, Mamadu Jalloh paid $3.50 for an everything bagel with plain cream cheese and $1.50 for a hot coffee at a street cart near his job in Queens
    Mamadu Jalloh needs to learn how to make his own breakfast at home.

  5. Long term, the government will definitely report no inflation as it always did. Inflation has always been 10% in Calif* even when the government said 0.

  6. Re: inflation expectations, start by looking at inflation in various sectors:

    – 40% in energy
    – 10% in food
    – 6% in everything else

    We know why energy prices are up. (I don’t know why food prices are up.)

    But in the case of energy, it’s not like high inflation this year implies high inflation the next year.

    If we now live in a world where energy suddenly costs 2x as much, that inflation is already behind us.

    So that increase is a one-time thing, and not a repeating effect.

    And even more likely, that energy inflation will likely retreat for a few reasons — the war might end in the next year, and the world is transitioning to other energy sources, which will decrease competition for this energy.

    So it’s likely that the contribution of energy to inflation will turn negative in the not-to-distant future, so even if core inflation continues at 6% again, total inflation will be below that.

    And since wage inflation is driven by the desire to keep up with costs, that will also drive future inflation rates lower.

    And people are expecting the Fed’s actions to be meaningful, and for them to keep at it until inflation is under control.

    • Reading this gave me shivers. Hope you are not really thinking those thoughts in your head.

      Pray, what other energy sources the world is transitioning to? Hot air spewed by the green deal politicians? Coal? Good ol’ firewood?

    • Anonymous, I actually wasn’t thinking of green sources. I meant other sources of similar energy.

      Saudi Arabia recently announced an increase in oil production, from around 10m barrels/day in 2021 up to 13M.

      The US will be adding an additional 1M barrels/day over the next year-ish.

      To put this in perspective, Russia exports a total of around 8 M/day.

      And I was thinking of Germany, which spent the last few years shutting down nuclear plans to use more Russian natural gas, and now find themselves under the Russians’ thumb. There’s now wide support to bringing those plants back on line.

      When scarcity drives a price up, people respond by making more of it and using less of it, although the transition doesn’t happen right away. So I would not be surprised to see more downward pressure on energy prices over the next year, and that could drive total inflation negative.

  7. I’ve said this one time before here (probably under Anon), and I’ll repeat it:

    For software engineers, it is far easier to figure out actual performance when working remote. The good ones will naturally work and have increased performance due to the absence of distractions.

    The politicians and group animals will push for a return to office, because they only thrive on personal contact, meetings and associating themselves with the work of others (in general, in software 90% of the value is produced by 10% of the people).

    In other areas like CDC work groups (where everyone falls into the useless politician category) or remote learning the dynamics are different.

    • Since you’re coming from a European IP, shouldn’t your nom de plume be “Europtimist”? Or maybe one more specific to your present country of residence (which I won’t reveal).

  8. philg: “Europtimist” might imply that I’m optimistic about Europe, which isn’t the case!

    If the implied point is that people from the U.S. know better what is going on in their own country, I completely agree! I didn’t mean to lecture in any way — I’ll just stop posting. Thank you for your always entertaining blog.

    • Please feel free to keep posting as “optimist” if you like! I suggested a moniker with a European tag (or your current home country if you prefer) only because Progressives in America always cite Europe as a shining example of how welfare states should be run. So it would be good to remind other readers that you have enjoyed direct personal experience of government by trained and skilled technocrats, universal health care, contact with economy-boosting migrants from the dar al-Islam, a tax code under which billionaires pay their fair share, etc.

    • Having had international experience, as it were, I can say that the optimist’s point of view is universally true.

      For example, the managerial class push for in-office work at one of the places in CA I consult for resulted in a mini-exodus of the smartest. Unfortunately, the “smartest” do no realize that the places they fled to are, most likely, no better in this respect, than their former ones.

  9. My experience of working at home has yielded two hours more of productivity. Prior to corona phobic, my hours in the office consisted of 7AM-7PM, and the committee time would be 6AM-7AM and 7PM-8PM. Once the work at home model started, I noticed that my productivity increased and now I could complete the work of the day from 7AM-5PM. It was clear from this experience that I was “Wasting” 2 hours a day. I attributed this waste to the following activities: 1)Getting Tea from the onsite cafeteria 2) Walking to the rest room which was 20 minutes round trip 3)Standing in line at the cafeteria for lunch and 4)Getting the proverbial afternoon hot chocolate in the winter or a milk shake in the summer. These activities combined with general socialization clearly added two hours of waste in my day.

    In response to the comments that people don’t learn from people unless they are in the office, I find that I deliver training via video conferencing and screen sharing as much at home as I did in the office. Maybe I am not recognizing the learning through osmosis that I received, but my learning experience has always been to execute the task asked for and then take feedback through the phone later.

    • > Maybe I am not recognizing the learning through osmosis that I received, but my learning experience has always been to execute the task asked for and then take feedback through the phone later.

      The claim is not that everyone needs to be in the office to learn. It is that people who are brand new to a job (recent hires with no industry experience) learn much faster when they are in the office with experienced people. People who already have experience do not seem to need this, and most are more productive at home. Of course there will be exceptions.

    • @Cordinal Lax, @JJ: Everyone needs supervision and correction from time to time in a real-life, face-to-face environment when they’re learning a new and complex task. I’ve recently read that “different learning styles” have been #Scientifically discredited but I don’t really believe that. People like my father are *much* slower readers than others. He’s partially dyslexic, possibly due to exposure to mercury when he was a child. As a result he thinks almost entirely using pictures in his mind.

      He also has told me that the best learning he’s ever done was in a face-to-face situation, and I think that applies to a lot of people.

      Just on face of it, you know that “Working From Home” is nothing like “Working at an Office.” Jeffrey Toobin proved that with his infamous Masturbation Zoom call-in. I think he literally single handedly called into question the theory that working from home is better for the Team.

      Like I said, I don’t have a Ph.D. and Other People’s Grant Money to prove it. And of course, people who are in favor it can probably find a researcher who will design a study that proves it’s better. Maybe they can get Jeffrey Toobin to write the summary.

Comments are closed.