Who still works from home? A detailed look at the return to the office

One of the biggest changes the pandemic has brought to the U.S. economy and to Americans’ everyday lives has been the rise of work from home (WFH). Tens of millions of Americans stopped going to the office and instead went to work from their home office, or kitchen table, or bedroom (or the beach). With the economy reopening, many of these workers are returning to the office.

How many employees return, and how quickly, will have major consequences for the office market in the coming years. I took a deep dive into research data collected by the Bureau of Labor Statistics (BLS) along with the traditional monthly employment report that provides detailed information about who is telecommuting because of the pandemic.

To give a taste of the findings of my analysis, more than half of those who worked from home last year have returned to the office. However, among the occupations and industries that are major tenants of office buildings, the return to the office has been slower. Recent announcements from some major employers suggest that the return to the office may not accelerate until after September. However, it is too early to say whether most or all employees will eventually return to the office, or whether the WFH will remain permanently higher after the pandemic is over.

In May 2020, nearly 50 million people were working from home.

In May 2020, the first month the BLS conducted the special survey, WFH rose to 48.7 million, or 37.4% of total employment. WFH declined steadily during the summer and early fall, but rose in November and December as the number of new COVID-19 infections increased. WFH started to decline again after vaccine distribution accelerated, and by June 2021, the total number of people working from home due to the pandemic had fallen by 54% from May 2020.

WFH ability varies widely by occupation.

This may seem obvious, but it’s interesting to see how sharp the differences in WFH between professions are. In particular, the management, professional and related professions are strongly overrepresented in WFH. These occupations represent 42.2% of total employment but account for 78.7% of total WFH. This should come as no surprise, as these occupations represent the stereotypical office job, the functions of which are most easily performed via telephone, email, or video conference. WFH in other occupations is underrepresented relative to employment, especially service workers, where face-to-face interactions are often an integral part of the job. Service workers accounted for only 2.1% of total WFH, although service workers account for 16.2% of total employment.

From May 2020 to June 2021, the WFH fell in all major occupational groups. The relative decline in WFH was strongest in the service occupations, natural resources and manufacturing, transportation and related matters, where WFH has fallen by more than 70% since May 2020. In contrast, among management and professional employees, the WFH decreased by 53% compared to May 2020 during the same period.

The BLS survey also reports WFH by industry, with results consistent with the occupation details discussed above. WFH ranks highest in finance and insurance, information, and professional and business services. In the financial sector, which rents much of the office space in New York and other financial centers, 41.7% of employees were still telecommuting in June.

WFH is concentrated among higher educated workers.

In May 2020, 68.9% of graduates and 53.5% of graduates were telecommuting, compared to 15.3% of high school students and only 5.2% of those without a high school diploma. Of those with higher education, 33.3% were still telecommuting in June 2021.

The return to the office will boost the office market.

It is not uncommon for commercial real estate markets to lag behind turning points in the general macro economy. As I pointed out in my Midyear Economic Outlook, office vacancy rates continued to rise and rents continued to weaken for 12-14 quarters after the labor market bounced back from both the Dot.com boom and collapse in 2001, as well as after the Great Financial Crisis in 2008-2009. The labor market recovery is already well underway, but this time there is the added factor of WFH. With many employers looking forward to Labor Day as the start of a more serious return to the office, office real estate markets are likely to pick up later this year and early next year.

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