Lets say we do get a tight jobs market
The Fed is hell-bent on getting unemployment as low as possible. Let's assume they succeed.
The aim is to generate some moderate wage growth and pull more workers into the workforce. At the same time, the Fed needs to be mindful of the changing bigger picture.A more-mobile and online workforce could end up driving its own set of employment dynamics that overwhelms whatever the Fed is trying to do.
Looking back at the past 20 years of central bank policy, there was a slavish focus on the Phillips Curve, r* and the domestic output gap. What the Fed and others missed was that globalization, automation and technological innovation were incredible disinflationary forces that rendered their models useless.
They could end up making the same mistake with the broad shift to remote work. Prudential is out with a survey of workers today and it shows that 26% of workers plan to look for a new job after the pandemic with that number rising to 34% among Millennials.
A similar survey in 2019 put the number who plan to leave at just 18%.
Could the embrace of remote work cause a great reshuffle? On the surface, those 26% of workers who plan to leave would want to earn an equal or greater salary.
"If there's one thing that keeps me up at night, it's the talent flight risk," said Prudential Vice Chair Rob Falzon. Business leaders "need to get back to looking more intently at our talent and ensuring we are giving them opportunities even in a remote environment, or we're going to lose them."
At the same time, there's a compelling argument that remote work is deflationary. Workers who have the option to leave big cities might take less to work remotely from smaller centers.
The whale is the international workplace. A broad shift to remote work means competition from everywhere. Americans are the world's highest-paid workers and they may soon be undercut, leading to persistent negative pressure on wages.
