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Oct. 8, 2020

When Will Firms Return to Pre-COVID-19 Levels of Activity? Results from The CFO Survey

Article by: Sonya Ravindranath Waddell

The economic shock that hit the U.S. economy in the spring of 2020 was sharp, unexpected, and, first and foremost, a public health shock. The downturn did not, in itself, represent the loss of productive capacity in the U.S. economy. However, as the virus lingers and uncertainty prevails, there is one question on the minds of firms, households, and policymakers: When will we get back to normal? The CFO Survey provides valuable information on how U.S. firms are grappling with the economic effects of the COVID-19 pandemic and how they see their businesses developing as we move forward.

To better understand how firms view their “return to normal,” The CFO Survey asked respondents—those that reported being below their pre-COVID-19 levels of revenue/employment/willingness to spend on structures and equipment—when, if ever, they expect to return to where they were before the outbreak of COVID-19. Firms were given the following response options: (1) A Year/Month between September 2020 and December 2022; (2) 2023 or later; (3) Unsure; or (4) Not likely to revert to pre-COVID-19 levels of activity.

There was more uncertainty in spending, where almost 10 percent of respondents were “unsure” when spending would return to pre-COVID-19 levels, compared with employment (5 percent) and revenue (less than 2 percent).

The chart below shows that of the 161 firms that reported revenue lower than pre-COVID-19 levels (and did not report being “unsure” as to expected return), almost all anticipated eventually returning to pre-COVID-19 levels. This was not the case for employment or spending. Of the 97 firms that responded (other than “unsure”) to the employment question, 10 percent were “not likely to revert to pre-COVID-19 levels.” Responses to the spending question were similar. Of the 113 firms that responded anything except “unsure” to the spending question, about 10 percent reported being unlikely to revert to pre-COVID-19 levels. In addition, for all measures, a large share of firms did not anticipate being back to pre-COVID-19 levels of revenue, employment, or spending by the end of 2021. What is more, even for those that expect to recover in 2021, much of the recovery is anticipated for the second half of the year. For revenue, only about 20 percent of firms that responded (including those that anticipated returning to pre-COVID-19 levels in 2020) anticipated being back to pre-COVID-19 levels before June 2021; for spending, that number was about 10 percent. For employment, only a quarter of firms expected to return to pre-COVID-19 employment before the middle of 2021.

Note: Only includes firms that reported being below pre-COVID-19 levels of activity. Denominator does not include those that reported being “unsure.” If responses included a year but not a month, December was assumed. Respondents were also asked when, if ever, they anticipated a return to pre-COVID-19 employment if they were currently above that level. For more information, see the full results from the Q3 2020 survey (September 14–25, 2020).

Another set of questions revolved around when firms anticipate returning to having a pre-COVID-19 share of their workforce working remotely. Of the 166 firms that are currently above their pre-COVID-19 levels of remote work (and responded with something other than “unsure” about an expected return), about 40 percent responded that they were not likely to return to their pre-COVID-19 level of remote work, as can be seen in the following chart.

Note: Only includes firms that reported a higher share of their workforce working remotely than pre-COVID-19. Denominator does not include those that reported being “unsure.” For more information, see the full results from the Q3 2020 survey (September 14–25, 2020).

What, then, can we learn from The CFO Survey with respect to the future? First, firms anticipate it will take some time to dig out from the shocking decline of the spring, with employment never returning to pre-COVID-19 levels in some firms and much still unknown around the spending recovery. Second, remote work is expected to become far more prevalent than it was pre-COVID-19, which, of course, could change our economic landscape and impact not only the office real estate market, but the distribution of everything from retail to restaurants to electricity use. Finally, these and other results from The CFO Survey bring into question the extent of spending and investment that firms will be able and willing to make in the near future—and, as any good economist knows, investment today is key for productivity tomorrow. The economic effects of this health shock might be with us for a while.


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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.


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