Dana Peterson, chief economist at The Conference Board, joins Yahoo Finance Live to discuss inflation due to labor shortages and Omicron cases as well as the outlook for remote work.

Video Transcript

ADAM SHAPIRO: I want to bring in a friend of the program and a familiar face here. Also, because she's got two great flags in the background-- I think you'll be able to see them-- when we say "hello" to Dana Peterson, The Conference Board's Chief Economist. Oh, I don't see it. Usually, you have the American and the Canadian flag behind you.

So there they are. The wide shot you just did. So I want to talk to you today the big headline. And when The Conference Board does a survey of 900 CEOs across the world who are expressing concerns about inflation, we have to listen.

So what is it you would want those of us who are looking to either protect our money or to invest to consider when you hear CEOs saying we're worried about inflation?

DANA PETERSON: Well, I think one key factor is that CEOs expect that inflation is going to be a problem not only this year or even into middle of next year, but even beyond that. And that's a big concern. Indeed, some of the things that we think are more persistent in terms of inflation include wages and labor shortages associated with them. And also, strong demand for technology-- meaning, chips. And also, housing.

Millennials are of age. They're buying housing. And they're going to be driving that demand for the next 15 to 20 years.

- Dana, based on the findings of your survey, did you find that there were CEOs in certain industries that were more concerned about inflation than others? And if so, where was this dispersion seen in this survey?

DANA PETERSON: Sure. Certainly manufacturers are very concerned about inflation, because they're the ones who are on the front lines and they're the ones who are facing increasing labor shortages. Certainly, they're looking for workers. But many workers are either afraid of getting sick while on the line or they're just looking for higher paying jobs elsewhere in those jobs that don't involve in-person services or interactions with the public. So that's really what we found there.

But all industries are very concerned certainly with respect to wages and the Great Resignation, keeping workers happy and making sure that you're attracting the best talent.

ADAM SHAPIRO: There's another search underway when you talk about keeping workers happy and recruiting the best talent. And that's the work-from-home surge. When you speak to these CEOs, what is The Conference Board learning. Are we looking at a permanent shift to at-home offices? Or are we looking at a permanent hybrid kind of situation?

DANA PETERSON: Looking at a permanent hybrid situation. Indeed in the US, a little more than a third of CEOs said that they expect that more of their workers are going to be working from home, or at least remotely, even if they're not at home. But certainly not physically in the office.

And this is something that I think CEOs have accepted and understand that there's going to have to be a balance. While they're more open to allowing remote work, there's still very high concerns about culture. Can you make sure that your employees are still connecting with each other? Are they still innovating and able to communicate and cooperate?

So while on the other hand, businesses are more open to remote work and believe it's here to stay, they want to make sure they have that proper balance to ensure productivity and higher profits, of course.

- Going back to inflation, how are CEOs planning on actually managing these price increases? Because we've seen that increase costs have been passed on to the consumer and the end user over the course of the past six months to a year. But can these higher prices continue to be passed on to the end users or are we going to start to see some decrease in demand because of this passing on?

DANA PETERSON: Well, it's a great question. It's really interesting because in the survey, to my surprise, about 52% of CEOs said that they were actually looking to cut costs. Well, we asked them all these questions. And 40% said that they would actually absorb some of those costs into their margins. And only about 36% said that they would actually pass those increasing costs down to the customer.

So I think businesses are really trying to do what they can on the front end before they have to pass it either down to their business customers or their consumers, understanding at some point consumers, especially, might substitute away from certain products, especially brand name products, and also may demand more discounting. So I think that there certainly is a limit. But still, small businesses are trying to do what they can to manage all these rising costs.

ADAM SHAPIRO: I'm going to ask you one of those wonky economist questions that will help us understand, because there's a revolution or an evolution underway not only because of inflation, but also-- you know, inflation meets up with this hybrid work issue because of the cost of salaries to keep people happy and pay them more. Are you going to have to, as economists, change the models by which you measure performance and productivity based on those two issues alone?

DANA PETERSON: I think that's a great question. And the answer is probably a resounding, yes. We are going to have to think more about what defines productivity, because it's no longer, you know, "fannies in seats." It's really about how much people are producing and whether or not they're able to continue to be innovative. And some of those are intangibles.

And I think also just thinking about inflation and costs. There's tremendous costs for businesses to have to accommodate some workers working on the premises, those who are working outside. Does everyone have the right technology, the same technology? Also, just thinking about whether or not development, whether you can develop the next talent if they're sitting at home v with their many roommates.

And so I think all of these things are really going to matter in terms of how economists measure productivity and certainly growth in the future.

ADAM SHAPIRO: Dana Peterson is The Conference Board's Chief Economist. And just a little secret for you, one of our favorite economists here at Finance. We always appreciate when you join us. It's always a good discussion. All the best to you.