Office vacancies hit a record high in the fourth quarter, surpassing previous peaks last reached in 1991 and 1986, according to data from Moody's Analytics, Emily writes.

Why it matters: Office buildings are emptying around the U.S., as companies continue to adapt to the new norms of remote and hybrid work by shrinking their physical footprints.

• Yet it's happening so slowly and in such a predictable fashion, that the impact on the overall economy so far has been minimal.

State of play: The stickiness of hybrid work arrangements "muted office demand," per the report out Monday, which says 2023 was "the most downbeat" year in the office sector since the global financial crisis.

• "Even though 2023 was largely a year of companies and organizations calling people back into the office, we're not seeing that it's typically the standard five days a week back," said Nick Luettke, an associate economist at Moody's Analytics CRE.

Zoom out: Unlike past crises, vacancies increased last year while the economy was in good shape overall.

• "If the soft landing is pulled off, [vacancy] numbers are probably not going to rise to much higher than this," Luettke said. "But if things do take a turn for the worst in 2024, it'll probably just keep going for much of the year."
• Even when we're through the transition in the market, the natural office vacancy rate will likely be higher than it was pre-pandemic, he said.

What's next: We're moving toward a new era for the office. Say goodbye to central business districts centered around big office buildings and hello to more mixed-use setups — areas with office buildings and retail and entertainment, etc.

• A similar transition happened in the retail sector — online was supposed to kill brick-and-mortar retail, instead, it transformed in-person shopping.

Between the lines: For office landlords, of course, this isn't great. But overall, the high vacancy rate has been priced into the market, so the systemic risk posed by the sector appears fairly minimal.

• Moody's "does not believe this will become a source of systemic risk for the overall banking system."
• Much of the risk from commercial real estate has been priced into public debt markets, Goldman Sachs analysts noted in December. "[B]anks' limited exposure to office real estate should be manageable."

The big picture: This is not just a pandemic trend. The office market's current troubles go back to the 1980s, as the WSJ, which first reported the vacancy data, noted this week.

• Back then a construction boom, particularly in the South where "land was cheap and red tape sparse," led to overbuilding.
• When a recession hit in the early 1990s, a glut of buildings couldn't find tenants. "That glut weighs on the office market to this day," WSJ reports.
• Five of the 10 cities with the highest vacancy rates in 2023 were in the South — including Houston, Dallas, Austin, Tampa and Jacksonville, per Moody's.

⚠️ United, Alaska Air find loose parts on some Boeing 737 Max 9s. (CNBC)

✨ Scoop: Carta is exiting the startup stock sale business. (Axios)

✈️ JetBlue names new CEO as it defends Spirit takeover. (Axios)

🇨🇳 China becomes the world's biggest auto exporter. (WSJ)

The Biden administration announced a final rule on Tuesday that makes it harder to classify workers as independent contractors — a victory for gig workers that could shift the business models of companies that rely on them, Axios' Courtenay Brown writes.

Why it matters: The rule, which takes effect in March, requires businesses to extend the benefits and protections offered to employees to other workers that may no longer fit the status of a contractor.

• The fresh standard, first proposed in 2022, faced pushback from business groups — stoking the war over how gig workers should be classified (and ultimately paid) in the fast-growing on-demand economy.

Details: The rule says a worker should be classified as an employee under federal law based on multiple factors, including the degree of control an employer has over a person's work and the permanence of the work relationship.

• The department also rescinded a Trump-era rule that allowed more workers to be classified as independent contractors.

Catch up quick: Unlike employees, independent contractors are not entitled to the full minimum wage, overtime pay, unemployment insurance and workers' compensation.

• "These labor protections are a promise of a floor, beneath which no one should be forced to live and work," acting labor secretary Julie Su told reporters.

Flashback: Share prices of gig companies like Uber and Lyft tanked after the department first unveiled the proposed rule in October 2022 — a reflection of investor jitters that the new standard would result in higher labor costs for the companies.

The price of bitcoin continued to climb yesterday as ETF frenzy builds.

Why it matters: The first investment funds tied to the spot price of the cryptocurrency are expected to gain SEC approval as soon as Thursday, Axios' Crystal Kim scoops.

• Filings containing prospectuses, known as S-1s, are expected to be declared effective immediately for some funds, clearing the way for trading, three people close to the matter tell Axios.
• Since Friday, more than a dozen investment funds filed updated papers with the SEC that included new details on the fees they'll charge for these Bitcoin ETFs — prompting headlines about a fee war.

Meanwhile: SEC chair Gary Gensler took to X on Monday morning to issue a warning about crypto.

• "Investments in crypto assets continue to be subject to significant risk," he writes. "Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams."

Between the lines: Gensler is likely trying to pour cold water on the frenzy over the bitcoin ETF hype. It's a signal that even if the agency lets these funds move forward, it wouldn't mean the SEC is cool with cryptocurrency now.

Go deeper: Unpacking the bitcoin ETF frenzy

Oil prices fell back sharply after Saudi Arabia cut cut the official selling price of its oil to Asian customers on Sunday, Matt writes.

Why it matters: It suggests that the world's largest exporter of oil sees some combination of weakness in the Chinese economy, and increased competition with Russian crude — no longer welcome in the West since the Russia invaded Ukraine — as a threat to its market share with its biggest customer.

• State of play: Both U.S. and global benchmark oil prices fell roughly 4% on the news.

The bottom line: Despite headlines surrounding the potential supply disruptions linked to fighting in the Middle East, the key concern for the global market is on the demand side, as no one is sure Xi Jinping's government will be able revive the People's Republic's struggling economy.