The Slow-Moving Economic Recovery for America’s Small Businesses
New data from the U.S. Census Bureau shows how COVID-19 has impacted small businesses. This memo examines five big takeaways from the survey data published so far:
- More than 8 in 10 small businesses have been negatively impacted by COVID-19.
- The majority of businesses are still seeing shrinking revenue.
- More than 60% of businesses have less than two months of business operations costs in reserves.
- More than one-third of small businesses have supply chain disruptions but very few have been able to shift production to other goods and services.
- Most of the small businesses that have applied for a PPP loan have received a PPP loan.
COVID-19 has ushered in unprecedented economic damage and uncertainty for small businesses throughout the country. All industries have reported steep revenue losses, and many firms are struggling to pay their employees, pay their bills, and keep their doors open.
To fully understand the sheer economic devastation heaped upon small businesses, the U.S. Census Bureau devised a new experimental data survey. Under this approach, emails are sent to small business owners across all industry sectors throughout the nation on a weekly basis probing how COVID-19 is impacting their revenue, staffing, cash reserves, and overall economic outlook. While this data unfortunately does not include demographic breakdowns, it still provides a fascinating snapshot for policymakers looking to understand how small businesses are being impacted by the pandemic.
The first week of these surveys began April 26 and will continue for nine weeks. New survey data is published weekly, making this one of the most up-to-date measures of real-time economic impact. This memo examines five big takeaways from the survey data published through early June.1
1. More than 8 in 10 small businesses have been negatively impacted by COVID-19.
The COVID-19 crisis has had a shockingly wide reach, with more than 8 in 10 small businesses reporting a moderate or large negative impact on their business. But the specific impact depends heavily on the industry sector. The Accommodation and Food Services sector has taken the biggest hit from COVID-19 with more than 9 out of 10 businesses reporting a negative impact. Other highly-impacted industry sectors include: Arts, Entertainment, and Recreation, Educational Services, and Health Care and Social Assistance. Only the Utilities industry reports fewer than 50% of its businesses as having experienced a negative impact.
Additionally, despite the massive effort by most states to reopen their economies, in the six weeks that this survey has been conducted, the share of respondents reporting a negative impact nationwide has decreased by 6 percentage points from 90% to 84%. While respondents’ answers reflect that the negative impact of COVID-19 on small businesses is waning, this decline is not happening as quickly as some economists have predicted.
There is also a strong correlation between the spread of COVID-19 and its economic impact. For instance, New York and Michigan are among the states with the highest rates of businesses reporting a large negative impact, 55% and 50% respectively. Concurrently, for the month of May, the unemployment rates in Michigan and New York were 21.2% and 14.5% respectively—among the highest in the country.2When compared to the national unemployment rate of 13.3%, states with a greater number of businesses negatively impacted by COVID-19 also have higher rates of people losing their jobs.3
2. The majority of businesses are still seeing shrinking revenue.
Across the nation, more than half (50.3%) of all small businesses are still reporting decreases in revenue on a week-to-week basis. Put another way, despite the reopening of many states’ economies, half of all businesses are continuing to experience decreasing revenue. Although fewer businesses are currently reporting revenue losses week over week, increases to revenue from the gradual reopening of the economy remain dramatically short of pre-pandemic levels.
There is, however, a wide range of revenue loss depending on which state the business resides. For example, New York (the most impacted state at 59%) is 23 percentage points higher than Idaho (36%). This data suggests that the economic recovery for states with lower COVID-19 infection rates could be swifter than for states that have been hit hard.
At the industry level, there is also a wide variation among small businesses reporting week-to-week revenue losses. The industries reporting the highest revenue decrease for week six are Management of Companies and Enterprises, Educational Services, Health Care and Social Assistance, and Arts, Entertainment, and Recreation. The industries reporting the highest revenue increase for week six are Retail Trade, Accommodation and Food Services, and Healthcare and Social Assistance. One notable trend in the most current data is that the Management industry has gone counter to the general national trend of things being less bad. Their firms reporting revenue loss have surged over the past few weeks percentage points to 73%. These firms provide services that were not initially as highly impacted by COVID-19 as other industries such as Accommodation and Food Services. This change shows a rippling effect throughout the economy. Moving forward, it will be important to track which industries are starting to show increasing or decreasing revenue trends as state economies are reopened.
3. More than 60% of businesses have less than two months of business operations costs in reserve.
Survey data also confirms that many small businesses are in a precarious position—even without a pandemic. Only 1 in 4 businesses have three months cash on hand—and many small businesses have less than one month of operating costs in reserves.
Some industries, however, are better equipped to survive an economic shock than others. The Accommodation and Food Services industry sector has especially lean profit margins, with only 20% of businesses reporting that they have three or more months of business operations’ costs saved in reserves. Eleven percent don’t have more than a week of cash in reserves.
Even industries with higher profit margins are vulnerable to a longer economic recovery. The management industry has one of the higher shares of companies with three or more months of cash on hand. Considering the surge of revenue losses reported in that industry, this figure might change in the near future.
4. More than one-third of small businesses have supply chain disruptions but very few have been able to shift production to other goods and services.
The crisis is affecting small business supply chains, and very few are able to dramatically adjust production to confront the challenge. Across all industry sectors, more than one-third of all small businesses reported supply-chain disruptions, and yet only 5% of small businesses surveyed have shifted their business production model to accommodate for the changing landscape.
Retail Trade (55%) and Management of Companies and Enterprises (56%) sectors report the highest likelihood for supply-chain disruptions. Despite this, neither industry has been able to substantially shift business production models. Only the Educational Services sector reports a high shift in production, with about 18% of industry respondents reporting that they have shifted business production.
While many members of President Trump’s Administration, such as USTR director Robert Lighthizer, are calling for an end to offshoring due to COVID-19 and Trump’s trade policy with China,4businesses are not nearly as responsive to adjusting their production models to supply-chain shifts.
5. Most of the small businesses that have applied for a PPP loan have received a PPP loan.
Since the start of the survey, more small businesses that have applied for a Paycheck Protection Program loan have received one. Thus far, 74% of small businesses surveyed have applied for a PPP loan, and 71% have received a one—meaning that only about 3% of small businesses surveyed applied for a PPP loan and either were rejected or are awaiting approval.
Since the second round of PPP funding, loan applications have started to slow down and over $120 billion in PPP funding remains unallocated. The most recent SBA PPP data, released on May 30, shows that 4.5 million PPP loans have been processed totaling $510 billion. The average loan size has decreased from $206,000 at the time of the first reporting in mid-April, to $114,000 by the end of May.5
Broken down by industry sector, Healthcare and Social Assistance, Accommodation and Food Service, and Manufacturing are the industries most likely to apply for or receive PPP loans, whereas Utilities, Finance and Insurance, and Management are the industries least likely to apply for or receive PPP loans.
COVID-19 has had an unprecedented and outsized impact on small businesses throughout the country. As the US Census Bureau continues to publish weekly data, we will continue to use this data to better understand how quickly small businesses are recovering from the economic crisis.
All calculations made in the report, unless otherwise specified, use the:
“Small Business Pulse Survey.” United States Census Bureau, April 24- June 6, 2020 weekly surveys, Accessed June 18, 2020. https://www.census.gov/data/experimental-data-products/small-business-pulse-survey.html
“Unemployment Weekly Insurance Claims.” United States Department of Labor, Published June 11, 2020, Accessed June 17, 2020. https://www.dol.gov/ui/data.pdf
Buh, Caleb. “Michigan jobless rate remains high despite initial rebound in payroll jobs.” Michigan.Gov, News Article, Published June 17, 2020, Accessed June 22, 2020. https://www.michigan.gov/dtmb/0,5552,7-358-82543-532198--,00.html
“NYS Economy Added 137,300 Private Sector Jobs in May 2020.” New York Department of Labor, Albany, NY, Published June 18,2020, Accessed June 22,2020.https://labor.ny.gov/stats/pressreleases/pruistat.shtm#:~:text=2)%20Unemployment%20rates%20(seasonally%20adjusted)%3A&text=In%20April%202020%2C%20the%20statewide,from%204.2%25%20to%2014.7%25.
Lighthizer, Robert E. “The Era of Offshoring U.S. Jobs is Over.” New York Times, Published May 11,2020, Opinion editorial, Accessed June 18,2020. https://www.nytimes.com/2020/05/11/opinion/coronavirus-jobs-offshoring.html
“Paycheck Protection Program (PPP) Report: Approvals through 12 PM EST 4/16/2020.” United States Small Business Administration, April 18, 2020, Slide deck, Accessed June 18, 2020. https://home.treasury.gov/system/files/136/SBA%20PPP%20Loan%20Report%20Deck.pdf
Paycheck Protection Program (PPP) Report: Approvals through 12 PM EST 5/30/2020.” United States Small Business Administration, June 1, 2020, Slide deck, Accessed June 18, 2020. https://www.sba.gov/sites/default/files/2020-06/PPP_Report_200530.pdf