The Federal Reserve Building was built on May 1, 2020 against a blue sky in Washington, USA. REUTERS / Kevin Lamarque / Photo Photo
Less than 200,000 businesses in the United States may have failed during the first year of the COVID-19 pandemic, a lighter toll than initially feared, and which had relatively little impact on unemployment, according to the Federal Reserve.
The figure contrasts with early predictions that the pandemic will leave America’s “Main Street” abandoned, as well as polls that still show large percentages of U.S. small business owners are concerned about their survival.
Perhaps 600,000 businesses, mostly small businesses, failed in any given year, and U.S. central bank researchers estimated that from March 2020 to February this year, the figure was perhaps a quarter to a third higher.
This included 100,000 ‘redundant’ failures among businesses that work with close contact services, such as barber shops and nail salons, a sector described by the Fed research group as the sector hardest hit by the pandemic’s economic downturn.
While potentially devastating for business owners and employees, ‘the authors write:’ compared to the general discussion … our results may be an optimistic view of the pandemic business failure views’.
They noted that exports of restaurants, grocery stores and outdoor leisure businesses were less successful than usual, while the net result was a smaller blow than expected blow to the overall economy.
“Many industries have probably seen lower-than-normal exit prices, and outgoing businesses do not appear to represent a large portion of U.S. employment,” the researchers wrote.
Federal aid
The study was the latest to give a positive note about an economic recovery that went faster than expected, and top Fed officials were confident that much of the potential permanent damage had been avoided. Earlier research predicted widespread business failures due to the pandemic, with 400,000 or more small businesses going dark.
Census and other surveys continue to reflect tensions among some businesses that continue to operate, and Fed researchers have acknowledged that more failures could occur if, for example, banks, landlords and creditors become less flexible with their tenants as conditions return to normal.
The study also does not take into account the millions of jobs still lost at surviving businesses that reduce staff or operations, or the excessive losses felt among racial or ethnic groups in the most devastated industries.
But it’s starting to place some magnitude at one of the potential economic scars of the pandemic, suggesting that small businesses were both more resilient than expected, and that they were effectively backed by loans from the Paycheck Protection Program and others. federal aid. .
The Fed and the U.S. government began flooding credit and direct allowances for businesses and households this past spring, so much so that personal income has actually risen, even while unemployment has risen to historic levels.
The funding included $ 755 billion in forgivable PPP loans spread across more than 9.5 million businesses. Although the approximately 30 million U.S. small businesses are diverse, most involve practitioners who have no employees, while the rest work only a handful. The failures of these enterprises, even in large numbers, therefore do not register deeply in terms of overall work.
Government official statistics on business failures usually delay the actual downfall of those businesses by a year or more. The Labor Department’s Bureau of Labor Statistics and the Department of Commerce’s Census Bureau have not yet released any formal estimates on the final toll of the pandemic on companies and their workers.
To magnify the scarce data, the Fed researchers linked available government information to high frequency, alternative measures such as cell phone location data recorded at retail locations, records of the payroll processor’s ADP, and other sources.
They found that while the early fears of a major COVID-19 hit might be justified, given the number of businesses closed in the spring of 2020, there was no evidence of excessive, ongoing inactivity at the end of August; the conclusion of the fact was at the end of 2020 much lower than normal. “
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