“While Congress provided help for businesses large and small on an unprecedented scale, [they] underestimated the pandemic’s toll on small businesses”, US Chamber of Commerce president Suzanne Clark wrote to lawmakers late last week.
“A total of 54% of all small businesses report they are closed or could close within the coming weeks”, Clark warned, addressing Nancy Pelosi, Chuck Schumer and Mitch McConnell directly, in a letter dated April 10.
Top Democrats have spent the last several days wrangling with McConnell not over whether to increase funding for the Paycheck Protection Program (which earmarks hundreds of billions for payroll grants to America’s small businesses), but rather by how much.
Last week, Steve Mnuchin asked Congress to top up the PPP by $250 billion. McConnell agreed, but in addition to the extra money for small businesses, Democrats want $100 billion for hospitals and $150 billion for local governments. For his part, Donald Trump maintains he’d rather allocate those funds later, as part of the next stimulus bill. With many lawmakers out of town, approval of additional funding for the PPP needs unanimous support in both chambers.
By Monday morning, the Small Business Administration (which guarantees the PPP loans) said nearly 880,000 applications had been approved for a total of nearly $217 billion. Funding for the $349 billion initiative could be exhausted by the end of the week if lawmakers can’t agree on the terms for enhancing the program.
“Today, independent contractors, many gig economy workers, and self-employed individuals – a group that makes up over 80% the small business population — are able to access PPP”, Clark wrote, in her letter. “Without an infusion of resources, PPP is unlikely to meet outstanding needs for a large number of small businesses”, she warned.
To be clear, it’s likely that Pelosi, Schumer and McConnell will come to some manner of compromise – topping up funding for small businesses is economically necessary and failing to deliver would be politically untenable.
Given that, the question isn’t so much whether more money is coming (it is), but whether any amount of money will be sufficient to ensure the majority of Main Street enterprises survive the downturn.
Data from Homebase – a scheduling and time tracking tool used by more than 100,000 local businesses and their hourly employees – shows community businesses have been “devastated” over the past 45 days, founder and CEO John Waldmann said on March 31, highlighting a dataset that provides near real-time monitoring of the situation on the ground.
“Hourly workers [have seen] hours, shifts, and operations come to a full stop”, Waldmann remarked, adding that “in the first week of forced closures and shelter-in-place orders, we saw as much as a 62% decline in the number of hours employees at small businesses were working”.
Things got worse from there. Hourly employees working at local businesses plunged as much as 75% through Sunday, with hours worked falling as much as 68%. The data compares a given day to the median for that day of the week for the period January 4 to January 31. That’s how Homebase captures the effect of COVID-19.
As Homebase notes on their website, the company’s customers in the US “primarily consist of restaurant, food & beverage, retail and services and are largely individual owned/operator managed”.
That makes this data particularly well-suited to the current malaise, given the pain is concentrated in the services sector, and particularly in food & beverage. The dataset covers 60,000 businesses and 1 million hourly employees.
Needless to say, the loss of income for those workers is dramatic. And it adds up.
The following visual shows both the breakdown for individuals and the total, economy-wide loss. Again, the numbers show the comparison for a given day to the median for that same day of the week over the period January 4 to January 31.
Deutsche Bank’s Torsten Slok describes the leveling off in the two visuals above as “signs of stabilization”.
I’d be more inclined to suggest that once more than half of local businesses are closed and only a third of employees are reporting to work on a good day, we’ve simply reached some temporary nadir, where all but the strongest hands have been shaken out.
The question is what happens after another month of lockdowns.
Remember, only one in five “healthy” small businesses reported having enough cash on hand to survive two months without taking actions including layoffs and downsizing, a Fed study conducted during Q3 and Q4 of 2019 showed.
We’re a little over a month into the lockdown now. You’d be forgiven for worrying that by this time next month, the purported “stabilization” in the visuals above will have been exposed as but a temporary floor/plateau.
It sounds like Suzanne Clark agrees.
Full letter from US Chamber of Commerce to congressional leaders
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H, just heard that the airlines balked at paying back 25% of their $25 billion bailout. Do these thieves realize that their (United, Delta, and American Airlines) total market cap is just millions or so above that $25 billion? Nationalize the bastards and give us more leg room.
Would be curious on how much has actually been given out to small business. Most friends I’ve spoken to that were the very first to apply have not received any money. I’m trying to understand is it the banks not giving it out or the SBA. I know of four small companies that have not received any money yet.
I guess clicking the Ruby Slippers ain’t gonna cut it here.
This will be horrible and a slow go forward. I do not think the one percenters trickle down is going to help much. Very many retirees are going to tighten their belts like it is the seventies. Too,too many young people will be out of work for years. Far too many business owners will not be able to rebuild. This is gonna suck.