The Atlanta Journal-Constitution
Economy’s vital engine sputtering
With about one in five small businesses closed, hiring will be hindered.
WINCHESTER, VIRGINIA — In a normal year, hundreds of book lovers would have descended on Winchester this summer for Shenandoah University’s annual children’s literature conference.
Some would have made their way to Christine Patrick’s bookshop downtown. Winchester Brew Works would have rolled out kegs this month for Oktoberfest revelers. The Hideaway Café would be advertising its monthly Div as Drag Show.
But 2020 is no normal year. The literature conference, Oktoberfest and drag shows have all been canceled — casualties, like so much else, of COVID- 19.
‘ Weird, weird time’
The pandemic has hammered
small businesses across the U. S.— an alarming trend for an economy that’s trying to rebound fromthe deepest, fastest recession in U. S. history. Normally, small employers are a vital source of hiring after a recession. They account for nearly half the economy’s
output and an outsize portion of new jobs.
Roughly one in five small businesses have closed, according to the data firm Womply.
Small companies are struggling even here in a city of 28,000 that works hard to promote and preserve local enterprises. Years ago, Winchester blocked off several blocks to create a pedestrian mall downtown — a bulwark for local businesses.
But city planning is no match for a global pandemic.
“We’re in such a weird, weird time,” said Mayor John David Smith Jr. “Small businesses and families are hurting.”
98,000 permanent closures
Lacking the credit access and cash stockpiles of larger companies, small businesses were especially vulnerable to the economy’s sudden stop.
Many crumpled under the pressure. Yelp, which publishes reviews of restaurants, bars and other businesses online, reports that nearly 164,000 businesses on its website have closed since March 1, 98,000 of them permanently.
Steven Hamilton, an economist at George Washington University, estimates that 420,000U. S. small businesses had closed permanently by July 10.
And small businesses’ troubles aren’t confined to their owners. They generate nearly 44% of U. S. economic output, according to the Small Business Administration, and account for two- thirds of new hiring. ( The SBA generally defines small businesses as those that employ no more than 500 workers.)
In Santa Fe, New Mexico, Leslie Moody is fighting to hold on to Rancho Gallina, the boutique hotel she opened in 2013 with her husband. In January, theywere looking forward to a banner year – forecasting $ 20,000 a monthin revenue from room bookings and weddings and other events.
“By the end of April, everything had canceled or postponed,” Moody said.
The rescue aid program the federal government enacted in March helped them survive. In addition to their state jobless aid, she and her husband could each collect $ 600 a week in federal unemployment benefits — until that program expired July 31.
“Thatwas the money that meant we didn’t have to hold our breath every month,” Moody said. “Now we’re in breath- holding mode.”
Governments at all levels did scramble to protect small businesses. In addition to the expanded unemployment aid, the Paycheck Protection Program provided $ 520 billion for 5 million businesses, most of them small.
But Congress has failed to agree on another financial rescue. Without further federal aid — soon — economists warn that the recovery will likely falter and intensify pressure on small businesses that are straining to survive.
‘ Scarring effect’
To hang on, many small businesses have tried to reinvent the way they do business, doing deliveries and letting customers pick up purchases.
The flexibility may be paying off for some.
Businesses with fewer than 500 employees were hurt the most when the pandemic struck: They slashed 16.4% of their jobs between February and April, versus a 14.1% drop in employment at firms with 500 or more workers, according to payroll processor ADP.
But since April, employment at the smaller businesses has rebounded somewhat faster than at larger companies.
Still, Hamilton fears the damage will be long- lasting.
“It seems clear to me that the COVID- 19 crisis is going to have an extremely deep scarring effect on the small business sector,” Hamilton said, “and through it the American job market and economy.”