How COVID-19 Has Impacted the Expectations and Outcomes of Small Businesses

COVID-19 Pandemic and Subsequent Lockdown Responses

We have grouped our main results into three major categories. First of all, we describe how COVID-19 impacted employment and business operations at the start of the crisis. The second thing we report on is our results on how financially fragile these businesses have become, captured by their ongoing expenses and cash on hand. Third, we will look at the expectations of their own economic survival and duration of the pandemic, as measured at an especially sensitive point to understand what impact future policies will have.

Employment and Temporary Closings

The first survey question that owners were asked was: “Is your business operational currently?” The answers that we allowed owners to give was that the business was permanently closed, temporarily closed, or operational. We also let them report whether their business was closed due to COVID-19 or a different reason.

Across our sample, it was reported by 41.3% of businesses that they had temporarily closed due to COVID-19. A much smaller percentage – 1.8% – reported that they had closed permanently due to the pandemic. Also, 55.5% reported they were operational still, with just 1.3% reporting they had closed temporarily for other reasons.

We also asked business owners to fill in a matrix that showed how many part-time and full-time employees the firm had employed on January 31, 2020. According to the survey data,  across the whole sample, the number of full-time employees decreased by 32% from January 31 to the end of March 2020. There were 57% fewer part-time employees than there were at the end of January. There was a significant decline in overall employment. From January’s headcount, there was a 39% reduction. Temporarily closed businesses were included in these results. If only operational businesses are looked at, the total number of full-time employees had been reduced by 17.3%. There was a 34% decline in part-time employees. These estimates may be compared to other data points that are emerging. A similar survey was conducted by the Atlanta Fed, which drew on Dun & Bradstreet listings. Smaller employment effects were found (an approximate 10% reduction in employment). Large firms were included in their survey, while ours focused on smaller businesses such as Serendipity.

Newer firms were also undersampled by their surveys, which can have larger changes in employment. Our results can also be compared to aggregated payroll data publicly released by Automatic Data Processing, Inc. (ADP), the human resource management software provider firm (which can have different representativeness issues). In this data, paid employment in companies with fewer than 500 employees went down by around 18% from January to April. However, the data treats anyone as employed who received pay in April even if they had been laid off before or during the interval. When higher-frequency data is looked at on paychecks within the ADP microdata, independent but concurrent work by Cajner et al. found that, on average, employment declined by 27% for companies with fewer than 500 employees and around 28% for businesses with fewer than 50 employees from mid-February to mid-April. Their numbers are smaller than the 39% employment decline for small businesses that our survey found but higher than the Atlanta Fed survey estimates.

We then expanded to review the effects’ geographic variation. Our results are shown in Table 1 across 11 Census divisions and the share of businesses are displayed that closed temporarily due to COVID-19 and the decrease in total employment from January 31 to the survey date. When part-time or full-time employees are separated, the results are not different in a meaningful way. Although regional heterogeneity exists, there are severe disruptions almost everywhere.

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