NEW YORK (AP) — A House committee heard experts and leaders testify Thursday on the nation’s small business economy amid the COVID-19 pandemic.
Watch the hearing in the player above.
As the U.S. economy undergoes an uneven recovery from the virus pandemic, many small business owners face a tough decision on whether and when to take on employees.
For many owners, it’s a question of how comfortable customers will feel about gathering in places like restaurants, stores and gyms. Retailers don’t know yet how much business they’ve permanently lost to online competitors. For owners starting over, it’s too soon to know if their brand-new companies will be successful enough to take on employees.
Small businesses accounted for 47 percent of employment at U.S. companies, according to the most recent business census, in 2017. When payroll company ADP reported the pandemic forced the loss of 19 million jobs at its business customers in April, more than 10 million of those workers, or 52 percent, were let go by companies with fewer than 500 workers.
Since then, small businesses have added about 6.2 million jobs, the most recent ADP data show.
A new $284 billion round of PPP funding could give small business hiring a boost, although owners will have more leeway to spend the money on rent, marketing and other expenses than they did in earlier rounds.
Through Sunday, the SBA approved more than 891,000 loans in the new round, totaling nearly $73 billion. More than two-thirds of the loans were for $50,000 or less, an indication the smallest businesses were seeking aid. In the first two rounds of funding last year, the government guaranteed 5.2 million loans worth $525 million.
Newly sworn in Treasury Secretary Janet Yellen testified at her confirmation hearing last month that it’s “critically important” to help small businesses with loans including those offered by the PPP.
“We will do everything we possibly can to get that money out to struggling businesses effectively,” she said. “When businesses fail that have been the backbones of their communities, that’s permanent job loss for workers and a tragedy for the communities.”
About one in six small businesses have closed their doors since the pandemic began, according to data from UKG, a work scheduling software company. That points to a reduced base of small employers who will be able to rehire when ongoing vaccinations are able to bring the virus under control.
And the pandemic has continued to harm many of those small companies that have remained open. In the week ending Jan. 10th, 40 percent of small businesses reported lower revenue compared with the previous week, for the second week in a row, while only 5 percent reported a gain, according to a Census Bureau weekly survey.
That’s forcing some small businesses to cut jobs again. The proportion laying off workers has topped 10% every week since mid-November, the Census found, after it fell below that mark in September. More than 12 percent of small businesses cut jobs in the week ending Jan. 10.
If the years following the Great Recession are an indicator, small businesses will be slow to staff up again once the economy improves. Traditionally, owners hired on expectations of higher revenue. But after the recession, during which an estimated 170,000 to 200,000 companies failed, owners’ approach was not to hire until revenue justified the additional expense and risk. They found ways to operate their business more efficiently.
AP Economics Writer Christopher Rugaber contributed from Washington.