NRF Chief Economist Says Coronavirus “Continues as a Shock” for Small Business Supply Chains

Data indicating that small business owners are increasingly pessimistic about the coronavirus shows the need for continued economic stimulus measures, National Retail Federation Chief Economist Jack Kleinhenz says.

“The coronavirus continues as a shock to America’s small employers,” Kleinhenz observes. “Small businesses are the backbone of American ingenuity and impact local economies in cities and towns across the country, but responses to recent surveys highlight the fragility of many small business enterprises and the importance of the need for well-tailored economic policy.”

“Just as a physician checks a patient’s pulse to measure the rhythm and strength of the heartbeat, small business is an important indicator of the comparative health of the local and national economies,” Kleinhenz adds.

Kleinhenz’s remarks came in the September issue of NRF’s Monthly Economic Review, which cited a new survey created by the Census Bureau to measure the impact of COVID-19 on small businesses.

The Small Business Pulse Survey, launched on a weekly basis in mid-May, looks at issues such as employment, revenue and supply chain disruptions. In the survey’s first nine weeks, it found pervasive difficulties with business operations and finances, including temporary closings, employment, revenue and cash on hand.

Even though those issues have eased as the economy has begun to reopen, optimism has declined. The survey initially found 30 percent of respondents thought it would take at least six months for their businesses to recover from the pandemic, while 25 percent thought recovery would take only two or three months. In June, the number expecting recovery to take six months rose to 44 percent and only 10 percent thought it could come in two or three months. By the week ending August 15, 48 percent expected recovery would take six months and only 4.1 percent though it might be possible in two or three. Only 8.5 percent said their business had already returned to normal levels.

Kleinhenz also cited the Small Business Optimism Index from the National Federation of Independent Businesses, which fell 1.8 points to 98.8 as of July, ending two months of improvement after a low of 90.9 in April. While the July number was still about average for the survey’s 46-year history, the number of businesses expecting economic conditions to be better in six months dropped 14 percentage points to 25 percent.

In addition, leading business economists surveyed by the monthly Blue Chip Economic Indicators report cited renewal of the extra $600 in weekly unemployment benefits that expired at the end of July as the best way to support recovery, but ranked small business assistance as the next-highest priority.

This analysis coincides with the latest Paychex | IHS Markit Small Business Employment Watch which shows that despite hiring remaining flat since its drop-off in April, employees of small business are seeing the benefits of solid wage growth.

Hourly earnings growth was steady at 3.28 percent in August and weekly earnings continue to improve as the number of hours worked increases.

The national jobs index stood at 94.39, moderating 0.21 percent from the previous month.

“The national index stalled this summer, with the month of August again, as it has since April, closing below 95,” says James Diffley, chief regional economist at IHS Markit.

“As the jobs index has remained near April levels, PPP loans appear to have provided stability and prevented further declines,” says Martin Mucci, Paychex president and CEO. “While employment levels remain challenging, wages continue to show positive momentum.”

The Paychex | IHS Markit Small Business Employment Watch report also includes regional, state, metro, and industry level analysis, showing:

• Amid a regional COVID-19 surge, the West and South reported the largest declines in employment growth, -0.38 percent and -0.31 percent, respectively.
• Weekly earnings and hours worked growth is strongest in the Northeast.
• New York posts the best weekly hours worked growth among states.
• Despite a significant downturn in August (-0.69 percent), Florida continues to lead states in employment growth with an index of 96.50.
• At 4.23 percent, hourly earnings growth in the Construction sector has improved every month in 2020.

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