Small businesses and unemployment during Covid-19

In 2019, The small Business administration (SBA) reported that 44% of the economic activity in the U.S. is contributed by small businesses. Two-thirds of jobs created in 2019 along with over 43% of the national GDP are the result of small business contribution. The national unemployment dropped by 0.1% from January 2018 to January 2019 according to FRED Economic Data and the SBA reported 1.8 million net new jobs created by small businesses. Companies employing fewer than 20 people we responsible for adding 1.2 million jobs. The phrase “small businesses are the back of the economy” seems like an understatement after listing the numbers, but now COVID 19 in 2020 may just cripple our economy for years to come. How much damage has the national economy and small businesses have sustained this year? How is it that in this free market economy we are forced to close the doors while the government sits back to see it collapse and not move a finger? 

SBA reported national unemployment at 14.7% as of April 2020 and the number has dropped to 6.7% in the same year. Nearly 100,000 establishments that were forced to temporarily shut down are now out of business according to Forbes. From April 2019 to April 2020, over 1 million small businesses were created and now about 10% of the 31.7 million are or have already shut down. Over 60 million American are employed by small businesses, and the loss of these companies have caused the unemployment numbers to skyrocket. The last time unemployment was at 6.7% was in February 2014. The Coronavirus has regressed the economic progress of 6 years in just a matter of months. The question is, what is the damage real damage and how long will it take for the economy to recover? 

While the unemployment numbers have dropped from the historic 14.7% in April 2020 to 6.7% today, the financial status of many Americans will take longer to recover. Large corporations dominate the market today on a much larger scale than before the pandemic started. Industries that were largely affected by the loss of income of many Americans such as hospitality, travel, and food will struggle to return to normal operation numbers. The price of rent has risen in every state as the housing crisis escalates, and renters get evicted after losing their jobs. This is not a depression, but this recession continues today and while states shutdowns businesses again to respond to the increase of infection numbers, more and more businesses shut down. The backbone of our economy has and continues to struggle to survive. How long will it take for small businesses to once again contribute to job creation by the millions every year? We just do not know. 

The federal government continues to play politics instead of passing policy to keep small businesses afloat while new shutdowns are set in place by multiple states across the nation. Covid-19 has not paralyzed economic growth, but it certainly has caused disincentives for investment by small business owners. Large food chains continue to operate, while small restaurants close their door. Local grocery stores limited by space fall while Walmart and Targets continue to be open. Amazon made record sales during shut down while small stores had no way to survive without customer interaction. It is clear who is winning during this pandemic, and it is certainly not the economy because Walmart and Amazon have no intentions of helping small businesses, and neither does our government representatives. While I am not inferring shutdowns are entirely responsible for the damage as they are meant to contain the infection, we are paying the price of an incompetent government that gloats when the market economy we live in succeeds and turns a blind eye when the same needs help to survive. It isn’t about complete government disassociation, instead of about excessive involvement with already existing minimal compensation.