Nearly 40% of American small businesses closed their doors during the coronavirus pandemic.
The data from Opportunity Insights shows that 38.9% of small businesses were closed as of June 2, the most recent metrics available.
COVID-19 lockdowns and business restrictions disproportionately affected businesses that the government designated “nonessential,” such as restaurants and leisure and hospitality outfits.
The leisure industry saw the most dramatic change in open businesses. The number of leisure and hospitality businesses open decreased by 52% compared to January 2020. The number of open small businesses in the education, healthcare, retail, and transportation sectors fell by around one-third compared to pre-lockdown baseline data.
The data, compiled by small-business marketing service Womply, is based on credit and debit card transaction data. A business was marked as “closed” if there were no transactions for three consecutive days beginning on March 1. Businesses that conducted all of their transactions through third-party apps, such as DoorDash and Grubhub, would also be marked as closed.
Not every business marked as closed is closed permanently, Jeff Michael, the executive director of the Center for Business and Policy Research at the University of the Pacific said, adding that “small businesses have been disproportionately hit” by pandemic lockdowns instituted by state governments.
The economy is continuing to show positive economic signs as the number of COVID-19 cases and fatalities fall after the moonshot effort to develop a vaccine for the coronavirus. Consumer spending has risen by 14.8% compared to January 2020. However, total small-business revenue decreased by 29.7% compared to revenue before the pandemic began.
As the economy begins to recover from the pandemic, economists and small-business owners fear a national labor shortage. Expanded unemployment benefits brought the average unemployment benefit to $687 per week. Compared to a 40-hour workweek, that equates to a wage of $17.17, more than double the federal minimum wage.
“The government is actually hurting more than it’s helping in this area of getting people back to work because they’ve had [this] extended unemployment insurance, a bonus $300 per week,” Rachel Greszler, an economics research fellow with the Heritage Foundation, told the Washington Examiner.
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