Tanzina: For more on what the pandemic has meant for small businesses across the country. I'm joined now by Amara Omeokwe economics reporter at the Wall Street Journal. Amara welcome back to the show.
Amara: Thanks for having me.
Tanzina: Earlier in the show, I spoke to Kathryn Wylde, who's the chief executive of the Partnership for New York City. She said that about a third of New York's small businesses could close when everything is said and done with the pandemic. Is that what we're seeing roughly nationwide?
Amara: What we've seen over the course of this pandemic is that small businesses have recovered. The economy has recovered roughly half the 22 million jobs that were lost early on in the pandemic. That is a good sign for small businesses, because small businesses account for about half of private-sector employment. We've also been tracking data that looks at the number of active business owners across the US and that has rebounded from a very steep plunge earlier on in the pandemic.
There are a lot of challenges that could still mean that small businesses close or that they face significant headwinds in the weeks and months to come. One of the big things that is happening right now as we all know, is that coronavirus cases are surging across the country. What that means is that state and local governments have re-implemented restrictions, meant to curb the virus's stem. That affects the ability of small businesses to operate, generate revenue, and continue to recover.
Tanzina: Are there specific types of small businesses that have been hit harder than others during the pandemic? Here on the show, we've talked about the effect that the pandemic is having on restaurants, for example, because of limits on indoor dining. What other industries, small businesses have been hit hard?
Amara: Basically any small business in an industry that requires personal touch, high levels of personal contact, and also people actually physically visiting the establishment. Those are the kinds of small businesses that have been hit the hardest. You mentioned restaurants, restaurants still are down by about 2 million in terms of employment, compared with pre-pandemic. Live and sporting events, leisure and hospitality small businesses.
Those are the kinds of establishments that really have not recovered to the extent as other small businesses have. For instance, professional and business services. Those small businesses weren't hit as hard early on in the pandemic. We have seen them recover a little bit better than other small businesses that require people to come in or require people to be in contact with one another.
Tanzina: How have small businesses, the ones that have survived, adapted best to some of the changes. Again, using restaurants as an example, we've seen some folks set out outdoor dining here in New York with heat lamps et cetera. What about other small businesses? How are they adapting?
Amara: It's really about doing things that make consumers feel comfortable or doing things that allow consumers to interact with the business virtually, right? We've seen and talked to a lot of small businesses that are talking, boosting their websites so that customers can shop online. At the same time however, a lot of small businesses were able to participate in the paycheck protection program.
Which was the federal government's main way of supporting small businesses through offering forgivable loans. But of course as you know Tanzina, the federal government is stalled right now on offering additional aid to small businesses amid this huge gridlock in Congress. Small businesses really are running out of that lifeline, or they are just anticipating and hoping that Congress passes more aid to help them along.
Tanzina: We should note that New York Public Radio, which produces this show, The Takeaway, received an $8.9 million loan through the paycheck protection program. We know that there's gridlock in Congress. Joe Biden, has he addressed this at all? Does he have a plan to start on day one, should Congress not pass additional stimulus funds for small business before he takes office?
Amara: Well, President-elect Biden has really been encouraging Congress to get something done now. He's encouraged Congress to not wait until after the inauguration to pass a package because of the need that is out there in the country. He's maintained this posture that if we can get cases down, get the public health crisis under control. That will give consumers more confidence to go to that small business, to support that small business. Also give small businesses more of the resources they need to be able to operate safely.
Tanzina: Amara, there's some data that talks about how Black and Latino owned businesses are doing better at this point in the pandemic than they were several months ago. What's driving some of that recovery?
Amara: Well, I think what happened is that over the course of the paycheck protection program. Congress and the Trump administration realized that the program wasn't reaching minority communities, perhaps as well as it should have. They implemented measures over the course of the program to ensure that the program was better flowing to those communities.
For instance, they set aside a certain amount of money for community development, financial institutions. Which often do a really good job of getting loans and other kinds of capital into minority communities. I think that certainly helped improving this federal lifeline and making sure that it reached those businesses. I think another thing that's happening is that small businesses have turned to other sources of aid.
There are States and local governments that have rolled out their own programs for small businesses. In the wake of the killing of George Floyd over the summer and this national conversation that we were having about racial injustice. A lot of state and local governments said we're going to roll out programs specifically for minority-owned businesses. I think Black-owned businesses and other minority-owned businesses have been able to take advantage of those sorts of resources as well.
Tanzina: What specifics would small businesses like to see from the next congressional relief package?
Amara: One thing that a lot of small businesses have said to me is that they would like to see a program or re-implementation of the paycheck protection program that addresses the neediest of businesses. The first iteration of PPP was really broad. It was a huge lifeline just thrown out there for all the take advantage of. Small businesses have said to me, let's make sure that this next package focuses on those hardest hit industries like restaurants like leisure and hospitality, like those small businesses that really saw a huge decline in revenue and that didn't come back.
A lot of small businesses that already took PPP loans are also looking for a simplified forgiveness process. You'll remember that a big draw of PPP was that these loans are forgivable if businesses meet certain criteria. Just looking at the applications that have come out for these businesses to apply for forgiveness. A lot of them are concerned that it will take a long time for them to get their documents together and to go through the process. They're really looking for Congress to simplify the process, make it really easy so that they don't have to take time away from keeping their businesses afloat to apply for forgiveness.
Tanzina: Also, as we mentioned earlier, the PPP loans were also really not limited to--. I think when a lot of people think small businesses, they think a certain dollar amount that might not be in the millions and millions of dollars. Is there anything that's really geared towards small companies, maybe mom and pops, single-owner type businesses. Or will they also have to compete with larger maybe mid-sized businesses to get that type of cash?
Amara: A lot of the proposals that are out there in Congress about how to restart PPP do have specific carve-outs for businesses, for instance, with 50 employers or fewer. There are also some proposals out there that would make it so that a business has to demonstrate a certain percentage drop in revenue in order to qualify. It does seem like if PPP were to be restarted, Congress is really thinking about how to make it a little bit more targeted than the first round.
Another interesting thing is that a lot of congressional proposals have also proposed set asides for community development financial institutions, and other community lenders. To address on the front end, the ability of minority communities to access this program. Whereas during the first iteration of PPP, it was on the backend as they realized that it wasn't really reaching those communities. This time around, it seems like they're thinking about it upfront.
Tanzina: If federal aid doesn't come soon. We are beginning across the country in different States at different capacities to implement what some people are calling a pause. Other people might call a modified lockdown for example, a shelter in place, stay at home, whatever it is. This is going to hurt small businesses if they don't get the money that they need. How can some of these folks survive the next couple of months?
Amara: I think that one thing that small businesses are thinking about is how to continue to meet consumers where they are. They're looking at programs, whether that be in their local communities, through civic organizations that can help them, for instance, boosts their websites, get online payments, going those sorts of things. I think small businesses have shown throughout this pandemic that they're really creative.
Whether that means pivoting to a different line of business or changing the way they do business entirely. That's what small businesses are going to try to do absent any further federal aid. I think just looking at data, looking at surveys, small businesses have been really clear that they need additional help. I don't really think it's optional. If we want to see small businesses continue to weather this pandemic,
Tanzina: You're in touch with small business owners for your reporting.
Tanzina: What are some of them telling you about how they're feeling? Because what I hear a lot in New York is some folks are saying, "This is it. If we have another lockdown, or shutdown, or modified shutdown, they won't be able to make it." What are you hearing from the folks you're actually talking to?
Amara: I'm hearing that also. It's a lot of uncertainty as these cases ramp-up again. One thing that small business owners are saying is, "I took a PPP loan that kept me afloat. I've been able to make adjustments to keep myself afloat," but it's also about consumers. If people are losing their jobs because businesses are closed or because there's uncertainty out there in the economy, consumers pull back on spending.
They don't necessarily spend on things that they don't need. That affects the ability of small businesses to have that customer come in or go to their website to buy a product. Everyone is intertwined, to the extent that there's uncertainty out there and consumers say, "Let me maybe not make that big purchase or maybe make that discretionary purchase because I'm not feeling confident about what's going on." That affects the ability of small businesses to survive.
Tanzina: Amara Omeokwe is an economics reporter at the Wall Street Journal. Amara, thanks so much.
Amara: Thank you.
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