Small Business Closures Could be a Bad Sign for the Recovery

August 26, 2020

Fears about a possible “double-dip” or “W” shaped recovery got an unfortunate bit of support recently, as data shows the number of small businesses open falling substantially in recent weeks.

The number of small businesses (those with fewer than 500 employees) cratered during the initial pandemic. They were down more than 30% in mid-April from the start of the year. Since then, there has been a steady climbing back up as government lockdowns lifted and pent up consumers were eager to spend their stimulus money.

Unfortunately, the trend reversed itself in early July. As of July 4, the number of small businesses open was down just 7.7% from the beginning of the year. Today, it is down 19.1%. The decline coincides with the flare-ups of the virus in many regions of the country.

Small businesses account for 44% of all economic activity in the country, so hopefully, the trend will reverse as the number of new coronavirus cases goes back down.

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