The impact of the Paycheck Protection Program (PPP), part of the $2.2-trillion CARES Act stimulus bill which passed in late March, has begun to wear off, as small businesses across the country have scaled back hiring from June through August, according to Ahu Yildirmaz, co-head of the ADP Research Institute.
Interviewed in the middle of Small Business Week and stalled talks in Washington, D.C. concerning a second stimulus bill for businesses and families, Yildirmaz tells New Jersey Business that small businesses lost 5.5 million jobs between March and April, “the first two months of the pandemic hit.” Since then, half of those jobs have come back, with May being the strongest month for small business hiring (50% of all job gains that month came from small businesses), according to Yildirmaz.
Small business hiring then dropped to 34% in June, increased slightly to 35% in July, and dropped to 12% in August. “We need to think about this in context,” Yildirmaz says. “As the PPP program expired and labor markets and consumer spending normalize, small businesses look like they are facing a (hiring) slowdown.
“Even if small businesses do fully open, I don’t know if they can manage their employee costs because consumer demand is not fully there yet,” she says.
The leisure and hospitality industries will likely experience the slowest recovery, as they will find it difficult to remain profitable with social distancing measures in place. “A vaccine or a so-called ‘second wave’ will all determine that,” Yildirmaz says.
Through it all, she says that residential construction continues to be a strong small business sector as it is being driven by low mortgage interest rates. “We know that new and existing home sales have recovered to pre-pandemic levels, so we believe builders are in a good position,” Yildirmaz says. Also doing well are professional service firms such as accounting and financial planning.
Looking at 2021, she says that most small business sectors, other than leisure, hospitality and retail, will be trying to get back to normal, with the only risk being consumer spending. She doesn’t know how talks in Washington, D.C. will play out regarding another stimulus package, and says that uncertainty regarding presidential elections always negatively impacts the economy and business confidence.
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