SMALL BUSINESS INSIDER
by Karen Kerrigan –
Yes, millions of small businesses got slammed by government shutdowns and restrictions during the pandemic. Thankfully, many were able to endure the initial shocks and aftermath with the help of technology, a gritty attitude, quick action, loyal employees, PPP support, and customers who love them.
Still, the latest data and surveys find that small and local businesses are far from being out of the woods. They’re being squeezed by high inflation, the Omicron surge, supply chain challenges, labor shortages and souring consumer sentiment. In the most recent Small Business Pulse Survey by the Census Bureau (week ending Jan 16), 34.3% of small business respondents experienced a decline in revenue, with 60.4% seeing no change in revenue either way. Only 5.3% of small businesses experienced an increase in revenue, which means 95% reported either no growth or a decrease in revenues.
In a Goldman Sachs 10,000 Small Business Survey released on January 24, 79% of small businesses are concerned about the ongoing pandemic, with 71% reporting that the rise in the Omicron variant has negatively impacted their business’s revenue.
Of course, finding workers continues to be a big problem for small businesses. According to CBIZ’s latest Main Street Market Index, “57.2% of small businesses reported inflation as their top concern, with staffing shortages running a close second at 54%.”
Indeed, the labor shortage squeeze is not only affecting the operations and recovery at many small businesses but also their bottom lines. In the CBIZ survey, 27% of small businesses reported having to raise compensation. There is no doubt in my mind that this percentage would be higher, and in other surveys it is, if small businesses had the capital and ability to boost wages.
As observed in SBE Council chief economist Ray Keating’s analysis of the January jobs data, which relates to the labor shortage issue noted above, labor force participation remains a persistent conundrum that must be addressed in order for our economy to grow strongly over the long term. He writes:
“The labor force participation rate registered 62.2 percent in January. A year earlier, that stood at 61.4 percent. However, prior to the pandemic, in February 2020, the labor force participation rate stood at 63.4 percent, and prior to the Great Recession, this rate topped 66 percent…And by the way, this labor force participation rate shortfall is not only about an aging population, as noted in the following chart of 25-54 year-olds.”
So, things remain tough for many local businesses. Many continue to experience cost challenges that are eating away at their financial health and competitiveness. As we’ve stated time and again, the White House and Congressional leaders need to prioritize policies that will help small businesses with their pain points, not push policies that make it harder and more expensive to do business and recover.
January’s strong jobs report reflects an economy that has the potential to move toward full healing. As noted above, the pandemic continues to negatively impact small business revenues and by extension the employees who work in these businesses. In fact, according to the latest BLS data: “In January, 6.0 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic–that is, they did not work at all or worked fewer hours at some point in the 4 weeks preceding the survey due to the pandemic. This measure is considerably higher than the level of 3.1 million in December.”
I expect that we will see some volatility in the jobs data throughout 2022, particularly if federal policies continue to drive uncertainty with business owners and investors, and inflation remains high. Hopefully, as Omicron fades, so do the policy ideas and actions that will further regulate and tax our businesses that are doing herculean work to recover.
On issues relating to taxation, technology, regulation, trade, health care, the workforce, education and more, SBE Council and our team remain focused on protecting small business and promoting entrepreneurship. It’s going to be one hell of a year. As always, thank you for your support and constant encouragement.
Karen Kerrigan, President & CEO
SBE Council