In addition to record unemployment numbers, experts now predict that a “wave” of small business bankruptcies is on the horizon — and it could leave the United States with 40% fewer small businesses.
The New York Times reports that the United States Chamber of Commerce estimates “more than 40 percent of the nation’s 30 million small businesses could close permanently in the next six months” — a statistic entirely attributable to the coronavirus pandemic and ensuing lockdowns.
The economic consequences of such a mass business failure could last for “generations,” the NYT reports.
“Commercial bankruptcies in the first quarter of 2020 ticked up 4 percent from a year earlier, according to data from the American Bankruptcy Institute,” according to the NYT. “But many of those filings were made before the pandemic, when the economy was healthy. Right now, some owners are waiting to find out if they will receive federal stimulus aid before deciding whether to file for bankruptcy protection.”
Restaurants and retail services are, of course, the most vulnerable, but family-owned enterprises, like heating and cooling operations and plumbing companies, and even health-care services, particularly small dental and pediatric practices, are in severe danger. The Small Business Restructuring Act, which took effect in February, could help some small businesses stay above water, but many are struggling to keep people on the payroll, to compete with unemployment insurance, and to handle mounting debt.
Of course, large companies — and, in particular, large retail outlets — are not immune to the economic effects of coronavirus. Brands like Neiman Marcus, J. Crew, JC Penney, Macy’s, Gap, GNC, and David’s Bridal are all staring down the possibility that their stores may not reopen once coronavirus lockdowns are lifted, according to USA Today. CNBC says that at least 150 companies, from airline conglomerates to healthcare providers, have warned investors to expect major earnings hits.
The bad economic news keeps piling. In addition to closures, a jobs report, due out from the Department of Labor on Thursday, “will almost certainly show that the coronavirus pandemic inflicted the largest one-month blow to the U.S. labor market on record,” per the Wall Street Journal.
“Economists surveyed by The Wall Street Journal forecast the new report will show that unemployment rose to 16.1% in April and that employers shed 22 million nonfarm payroll jobs—the equivalent of eliminating every job created in the past decade,” the outlet says, adding that the end result is likely the worst unemployment rate since the United States began collecting records on the topic, back in the wake of World War II.
And although, according to unemployment filings, it appears the United States has lost around 22 million jobs, experts believe the actual rate is much higher. Self-reported surveys, analyzed by the WSJ’s business experts, show “the employment rate among 18- to 64-year-olds surveyed declined to 55.8% in mid-April, indicating that 34 million jobs were lost since mid-March.”
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