The Disparate Impact of Covid on Small Businesses
Like most small businesses, our revenues took a big hit early on in the pandemic. And, like many other businesses in the service industry, today we have largely recovered and are “back to normal.”
While our experience is not uncommon, it is not universal. Drawing on robust tracking data from the US Census Bureau, we take a look at how America’s small businesses are faring today, and the varying impact of Covid-19 on America’s small businesses.
While some sectors are largely back to normal, for other sectors the pandemic has been particularly “sticky” and small business owners have had to find new ways to adapt to evolving challenges.
Things are improving for small businesses, but we’re not there yet
Six months ago, we mapped the arduous journey of America’s small businesses as they navigated the pandemic and noted that the pandemic and shutdown were extremely challenging for nearly all small businesses.
Now two years in, the negative impact of the pandemic on small businesses has abated over time and many small business owners say that they are back to normal.
- In April 2020, 90% of small business owners said that the pandemic had a negative effect on their business. By March 2022, that had dropped to 65%.
- Conversely, the proportion of businesses who said that things are “back to normal” rose from 0% in April 2020 to 41% in March 2022.
Yet, while four in ten small business owners say that things are “back to normal” today, that means that for over half of small businesses, things are still not “back to normal” more than 2 years after the first shut down.
Covid has had a differential impact on small businesses
Covid’s impact on small businesses has been very uneven – with some sectors coming out of the pandemic relatively unscathed, while others continue to struggle.
The hardest hit sectors are accommodation and food services (hotels and restaurants); education; arts, entertainment, and recreation; and healthcare.
The least hard-hit sectors include utilities; finance and insurance; real estate; and professional, scientific and technical services (which is where our market research business falls, along with law firms, accounting firms, ad agencies, etc.).
*US Census Survey of Small Businesses, March 14-20, 2022
To add insult to injury, the hardest hit industries are most likely to still be feeling the impact today.
- When asked how long it will be before they are “back to normal,” just one third of the most impacted sectors said that things are already back to normal.
- By contrast, half or more of the least impacted sectors say that things are “back to normal” already.
Covid Challenges are Evolving
The nature of the challenges to US small businesses has morphed over time. The sudden shock and uncertainty of the early shutdown and new variants have given way today to inflation, supply chain delays, and labor shortages.
- In March 2022, 44% of US small businesses said that they are experiencing domestic supplier delays, up from 29% in August 2020.
- 40% of small business owners say that they are seeing a large increase in the prices they pay today compared to six months ago.
- About one in three small businesses (32%) are having trouble hiring today.
The impact of these challenges also varies by sector.
Accommodations and food services; manufacturing; construction; and wholesale and retail trades are all struggling today with inflation, supplier delays and labor shortages.
By contrast, small business owners in real estate; finance and insurance; and professional, scientific, and technical services are least likely to be impacted by supply chain delays, inflation, and labor shortages.
The Pandemic is Still Not Over for Many Small Businesses
Taken together, the surveys of small business owners from the US Census Bureau tell us that, like ours, many small businesses have recovered from the pandemic and returned to business as usual.
However, for many others, the pandemic is still not over and, in fact, continues to present new and different challenges.
The “Accommodations and food services” sector has been hit the hardest and longest. Early on, they had to adapt their businesses to immediate and ever-changing shutdowns, capacity restrictions and sanitation requirements and dramatic changes in travel and dining habits. Today they face the triple-whammy of inflation, supplier delays and labor shortages.
Yet, the present challenges cannot be solely attributable to the pandemic. Issues like inflation, supplier delays and hiring shortages have multiple causes and the farther we get away from the initial shutdowns, the more these other factors come into play.
Yet, whatever the causes, these data indicate that an exogenous shock like a global pandemic will hit most small businesses hard, and some small businesses will feel it more than others.
Source of Data: US Census Small Business Survey
The US Census has been tracking the impact of Covid-19 on US small businesses for two years. Through over 60 different surveys of small businesses (defined as businesses with fewer than 500 employees), conducted from April 2020 to present, the Census has monitored the impact of Covid on small business revenue, employment, operations and outlook. The data are robust, with roughly 20,000 small businesses across the country responding in each measurement.
Unless otherwise cited, all data in this blog post come from the US Census Small Business Pulse Survey. More information about the survey can be found at: https://portal.census.gov/pulse/data/#methodology