(Bloomberg) — About 2.7 million job losses in the U.S. can be attributed to shuttered small businesses since the start of the pandemic, or about 18% of the total, according to a Goldman Sachs Group Inc. study that found that those firms have been surprisingly resilient so far.
The report shows that the majority of employees let go in early temporary closures are now back at work. The job losses from small-business closings as of July are down from a peak of 10.7 million as of April, suggesting reopenings helped propel the better-than-expected employment reports of recent months. One caveat: active small businesses probably cut jobs as well, so the overall effects of the pandemic on employment are probably much higher, according to the Aug. 16 report.
Among optimistic economic signs is an all-time high in business formations filed with the IRS, including so-called high-propensity applications that are likely to lead to new wage-paying businesses, according to the report. Most small businesses that responded to a July U.S. Chamber of Commerce survey reported being able to sustain operations for at least another six months without permanently closing.
One major unknown is what will happen once support from the $669 billion federal Paycheck Protection Program and other aid to small businesses wears off. With little chance that a new stimulus deal may be reached in Congress before September, the next few months may proved challenging for small firms.
“Thus far, the U.S. appears to have avoided the surge in Covid-19-related permanent business shutdowns that many feared at the pandemic’s onset, likely because the PPP and other policy support helped businesses survive the sharp pullback,” the Goldman Sachs economists wrote in their study.
One troubling spot for the economy is a fairly high rate of bankruptcy filings among large companies, although most appear to have had unsustainable capital structures even before the health crisis, according to the report. Overall, bankruptcy filings by large companies could hold back U.S. employment growth by 94,000 jobs a month if they stay at their elevated levels, according to the study.
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