After what feels like countless weeks of lockdown, an overwhelming news cycle, and 40 million Americans out of work, there are finally some positive signs for small businesses recovery and the economy as a whole.
On June 2nd, Paychex published it’s Paychex|IHS Markit, Small Business Employment Watch report for May 2020, which indicated a modest 2.5% increase in weekly hours worked and a 3.12% increase in wage growth. The report samples data from 350,000 Paychex customers as a way to extrapolate macroeconomic trends for small businesses in America. Although the gains are small, they show signs of recovery after a sharp decline in April. The report also breaks down data across regions.
As expected, the areas hardest hit by COVID-19 are showing slower growth rates, but the good news is that all areas across the country are growing. The Northeast, which was hit the hardest, showed a tiny .01% increase in comparison to the South’s .40%, the West’s .41%, and Florida’s 1%. In addition to these gains, there seems to be a renewed sense of optimism among most small business owners. 63% of small business owners polled believe the worst has passed and 57% are optimistic that the US economy will recover after seven months.
It also looks like small business owners have another reason to be optimistic in the form of another potential Paycheck Protection Program Loan (PPP) legislation, the new Paycheck Protection Flexibility Act passed yesterday in the US Senate. The bill is now headed to the President's desk, who is expected to sign it. For those unfamiliar with the PPP, small business recipients of the stimulus must spend 75% of the loan on payroll within eight weeks of receipt in order to qualify for loan forgiveness. Failure to do so means the business must reduce staff and require the business to pay back some of the loan within two years at a 1% interest rate.
Many loan recipients began receiving funding back on April 3rd and need more time to spend the money due to the extended shutdown and slow reopening. The bill extends the original eight week period to 24 weeks and allows business owners to spend some money on rent. Small business owners across America can focus on getting back to work without the concern of holding a costly liability to the US Government, as long as the funds are spent accordingly.
Lastly, yesterday’s May job report is also a positive sign for the future. According to the Associated Press, the US added 2.5 million jobs bringing down the unemployment rate to 13.3%. The spike in jobs can be attributed to the gradual reopening of the service industry, theaters, salons, and gyms as their workers are reinstated from furloughs.
Although we are not out of the woods yet with this pandemic, there are reasons to be hopeful that we will return to business as usual in the not-so-distant future.