A K-shaped recovery, and entrepreneurship persists
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This source is new to me, so I’d love to hear what you think. Pulling from several pretty sound sources, Visual Capitalist documents some interesting trends in US small business in (hopefully) the closing months of the COVID-19 pandemic. There’s sobering news, such as the small business recovery rate, but there’s also some encouraging news
First, the not so great news: Opportunity Insights at Harvard finds that 34% of small businesses that were open in January 2020 in the 50 largest metros are still closed as of the end of April. All of the 50 are between 25% and nearly 50% down from that date.
Second, the K-shaped part. Nationally, the professional services sector has rebounded much more strongly than leisure and hospitality -- not only did it not essentially bottom out, like leisure and hospitality understandably did, but leisure and hospitality actually lost ground in late 2020/early 2021, while professional services held steady. The trends converge a little bit toward the end of April, but only slightly.
While that’s probably not surprising to, well, anyone who has been alive in the past year, it’s important to keep in mind that leisure and hospitality employs more people in most regions, and that those employees are overall more likely to be women and people of color.
The third point was a surprise to me: there is an enormous spike in applications for an Employer Identification Number in early 2021. You don’t have to have an EIN to start a business, but it’s a darn good proxy. So that’s super intriguing. Of course, establishing an EIN does not equal a successful business, but it might indicate a continuation of a trend toward self-employment that we were seeing, in at least some sectors, before the pandemic.
So: continuing crisis, uneven recovery, and a surge in business creation and potentially self-employment. We’ve said before that the pandemic seemed to accelerate pre-existing trends as much or more than it created completely new impacts, and this data appears to support that conclusion. And just like before, but more so, there’s some important questions for you to grapple with as you prepare for post-pandemic recovery. Here’s a few:
What did your community lose? What business sectors, and what demographics, took the hardest hits? Of those, which are likely to bounce back, and which might be permanently crippled?
How does your population map against that economic impact? Who took the brunt of the pain? What factors, like lack of insurance or child care, helped to drive them out?
Who is starting businesses? What do they need? (Hint: don’t assume they know what they’re doing. Most entrepreneurs go into it because they want to do their service or product, but fail because of what they don’t know about running a business.)