New findings on how COVID-19 is affecting small businesses, unemployment, and low-income Americans.
Low-income women have suffered the most in the pandemic-induced recession, finds Chicago Booth’s Marianne Bertrand. She and collaborators at the Poverty Lab and the Rustandy Center for Social Sector Innovation drew that sobering conclusion from an early April survey of demographically representative US households. Among workers making less than $15K a year, 58 percent of women and 54 percent of men lost income during the first month of the pandemic; among workers making $15K–$30K, 57 percent of women and 45 percent of men lost income. For all workers making $45K–$75K, fewer than 30 percent reported lost income during that time. With the economic hardship comes a psychological toll: more than half of low-income workers said they feared job loss, while less than 20 percent of higher-income Americans reported that worry.
Small businesses have been especially hard-hit by COVID-19. So Congress threw them a lifeline: the Paycheck Protection Program (PPP), which provides loans to small enterprises with the goal of preventing layoffs and bankruptcies. However, a July working paper from researchers including João Granja, PhD’13; Constantine Yannelis; and Eric Zwick of Chicago Booth found that the program hasn’t reached the firms that most need it. Their analysis of the first round of funding, doled out between April 2 and May 2, revealed that just 15 percent of businesses in the most virus-stricken regions of the United States received PPP loans, as compared to 30 percent in the least affected areas. And most recipients used PPP funds to build up liquidity and meet loan obligations—not for payroll. While strengthening balance sheets wasn’t the program’s intent, the researchers say it could have longer-term benefits, because less cash-strapped companies are more likely to survive.
When US states start inching toward normalcy, will the job market rebound? Not uniformly, cautions Chicago Booth economist Steven J. Davis. In a June Becker Friedman Institute working paper, Davis and his coauthors predict that 32–42 percent of pandemic-related layoffs could become permanent job losses. They used the Survey of Business Uncertainty—a measure developed by the Federal Reserve Bank of Atlanta, Chicago Booth, and Stanford University—to create a model of the future job market. The losses will be only partially offset: the researchers estimate that for every 10 layoffs in hard-hit sectors, such as hospitality, there are three new hires in suddenly booming industries, such as grocery stores and delivery-based services. With so many shocks to the system, they write, the economic effects of the pandemic are likely to outlast the COVID-19 crisis.