Pandemic Closes at Least 200,000 Businesses

The Federal Reserve suggested small business shutdowns due to COVID-19 were less than anticipated.

April 22, 2021

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WASHINGTON—COVID-19’s economic toll on smaller businesses appears to be less harmful than predicted, the Wall Street Journal reports. The pandemic permanently shuttered around 200,000 U.S. businesses above historical levels during 2020, according to a recent study from the Federal Reserve.

During the past few years, about 600,000 companies, or about 9.5%, went out of business each year, according to the study. Individual companies were the lion’s share of the closures at about 130,000 (two-thirds) of the extra shutdowns. Other closures were locations of larger chains.

The pandemic hit barber shops, nail salons and other personal service providers especially hard. These made up more than 100,000 establishment closings beyond historically normal levels between March 2020 and February 2021. The new estimate points to fewer U.S. business failings than some economists predicted. “Actual exit is likely to have been lower than widespread expectations from early in the pandemic,” the Fed researchers said in the report.

The Fed emphasized that the new estimates are preliminary, and don’t include the roughly 26 million U.S. businesses without workers. Some speculate that government aid, such as the Paycheck Protection Program (PPP) has kept small businesses afloat. “The PPP allowed small businesses to ride things out,” said Scott Stern, a management professor at the Massachusetts Institute of Technology’s Sloan School of Management. “Not only are things less bad than we thought, but they are less bad by an order of magnitude.”

Some of the hardest hit sectors like hospitality and leisure have a more mixed picture. For example, the restaurant industry has seen above-average shutdowns of full-service eateries but more spending at fast-food restaurants.

Coronavirus Resources

NACS has compiled resources to help the convenience retail community navigate the COVID-19 crisis, including information about how to educate employees about the vaccines and other vaccine-related human resources advice. For news updates and guidance, visit our coronavirus resources page.