Fewer than 200, 000 U.S. businesses failed during first year of COVID - 19

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WASHINGTON, April 16- Fewer than 200,000 businesses in the United States may have failed during the first year of the COVID-19 pandemic, a heavier toll than originally feared and one that could have had relatively little impact on unemployment, according to Federal Reserve research.

The figure contrasts with the early forecasts that the pandemic would leave America's Main Street desolate as well as with polls which continue to show large percentages of U.S. small business owners worried about their survival.

Some 600,000 businesses, most of which were small companies, fail in any given year, and the U.S. central bank researchers estimated that from March 2020 to February of this year the number has been perhaps a quarter to a third higher.

That included 100,000 out of the industry failures among firms engaged in public-contact services such as barbershops and nail salons, a sector that is described by the Fed research group as the hardest hit by the economic fallout of the pandemic.

Although potentially devastating for the owners and employees of these firms, our results may represent an optimistic update to popular opinions about pandemic-related business failure, wrote authors.

They noted, carry-out restaurants, grocery stores and outdoor recreation companies seemed to suffer fewer failures than usual, with the net result being a smaller-than anticipated blow to the overall economy.

Many industries have likely seen lower exit rates than usual and exiting businesses do not appear to represent a large share of U.S. employment, the researchers wrote.

The study was the latest to add a positive note on an economic recovery that had proceeded faster than expected, with top Fed officials confident that much of the potential permanent damage had been avoided. Earlier research predicted small business failures due to the pandemic, with 400,000 or more small firms going dark.

Census and other surveys continue to reflect the stress of some firms that can continue to operate, and Fed researchers acknowledged that more failures could occur if, for example, banks, landlords and creditors become less flexible with their business tenants as conditions return to normal.

Nor does the study account for the millions of still-lost jobs in surviving firms that cut staff or reduced operations, or for the disproportionate losses experienced among racial or ethnic groups overrepresented in the most devastated industries.

But it does begin to put some scope around one of the possible economic scars of the pandemic, and suggests that small businesses appear to have been both more robust than anticipated, and were effectively propped up by loans from the Paycheck Protection Program and other federal aid.

Actual governmental statistics on business failures typically lag the official demise of these firms by a year or more. The Department of Labor Statistics and the Census Bureau have not yet released any final estimates on the pandemic's formal toll on companies and workers.

To supplement the scarce information, Fed researchers mapped available government information with high-frequency, alternative measures such as cellphone location data on retail locations, records from payroll processor ADP and other sources.

They found that while the early fears of a large COVID-19 hit may have been justified given the numbers of businesses shut down in the spring of 2020, by the end of August there was no evidence of normal business inactivity; in fact, the shutdown was well below excess by late 2020. When I know that I have an opinion, then I will be happy if I can get it all right with my life.

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