New estimates suggest small business failures were much worse than expected

2 minutes
New estimates suggest small business failures were much worse than expected

The economic toll has been tough to measure, but new estimates from the Federal Reserve suggest it was not as bad as feared for smaller businesses.

The pandemic resulted in the temporary closing of roughly 200,000 U.S. establishments above the viral level during the first year of the outbreak, according to a study released Thursday by economists at the Fed. According to the study, according to recent years, around 600,000 establishments have closed per year or about 8.5%.

US BUSINESSES NEAR BORDER STRUGGLE WITH BOUNDARIES' CLOSURE According to Fed economists, individuals account for about two-thirds- or approximately 130,000- of the extra closures if historical patterns hold, according to individual companies that examined businesses with employees.

Other closed facilities are units of major companies- say, a Gap or Pizza Hut- that were certain locations closed while remaining in businesses. According to the Fed study, barber shops, nail salons and other providers of normal services appear to be the hardest hit, representing over 100,000 establishment closures between March 2020 and February 2021 beyond historically personal levels.

Many small businesses continue to struggle to stay afloat, but the new estimate suggests that US business failures have been fewer than some economists expected.

One earlier study estimated that over 400,000 small businesses closed in the first three months of the pandemic. GET FOX BUSINESS ON THE GO BY CLICKING HERE Early exit is likely to have been lower than widespread expectations from the original pandemic, the Fed researchers say in their report.

The new estimates are preliminary; in addition, some businesses that have hung on could eventually collapse under the weight of back rent, unpaid loans and other expenses.

The Fed estimates do n't include the estimated 26 million United States companies without employees.

The most frequently observed business failures were among the smallest firms, those with fewer than five employees. CLICK HERE TO READ MORE ON FOX BUSINESS.

The study does n't explain why small business failures have been higher than anticipated, but some economists point to extensive government assistance, including the Paycheck Protection Program, which was reopened in January with$ 525 billion in forgivable loans to small businesses. The PPP allowed small companies to ride things out, said Scott Stern, a management professor at the Sloan School of Management at the Massachusetts Institute of Technology, which studies business formation.

Not only are things less bad than we thought, but they are less bad by an order of magnitude.

  • Comments
Loading comments...