Six Months Into Pandemic, Taking The Pulse Of Main Street SMBs

Summer wanes, Labor Day is here, and — as prodded by the name of the holiday — thoughts turn to work.

The latest round of employment data, released Friday (Sept. 4), shows that the United States added 1.4 million jobs in August, as estimated by the U.S. Bureau of Labor Statistics.  As a result, the unemployment rate fell to 8.4 percent.

“These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the COVID-19 pandemic and efforts to contain it,” the BLS said in its report.

The continued resumption may not be enough to stave off the top-line pressures and cash crunches that bedevil the Main Street SMBs that power a significant portion of the U.S. economy.

The U.S. is roughly six months into a global pandemic (as declared in March by the World Health Organization).  Lockdowns are easing, businesses are reopening in stages, and though there are headlines trumpeting vaccines that may be made available sooner than many people might have expected, the question lingers:

Has the damage been irreparably done?

As has been seen over the past several months, PYMNTS periodically asks more than 500 SMB owners for their thoughts about the state of their business prospects, how they have coped and strategized and what might lie ahead.

The sentiments have been sobering — but not without some hope, and perhaps what might even be called optimism.

Turning back to the unemployment data for a moment, though, the numbers were better than expectations — and the numbers mark four straight months of employment gains.  The BLS data for August also mark a slowdown from 1.8 million non-farm jobs reported in July. Beyond the roughly 238,000 workers hired for the U.S. Census, there were notable gains in retail, where 249,000 jobs were added, and professional services, with 197,000 positions.

A Bit Deeper Into The Data 

Those are some sanguine data points to be sure, but they are data points that do not yet add up to a trend for the SMBs that employ roughly half the nation’s workforce.

Dig a bit deeper: because the BLS has said that about 40 percent of its sample is comprised of firms with fewer than 20 employees, generally speaking, as goes the BLS report, so might Main Street.

Recent PYMNTS coverage indicates that a recovery could not come soon enough.  To hire means that some top line torque, or at least visibility, must be in place — cash flow, after all, is what pays for employees. And cash coming into the (real and virtual) doors would do much to replace the spotty success of various government programs that were designed to help SMBs weather shutdowns.

As noted in this space last month, the Paycheck Protection Program (PPP), arguably the flagship stimulus effort here, began taking applications from SMBs back in April.  We found that through the Spring, the share of SMBs which had taken the plunge to apply for Small Business Administration loans stood at about 33 percent (this includes all SBA loans), but a relatively higher percentage of firms had opted to reduce payrolls to mitigate the external pressures of the economy and the pandemic. (The PPP has been decidedly mixed, as at the beginning of August there was $130 billion of funding unused and still available, as the program was buffeted by confusion over how to apply, who was eligible, and how and when the loans should be repaid).

And many of those firms that have kept operations humming have done so by tapping into the personal till (37 percent, while 26 percent are using personal credit cards), as roughly half of those surveyed have said that they’d seen cash flow trouble, almost wholly attributable to the pandemic.

Some Silver Linings? 

The pandemic wends on; taking the long view, PYMNTS found that merchants expect the pandemic to wallop them for more than 200 days.  But a glimmer of hope: Back in March, only 40 percent of SMBs queried by PYMNTS said they were sure they would survive the pandemic, in an April survey that number had ratcheted up to 58 percent.

As they say, necessity is the mother of invention, and here the great digital shift has done much to keep merchants pivoting not just to meeting their customers — virtually, yes, across card-not-present and other digital transactions — but improving their own operations.  As noted last month, Visa’s Kevin Phalen, head of global business solutions, told Karen Webster, “the first 60 days of the shutdown was really that critical time when the small businesses in most of the markets had to make a quick pivot and move into this new digital environment if they weren’t already there. And they had to expand out their consumer base.”

The SMBs that have made it past that survey — to the here and now — are now the ones that are poised to, perhaps, weather what’s left of the storm. A majority, at more than 71 percent, have been boosting their digital capabilities (prompting the seismic shift to curbside pickup and buy online/pickup at store initiatives as more than half of sales come from eCommerce).  And Visa/PYMNTS have found an increasing awareness of real-time settlement, which would be embraced by nine of 10 surveyed SMBs.  Better cash flow means a better outlook for expanding businesses on the other side of the pandemic, and hiring, in what becomes a virtuous cycle.

The state of Main Street right now?  Bruised, yes, but not necessarily broken — and for those still-standing virtual and tangible storefronts, looking ahead for even more traction in the months ahead.