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Small business owners faced with tough hiring decisions
Job outlook gets stronger as vaccine rollout improves: Economist
Cornerstone Macro chief economist Nancy Lazar argues the U.S. job outlook will improve in 2021 due to ‘pent-up’ coronavirus vaccine rollout demand. She also discusses her outlook for the U.S. dollar and inflation.
As the U.S. economy undergoes an uneven recovery from the virus pandemic, many small business owners face a tough decision on whether and when to take on employees.
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The pandemic forced Meghan Gardner to let go of 16 staffers at Guardian Adventures, which ran educational summer camps, part of an industry decimated by the virus outbreak. While Gardner got a Paycheck Protection Program loan and ran online camps during the summer, by October she couldn’t afford to pay her employees.
Gardner would like to build her company back up, but the virus is still raging and the future for children’s group activities is still uncertain. She’s worried about the summer of 2021 being a repeat of 2020.
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So, for the time being, she’s working as a consultant and holding off hiring.
“If I don’t have my business up and running and make enough money to pay my employees, I’d have to lay them off again,” says Gardner, whose company is based in Burlington, Massachusetts.
Owners such as Gardner who are rebuilding a business or starting anew after losing their companies are hesitant to make hiring commitments because it’s unclear not only when the pandemic will end, but whether they’ll have enough revenue to justify bringing employees on.
For many owners, it’s a question of how comfortable customers will feel about gathering in places like restaurants, stores and gyms. Retailers don’t know yet how much business they’ve permanently lost to online competitors. For owners starting over, it’s too soon to know if their brand-new companies will be successful enough to take on employees.
Small businesses accounted for 47% of employment at U.S. companies, according to the most recent business census, in 2017. When payroll company ADP reported the pandemic forced the loss of 19 million jobs at its business customers in April, more than 10 million of those workers, or 52%, were let go by companies with fewer than 500 workers.
Since then, small businesses have added about 6.2 million jobs, the most recent ADP data show.
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A new $284 billion round of PPP funding could give small business hiring a boost, although owners will have more leeway to spend the money on rent, marketing and other expenses than they did in earlier rounds.
Through Sunday, the SBA approved more than 891,000 loans in the new round, totaling nearly $73 billion. More than two-thirds of the loans were for $50,000 or less, an indication the smallest businesses were seeking aid. In the first two rounds of funding last year, the government guaranteed 5.2 million loans worth $525 million.
Newly sworn in Treasury Secretary Janet Yellen testified at her confirmation hearing last month that it’s “critically important” to help small businesses with loans including those offered by the PPP.