With small businesses going bust at breakneck speeds and a quarter of all US income derived from the government, it just makes you wonder if this was all planned...
The virus-induced
recession has resulted in deep economic scarring that will be seen for years.
Tens of millions of Americans remain unemployed, broke, and hungry. US bankruptcies of large
companies are on pace to hit a 10-year high, with even more devastation seen among smaller firms.
The collapse of small business is absolutely shocking,
considering firms with under 500 employees account for about 44% of US economic
activity.
Bloomberg notes a "wave of silent
failures goes uncounted in part because real-time data on small business is
notoriously scarce, and because owners of small firms often have no debt, and
thus no need for bankruptcy court."
"Probably all you
need to do is call the utilities and tell them to turn them off and close your
door," said William Dunkelberg, chief economist for the National
Federation of Independent Business.
Dunkelberg warned:
Small business closures "are going to be well above normal because we're
in a disastrous economic situation."
Yelp's latest data on
business activity shows more than 80,000 companies permanently shuttered
operations from March 1 to July 25. What's concerning is that 60,000 of
these closings were small firms.
We recently pointed
out small restaurants across the country have listed their eateries for
sale on Facebook Marketplace. The number of listings is
stunning, a clear indication the bust cycle is far from over. Another
round of closures could be seen later this year, or into next, as the
recovery reverses and fears of a double-dip recession
materialize.
A July report from the
US Chamber of Commerce survey showed 58% of small business owners are worried
about permanently closing. The problem today is that the economic recovery
stalled in June and has started to reverse, a fiscal cliff has been festering underneath the
surface in August, which could result in lower consumption among tens of
millions of Americans that would pressure businesses sales.
A combination of firms
going bust and depressionary unemployment levels have tremendous
spillover effects in the mostly dominated consumer-driven economy.
President Trump's
orders to provide more direct transfer payments to broke Americans
have tremendous consequences; first, a quarter of all US income is derived from the
government, and second, this transfer of wealth creates unsustainable
artificial growth.
We outlined, in late July, how a decline or ending helicopter
drops via President Trump's stimulus checks will have more significant fiscal
cliff impacts on small towns with a lower standard of
living than large metro areas.
With small businesses
going bust at breakneck speeds and a quarter of all US income derived from
the government, it just makes you wonder if this was all planned...