Trillions of dollars for governments, for businesses, and for individuals – and it may all be a case of too little, too late.
This week saw the debut of a massive $2.3 trillion lending program that seeks to help pretty much every subsector of the economy, courtesy of the Federal Reserve. The Fed said on Thursday (April 9) that it would create a Municipal Liquidity Facility featuring up to $500 billion in loans geared toward governments. In addition, the Fed said it would offer financing to banks that seek to get funding to smaller businesses as part of the Small Business Administration’s Paycheck Protection Program (PPP).
The Fed’s program comes on top of the $2.2 trillion plan passed by Congress last month that seeks to get direct payments to consumers and families, and also offers up to $349 billion to SMBs (the aforementioned PPP).
The goal, at least in part , has been to keep at least some payroll in place against a backdrop where more than 16 million Americans have lost their jobs in the past three weeks.
But as The New York Times reported on Friday (April 10), “there is a growing agreement among many economists that the government’s efforts were too small and came too late in the fast-moving pandemic to prevent businesses from abandoning their workers. Federal agencies, working in a prescribed partnership with Wall Street, have proved ill-equipped to move money quickly to the places it is needed most.”
University of Chicago economists analyzed data from Homebase, which offers scheduling software used by thousands of smaller firms. The software is used to schedule hourly workers across the restaurant, retail and other verticals. The data, the Times reports, implies that 40 percent of these smaller companies have closed since the crisis began.
CNBC reported that HR provider Gusto has estimated that SMB unemployment filings spiked more than 1,000 percent in March compared to February. That data comes from a survey of more than 100,000 businesses across the U.S. that employ up to 100 people per enterprise. Overall headcount slipped by more than 3.7 percent in the month among these smaller firms, which represents more than two million individuals joining the jobless rolls.
In at least some cases, companies have chosen to lay off workers because keeping them on part-time or at slashed salaries would give them less than they could make with unemployment benefits, which have now been boosted by an additional $600 per week across four months.
In the meantime, the funds from the $349 billion in aid slated for smaller businesses has been slow to come, due to website glitches, loan caps and paperwork. Since that program went live last week, the Times reports that “very little” of the aid that has been thus far committed has made it into SMB coffers.
As we noted this past week via “Main Street On Lockdown: How SMBs Are Coping With The Economic Fallout Of COVID-19,” late March proved to be a distressing period for the more than 200 SMB owners we surveyed. Among the findings: One in four SMBs are dubious that their businesses can endure the abrupt loss of cash flow. About 40 percent are confident they can survive. The survey also revealed that more than 30 percent of SMBs have closed temporarily and over 4 percent have gone out of business since the pandemic began – and the damage is certain to grow.