The pandemic has spared no one on Main Street – the fallout has touched everyone, from the smallest of storefronts to the largest of mid-sized companies.
To that end, a report by Automatic Data Processing (ADP) on Wednesday (May 6) showed that private-sector companies in the United States lost 20.2 million jobs in April.
The massive job losses were tied to the lingering impact of the pandemic and mandated shelter-in-place and storefront shutterings that blanketed much of the country.
Drilling down by business size, the smallest employers, as measured by firms that have as few as one to as many as 49 workers, lost six million jobs in April.
Mid-sized companies, with between 50 to 499 workers, lost 5.3 million jobs. Larger firms, with at least 500 employees, gave up 8.9 million positions.
By sector, the service industry was hardest hit at 16 million jobs, and more than half of that tally came from jobs lost at hotels and restaurants.
Analysts surveyed by MarketWatch expected the overall unemployment rate to be as high as 15 percent amid the current economic climate, skyrocketing from 3.5 percent just a few months ago.
In commentary that accompanied the report, Ahu Yildirmaz, co-head of the ADP Research Institute, noted that “job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession.”
The relatively higher numbers of jobs lost among larger SMBs may underscore the urgency of the expansion of the Main Street lending program on offer from the U.S. Federal Reserve.
The Fed said last week that it would broaden the program to include companies with as many as 15,000 employees and as much as $5 billion in revenues. The previous limit had been 10,000 workers and $2.5 billion in sales.
The expanded program also boosts the size of loans that can be accessed by firms. As has been widely reported, “new” and “priority” loans have a minimum size of $500,000, and the expanded loans can be $10 million or more. In terms of who will hold the new loans, which will last between two to four years: Banks will hold 15 percent and the Fed will hold the remainder.
As reported in this space last week, the extension was developed based on input from over 2,200 letters received about the program. As a result, The Fed’s actions widen the pool of eligible SMBs.
This time around, we would suspect the demand to be as broad-based as the roster of companies affected by the coronavirus. There’s been an increasing willingness (and necessity) for these companies to tap into government aid. As we found late last month, and tied to the first tranche of lending through the Paycheck Protection Program (PPP), as many as 41 percent of SMBs said they had applied for PPP loans, up from 32.7 percent earlier in the month.
And yet, the hundreds of billions of dollars flowing to SMBs have been only a stop-gap measure. As PYMNTS has reported, even when PPP forgivable loans were factored in, SMBs surveyed said they would have enough funds to go another 69 days.