Small Business and Rehiring

During the COVID-19 pandemic, the services sector took a beating.

Small companies were especially hard hit, and many were forced to shut down.

According to the data, from the NY Fed, 35% of businesses that were open prior to the pandemic are still closed.

In early April 2020, the number of closed businesses peaked at around 60% of all small businesses, dropped to around 30% by mid-June, and then increased again in December.

New businesses that first emerged after February and have been operational for at least three weeks has steadily increased to around 20% of the firms in the survey.

Source: NY Fed

Accordingly, 25% of the companies have closed since March 2020.

The longer a company is closed, the more likely it is that its net present value will decrease.

About 70-80% of the workers terminated at closure are immediately rehired upon reopening.

Conclusion

Just about 3% of currently closed companies are expected to reopen in the next four weeks, and expect these reopening businesses to rehire about 35% of their laid-off employees.

For more details: Many Small Businesses in the Services Sector Are Unlikely to Reopen -Liberty Street Economics (newyorkfed.org)