The U.S. economy may be starting to recover from the coronavirus crisis, but many small-business owners are not.
After appearing on Shark Tank, Kelsey Moreira, 29, opened an edible cookie dough bar called Doughp on the Las Vegas Strip in 2019.
“Even though I came out without a deal, I had a burst of confidence from all the incredible things the investors said and just a few months later I was able to strike a deal with an outside investor,” she said.
But the rising star was forced to close in March due to coronavirus-related restrictions.
She furloughed her staff during the peak of the Covid-19 crisis and has not been able to hire them back. Since reopening, traffic to the store is down more than 80% year over year with no signs of gaining steam.
“Given the health risks, we feel it wouldn’t be responsible to encourage people to travel to see us in Vegas at this time,” she said.
Even though Doughp’s online sales grew, shifting to e-commerce also meant Moreira had to lay off most of the staff that had been on furlough since the spring.
“The cost of keeping those salaries ongoing was substantial,” she said. “We let much of our retail staff go and only had three of our furloughed workers return to the storefront.”
Six months after an unprecedented shock, employers’ ability to re-hire furloughed workers or to bring them back at prior wage levels is worsening, according to exclusive data, based on more than 100,000 small businesses nationwide, compiled by human resource provider Gusto.
“For a long time, the real state of the economy was masked under the stimulus, now that stimulus is running out,” said Daniel Sternberg, the head of data science at Gusto.
Many small-business owners, like Moreira, initially chose to furlough employees so they could then bring workers back quickly when the economy rebounded. (Although furloughed employees generally are not logging hours and don’t earn wages, they may still be eligible for health insurance.)
Then, as part of the $ 2.2 trillion CARES Act, the federal Paycheck Protection Program provided an incentive for small-business owners to rehire furloughed or laid-off workers, at least temporarily.
But since that money has run out, more employees on furlough are now being laid off and those who did return to work are facing reduced hours and lower pay, Gusto found.
“We all thought back in March that this was very, very temporary,” said Jorge Guzman, an assistant professor at Columbia Business School. “At this point, it’s not as clear where we are.”
Amid a public health crisis, stores in Las Vegas have been particularly hard hit because they rely on foot traffic and travel.
Those small businesses “are going to be struggling for a while and some will have to close,” Guzman said.
Meanwhile, Congress has been unable to strike a compromise on another stimulus package.
With no additional aid on the way, “now they are making the really difficult decisions,” Gusto’s Sternberg said. “We are really uncertain about what is coming next.”
Small businesses employ roughly 59 million people in the U.S., according to the Small Business Administration.