SMALL BUSINESS
Small businesses across the region struggled to stay open during the pandemic, particularly those that depend on in-person service delivery, and workers in small businesses were especially vulnerable to job loss during this time. However, MSP has returned very close to pre-COVID levels, a strong sign of progress toward economic recovery after more than two years of difficulty and uncertainty.
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WHAT THE DATA IS TELLING US Small business employment in the MSP region has improved significantly to near pre-COVID levels. After some weeks of decline at the end of 2020 due to state restrictions on restaurant and entertainment businesses due to high COVID-19 case levels, the region saw strong, steady improvement throughout 2021. Initial improvement was due in large part to the reopening of restaurants and entertainment businesses in early January 2021, and was helped along by continued loosening of restrictions in March and in May of 2021. By early Summer 2021, small business employment was between -1% to -3% below pre-COVID (January 2020) levels. In the last quarter 2021, small business employment fell again, as COVID cases increased in the region, down to -20.1% below pre-COVID (January 2020) levels. In March of 2022, small business employment levels remain -19% below pre-COVID (January 2020) levels. The region saw a nearly 60% drop in small business employment levels in early April 2020, relative to employment in January 2020. The abrupt drop in small business employment was the result of temporary closures of nonessential businesses in response to the initial stay-at-home orders implemented at the start of the pandemic. Small business employment levels have remained much closer to pre-pandemic levels since late 2020.
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This metric tracks the percent change in the number of workers employed at small businesses in the MSP region from a baseline employment level in January of 2020. Data is updated weekly and sourced from Homebase.
WHY THIS MATTERS TO ECONOMIC RECOVERY:
Small businesses are important to the MSP regional economy. They provide meaningful opportunities for entrepreneurs and create jobs in the local communities that they are located, supporting community development across the region. Small businesses create a significant percentage of new jobs in the MSP region. A GREATER MSP analysis of U.S. Census Statistics of U.S. Businesses data found that small businesses (in this case, establishments with less than 100 employees) created nearly 54,000 net new jobs in the MSP region from 2010 to 2017, accounting for 23% of total employment growth during that time.
Small businesses were the most vulnerable overall during the COVID19 pandemic and at higher risk of closure. A 2020 McKinsey analysis of several surveys of small businesses found that 25 to 36 percent of small businesses could close permanently as a result of disruption from just the first four months of the COVID19 pandemic. Small businesses in hard-hit industries like accommodations and food services are at a higher risk due to government restrictions and changing consumer behavior. Other small businesses are at higher risks of closure due to limited financial resources before the pandemic. Major changes in employment levels at these businesses are an indicator of the relative health and stability of neighborhoods across the region and can help us understand how our communities are faring in real time.
RACIAL EQUITY AND INCLUSIVE RECOVERY:
A 2020 McKinsey analysis found that minority-owned businesses represented a disproportionately higher vulnerability to closure during the COVID19 pandemic because they are concentrated in the most vulnerable industry sectors and because they tend to have lower resilience. Black, Indigenous and People of Color (BIPOC)-owned small businesses have obtained less federal relief loan funding than white-owned small businesses, putting BIPOC-owned firms at even more of a disadvantage during an abrupt and severe economic recession. A GREATER MSP analysis of Paycheck Protection Program (PPP) COVID19 relief loan funding data for the Greater MSP region finds that, as of December 2020, 91% of federal PPP loan funding was awarded to white business owners, while only 9% went to BIPOC business owners. Data represents PPP loans of $150,000 or less to represent small businesses. Data comes from the U.S. Small Business Administration, and it is important to note that a large majority of PPP applicants did not report their race/ethnicity and were excluded from the analysis.
Many of the MSP region’s largest and most notable businesses have committed to specific actions to support BIPOC-owned small businesses. General Mills, for instance, committed to doubling spending with minority-owned suppliers in the U.S. There is more work to do in our region to ensure that BIPOC-owned businesses have equal access to funds and resources that can help them sustain and grow during and after the COVID19 pandemic.
TELLING THE FULL STORY:
Small business employment data is sourced from Homebase, a cloud-based time tracking and scheduling platform used by more than 60,000 small businesses across the U.S. but does not include all small business data in the country or the region. “Employment” in this data is determined by whether or not an hourly employee “clocked in” that week, and therefore may not perfectly represent the employment of workers who took time off or are paid salary wages and do not “clock in.” More, tracking other indicators such as wages, hours worked, and the share of open businesses help to round out the full story about what’s going on with small businesses and their employees in the region.
HOW WE STACK UP:
The impacts of the COVID-19 pandemic on small businesses have been significant across the country but have varied across regions. This is due in part to variations in the timing and intensity of state mandates that restricted business operations to control the spread of the virus. To understand the relative intensity of COVID-19 impact and the pace of recovery, we are comparing weekly small business employment change for the MSP region’s peers, a set of regions selected based on demographic and economic characteristics. The same peer regions are tracked in the Regional Indicators Dashboard, a set of indicators that track MSP’s long-term economic competitiveness.
n March, small business employment levels increased in all of MSP’s peer regions except Denver, where levels decreased by about nine percentage points from February. The largest increase in small business employment levels occurred in Austin, up nearly 19 percentage points from February. Overall, Boston is at the bottom of the peer set in this economic indicator, with small business employment levels 33% lower than January 2020 levels. Austin, MSP, and Charlotte are experiencing the smallest decline in small business employment from January 2020, with Austin small business employment just 16.4% below January 2020 levels.
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HOW TO LEARN MORE:
To learn more about the availability of small business funding support or how your business can make a pledge to support the MSP small business community, visit Business4Business MSP.
The Small Business Administration (SBA) provides information on relief available for small businesses, as well as data on the businesses who have received funding thus far.
Homebase provides real time Coronavirus Stats for MSP, which include the rate of change from January 2020 in small business employment levels, hours worked by small business employees, and the number of small business open during the week.
The Opportunity Insights Economic Tracker tracks these same measures and more for various geographic levels and allows comparison across regions and indicators.
Want to share insights from the Regional Recovery Hub in your own presentations and materials? Download the Recovery Toolkit.