Small Businesses Are in Desperate Need of Assistance Once More. More Stimulus, on the Other Hand, Maybe Dangerous | Your Views!
An surprise increase in new unemployment claims during the week of Jan. 15 uncovered the type of bad news that experts had feared was hiding beneath the surface of an improved economic picture: The rapid spread of the omicron variant has harmed both small and major companies, as mom-and-pop eateries have been forced to close, huge shops such as Macy’s have reduced their hours, and hospitals in certain hard-hit areas have suspended elective surgeries in order to save precious human resources for COVID-stricken patients.
To be sure, such weekly changes are what economists refer to as “noisy”—and they advise against drawing too many conclusions from a single data point.
“I’m not frightened,” Ken Kim, senior economist at KPMG LLP, said of the 286,000 seasonally adjusted first applications for unemployment insurance – a 55,000 increase over the previous week and over Wall Street’s projection of 225,000.
As is customary when pandemic forecasts are made, the impending question is one of duration: “Certainly, if the situation continues to deteriorate in the next weeks, it may need some form of action,” Kim added.
While not quite as bad as the country’s almost two-year-old shutdown, the fast-replicating omicron variant—which moved from being unknown to the dominant strain in Europe, the United Kingdom, and finally the United States in the blink of an epidemiological eye—has given many Americans a wearied feeling of déjà vu: long lines for testing, frequent closures of childcare and schools, discussion over whether masks (and how many) should be worn to ensure the maximum degree of protection ag
Unlike two years ago, when a bipartisan feeling of urgency compelled politicians to approve trillions of dollars in economic relief, this time around, individuals and businesses—particularly small businesses—have largely been left to fend for themselves.
“As the surges pass, many small companies are feeling the effects of diminished customer confidence,” said Sarah Crozier, communications director for Main Street Alliance, a small-business advocacy organisation.
“Consumer behaviour is shifting, particularly during the winter,” she said, adding that firms in the in-person service sector, such as restaurants, gyms, salons, and live entertainment venues, face the biggest financial risk, as individuals once again fear gathering with strangers in indoor places.
According to a new poll conducted by the National Federation of Independent Business, a trade association for small businesses, more than one-third of small firms experiencing workforce shortages as a consequence of omicron report losing “moderate” or “major” sales opportunities as a result. “It is undoubtedly having an effect on income for a significant number of companies,” said Holly Wade, executive director of the NFIB Research Center.
Wade noted that the quick growth of the omicron might mean that small firms could soon see a light at the end of the tunnel, but she highlighted that many are operating on fumes following nearly two years of terrible upheaval. “Hopefully, this is a brief period of additional stress, but adding a few months to what they’ve already endured over the previous two years is a strain,” she said.
The speed with which omicron has ripped across the United States also means that politicians will be unable to coordinate any more federal stimulus in time to make a difference, even if Washington isn’t polarised into paralysis, according to Mark Zandi, chief economist at Moody’s Analytics.
- Stimulus Update: In 2022, the IRS Will Give an Additional $5,000 to the Following Taxpayers.
- Check to See If You Are Eligible For Two $1,400 Stimulus Cheques That Could Arrive In Your Mailbox In February.
- Thousands of Dollars in Stimulus Money Are Available to American Families; Find Out Whether You Are One of Them.
“It would be extremely difficult, if not impossible, for Congress to adopt laws supporting small companies in a timely manner,” he added.
According to experts, the lack of an administrative framework for federal assistance distribution today is directly related to how Congress behaved in 2020—and politicians’ unwillingness to view the epidemic as a social and economic turning moment rather than a short-term emergency. “From the beginning of the crisis, we strongly campaigned for direct payroll subsidies,” Crozier explained. “Many European countries took that path. That is not the case.”
Rather of that, Congress enacted the Payroll Protection Act and increased unemployment insurance benefits. While these efforts aided in the survival of millions of individuals and families, they were less effective at saving employment and companies, especially as it became evident that the epidemic would not be contained in weeks—or even months.
“The PPP was created to incentivize firms to retain their employees,” Zandi explained, adding that it is “very effective” in the short run. “We allowed the PPP to expire,” he explained. “I believe that is the error we made.”
The contrasts in political methods, Zandi explained, go beyond words. The labour market distortions that have occurred in the American economy over the last two years have exacerbated the inflationary pressures that are presently plaguing policymakers and American consumers alike.
“One of the reasons we have an inflation problem is that employees were laid off during the epidemic and did not rapidly return, forcing firms to provide very large wage increases,” he explained. By comparison, countries such as Germany and Japan did not experience quite the same level of employment loss. “They have not had the same difficulties in rehiring personnel,” he explained.
And, with inflation at a 40-year high, officials have been hesitant to add gasoline to the inflationary fire, even as small-business losses continue to pile. “If further stimulative policies are implemented,” Kim of KPMG explained, “they will have a greater cumulative effect on inflation.”