Looking back at the 2007-2009 Great Recession will allow us to gauge how small businesses will be affected by the COVID-19 pandemic.
In 2007-2009, small businesses accounted only for 45% of employment nationally, but when the economy contracted they accounted for 62% of around five million lost jobs. Based on the early analysis of the coronavirus crisis, it is likely to have a greater impact on small business employment.
During the Great Recession, micro and young businesses reported job loss ranging from 15% to 35% affecting mostly wholesale trade, retail trade and construction. In the early stage of the COVID-19 crisis, small retailers and restaurants reported the largest job losses. But this will certainly spread to other small business segments as consumer and corporate demand declines.
The location of small businesses and geographic trends also influence how they will be affected by an economic downturn or recession. During the Great Recession, small firms accounted for 60% of net job losses in the top 100 largest metropolitan areas. This is even larger in the top 16 largest metro areas at more than 90%. The metro areas most affected included Fresno, Philadelphia, Jacksonville, Bridgeport and Louisville.
Relief measures for small businesses are very important because they account for a disproportionately large number of job losses during economic crises. But these measures must be fast and simple because not all small businesses are equipped to survive the crisis. The COVID-19 crisis demands policy supports that are longer-term and broader than those implemented in 2009.