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An Uneven Recovery: A Slow One For Many Firms

By News Creatives Authors , in Small Business , at October 20, 2021

Since 2019, the economy has been on a roller coaster growth trip. First, a stomach wrenching drop in output and employment, then a Q3 2020 rise at the fastest pace in modern history. Now the economy is approaching “normal” and growth is slowing to historically typical rates.

But the recovery has not been easy on Main Street. More small business owners predict that their local economy will take longer to return to pre-crisis levels than did so two months ago. Half (50%) of small business owners expect that their local economy will not be back to pre-crisis levels until the second half of 2022 or later, a 20-point increase from those giving the same response two months ago. Twenty-one percent of owners report that economic conditions are back to normal now in their area. Another 6% of owners expect it will take until the second half of 2021 and 23% predict sometime in the first half of 2022 before economic conditions return to pre-crisis levels. Twenty-eight percent of small business owners are less optimistic and expect conditions not to fully improve until the second half of 2022 and 22% in 2023 or later.

The unevenness is apparent in industry responses as well. The percent of owners expecting business conditions in six months to be better ranges from 40% in Construction to 67% in Transportation & Communications. Owners thinking that the current period is a good time to expand substantially ranged from 0% to 30% in Professional Services.


                                             BUSINESS CONDITIONS  GOOD TO

                                         BETTER  WORSE              EXPAND

Construction                       40%           27%                 11%

Manufacturing                    48%           22%                 11%

Transportation, Comm.    67%           14%                 0%

Wholesale                            57%           11%                   7% 

Retail                                    41%            19%                   5%

Agriculture                          49%            18%                   3%

Finance, Ins., Real Estate 45%            24%                 19%

Services                             43%            31%                  11%

Professional                         44%            30%                  30%

This squares with the rather pessimistic view owners hold regarding future business conditions overall. Only 10% of small employers expected better business conditions in September, down from 53% in April 2020 and 25% in April 2021. Forty-eight percent now expect worse business conditions to develop in the next six months. Coupled with negative views about expected sales, an otherwise exuberant set of Index of Small Business Optimism components are tamed down to a reading of 99, just 1 point above the historical average.

Small business owners are facing strong headwinds operating their business, including significant staffing shortages, supply chain disruptions, and surging Covid-19 infection rates in some parts of the country. Owners must navigate these challenges, many of which are impacting sales. Sales levels are 50% or less than they were pre-crisis for 15% of small businesses with another 18% at sales levels of 51%-75% pre-crisis. Forty-one percent are back or nearly back to where they were with sales between 76%-100% of pre-crisis levels. About one-in-four (26%) are exceeding pre-crisis sales levels. As the recovery ages, the industry differences in experience will likely converge, evening out at historically familiar levels.


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