Taking the Pulse of America’s Small Business Sector: March 2022
By Daniel Newman
Across the United States, more than 32.5 million small businesses employ nearly 47 percent of the country’s workforce. The Census Bureau’s latest Small Business Pulse Survey provides timely insight into the condition of the country’s small business sector as economic conditions continue to evolve through the on-going COVID-19 pandemic. Here are four things we learned about this vital segment of the economy from February 14th to March 6th, the first three weeks of the survey’s most recent phase.
- More than three-quarters of small businesses felt a moderate-to-large bite from inflation while businesses across many sectors simultaneously navigated domestic supplier delays.
Despite the promising downward trend in COVID-19 infections nationwide recently, most small businesses are still facing the twin threats of inflation and supply chain holdups. Seventy-six percent of small businesses said that they have seen large or moderate price increases for necessary goods and services over the past six months. Inflation was the highest in nearly 40 years at 7.9 percent in February, and supply chain delays have been a major factor in the price surge. As such, domestic supplier delays remained a major concern last week for 44 percent of small businesses, although the share has ticked down slightly over the past three weeks. These dual concerns remain a major drag on sectors such as trade, manufacturing, construction, and accommodation/food services. At the same time, knowledge economy sectors like finance/insurance, professional services, and information remained relatively insulated from these issues.
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a - The pandemic’s impact is fading on one important measure, as the share of small businesses reporting that the pandemic had little to no overall effect on their operations last week rose above 26 percent—a high point after nearly two years of the survey.
The highest share yet of small businesses (26.4 percent) felt that the pandemic had little or no impact on their ability to run their business last week. Even so, nearly two-thirds still reported a moderate or large negative impact on operations. This sentiment is not uniform across the country, as relatively larger shares of businesses in certain states are feeling the pandemic’s ongoing strain. The greatest share of small businesses reported facing stiff headwinds in Hawaii, New Jersey, Alaska, New York, and Illinois, while those in more rural states like South Dakota, Montana, Wyoming, Mississippi, and West Virginia were less likely to indicate large effects from the pandemic.
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a - Many small businesses are seeing strong growth in consumer demand alongside improvements to revenues and increasing employee hours.
Nearly 33 percent of small businesses indicated a moderate or large increase in consumer demand relative to six months ago, as measured by a newly added question (which previously had asked about demand compared to before the pandemic). Businesses in the manufacturing and accommodation/food services sectors reported the strongest jumps in demand relative to early October 2021 after being buffeted by the Omicron surge and growing supply constraints this past winter.
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Fewer small businesses reported drops in their operating revenues over the past few weeks as well. Twenty-one percent saw a drop in their revenue in the first week of March, a strong improvement relative to late January when more than one-third indicated a decline in overall receipts. Similarly, 12 percent of businesses reported a decline in the number of hours worked by employees—a share that has fallen by half since mid-January. This improvement is particularly notable in sectors that were hardest hit by the confluence of challenges in recent months, such as manufacturing, trade, healthcare/social assistance, arts/entertainment, and accommodation/food services.
a - Despite promising developments in recent weeks, many small businesses still have concerns over the availability of supplies and the ability of current employees to work.Supply chain issues continued to hamper small business operations, with 31 percent of firms indicating last week that the availability of supplies or other inputs necessary to provide goods and services has affected them negatively. At the same time, the ability of current employees to come into work affected nearly 18 percent of small businesses, particularly within the accommodation/food services (39 percent) and healthcare/social services (26 percent) sectors, where the Omicron variant continues to have a sustained impact. Overall, 60 percent of businesses felt that neither of these issues had negatively affected their performance in the past week.
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