Small Businesses Mull Job Cuts After Aid Runs Out

Small business stand temporarily closed in Portland, Ore., on June 17.
Small business stand temporarily closed in Portland, Ore., on June 17. (Rebecca Smeyne/Bloomberg News)

[Ensure you have all the info you need in these unprecedented times. Subscribe now.]

At least 1 in 10 small businesses in the U.S. are expecting to lay off workers once their fiscal relief funds run out, according to a new survey.

While the vast majority of companies aren’t currently planning cuts, the data from the National Federation of Independent Business suggest that more aid may be needed to keep businesses afloat and workers employed as the economy gradually reopens in the midst of a pandemic — with many states now facing spikes in COVID-19 cases.

In the survey, 14% of companies that received a loan from the Paycheck Protection Program, the centerpiece of federal relief for small businesses, anticipate having to reduce their workforce after using the loan. Among those companies, half expect to dismiss one to two employees, and about 12% say they’ll likely lay off at least 10 people.

“Economic conditions have improved for many small business owners over the last month as states have eased business restrictions and stay-at-home orders,” NFIB analysts wrote. “However, those businesses hardest hit by the crisis will likely need additional help” as “restrictions on business operations and weak consumer spending will likely extend through the end of the year.”

Business activity has perked up from the recession low. Retail sales jumped by a record in May, signaling a faster-than-expected recovery. The survey underscores an improvement in demand, with one-third of small businesses reporting sales volume that is greater than 75% of pre-recession levels, while more than a quarter say it’s half to 75% of the prior level.

Nonetheless, almost half of small firms that applied for PPP or an Economic Injury Disaster Loan, another federal program, anticipate needing additional financial support over the next 12 months. Some 56% say they’ll need less than $50,000 while 27% say they need more than $100,000.

The end of funds comes quite early for many companies: About 4 in 10 of those who received loans are using them in the original eight-week window.

Want more news? Listen to today's daily briefing: