Responses to the COVID-19 Pandemic and Lockdown

We have grouped the main results of our research into three categories. First, we detail the effects COVID-19 has had on business operations and employment in the wake of the crisis. Second, we take a look at the financial vulnerability of these businesses in the crisis, as demonstrated by their cash-in-hand and operating expenses. Third, we report on the expectations of these businesses about how long the crisis will last and their economic survival, as assessed at a certain sensitive point for understanding the implications of future policies.

Temporary Closures and Employment

For our first survey question, we asked business owners whether their businesses, such as retailers in Antiques and Collectibles, were currently operational. The owners were asked to indicate whether their businesses were currently operational, permanently closed, or temporarily closed. They were also allowed to state whether the business was closed due to the pandemic or for other reasons. Of the respondents, 41.3% reported that their businesses were closed temporarily as a result of COVID-19, while 1.8% claimed that their businesses were permanently closed due to the crisis. In comparison, 55% confirmed that their businesses were still operational, while 1.3% stated their businesses were temporarily closed due to other reasons.

Business owners were also asked to fill in a matrix indicating the number of part-time and full-time employees currently employed by the firm, as of the survey data, and on January 31, 2020. Across the sample, there was a 32% drop in the number of full-time employees between January 31, 2020, and late March 2020. On the other hand, the number of part-time employees had reduced by 57%. All in all, employment had dropped considerably, seeing a 39% dip from January.

Keep in mind that these figures also include businesses that had been temporarily closed. If we only consider businesses that are currently operational, the total number of full-time employees had dropped by 17.3%. On the other hand, the number of part-time employees saw a 34% reduction.

One can also compare these figures to other emerging data points. A similar study conducted by the Atlanta Fed, sourced from Dun & Bradstreet listings, reported that smaller businesses saw a 10% reduction in employment. While their survey also focused on larger firms, we primarily focused on smaller businesses. Additionally, Atlanta Fed's survey did not adequately sample newer firms, which may have more significant employment changes.

Our results can also be compared to aggregated payroll data released by Automatic Data Processing, Inc. (ADP). ADP provides human resource management software, which could have various representativeness issues. According to these data, between January and April, there was an 18% reduction in terms of paid employment at firms with less than 500 employees. But the problem with these data is that they consider everyone getting paid in April as employed, regardless of whether or not they were laid off before or during the interval.

Taking a look at higher-frequency paycheck data in the ADP microdata, coinciding but independent work by Cajner et al. (15) finds that there was an average reduction of 27% in employment for firms that hire less than 500 employees and around 28% for firms hiring less than 50 employees from mid-February to mid-April. These figures are relatively smaller compared to the 39% drop in employment for small firms that our survey found but higher than the results of the Atlanta Fed Survey.

We then dive into how the effects are distributed geographically. In Table 1, you will see our findings over the 11 Census divisions and also the share of firms that had closed temporarily due to the pandemic and the drop in total employment from January 31 to the survey date. There isn't much of a significant difference in the results even if full-time or part-time employees are separated. Even though there is regional heterogeneity, there are serious interruptions everywhere.