The impacts of COVID on small business: more challenges lie ahead
When viewed through the lens of job-growth figures, the Canadian economy is bouncing back, slowly, from the COVID-19 lockdown. However, the picture is not nearly as rosy when considering how far – and how quickly – it declined.
Indeed, some choppy waters still lie ahead. And for small businesses, navigating those waters will take ongoing dedication, innovation, funding and sweat equity.
Strong upward trend in jobs
Building on an initial recovery of 290,000 in May, employment numbers in June rose by 953,000, a monthly increase of +5.8%, according to Statistics Canada. These strong gains split almost evenly between full-time work (up by 488,000) and part-time work (up by 465,000).
Despite this two-month uptick, however, there are still 1.8 million fewer jobs in Canada in July than there were in February. In other words, jobs are returning to the economy generally speaking. But given how precipitously they fell off a cliff earlier this year, there’s still a long way to go.
A few other interesting facts stand out in these same StatsCanada figures, released on July 10:
- the unemployment rate was 12.3% in June, a drop of 1.4 percentage points from a record-high of 13.7% in May
- while this was the largest monthly decline on record, the unemployment rate remains much higher than February, when it was 5.6%
- the unemployment rate for all major demographics groups fell in June, but it remained slightly higher for women (12.7%) than for men (12.1%)
- approximately 2.5 million Canadians were unemployed in June, a decrease of 167,000 (-6.4%) from May but more than double the February level (1.1 million).
- every province added jobs in June, with Ontario adding 377,000 and Quebec seeing a rise of 247,500. These are largely “bounce back” numbers.
Business survey on COVID
Some – but not all – of this rising strength is reflected in the “Canadian Survey on Business Conditions”, released on July 14 by Statistics Canada.
Take expectations for job growth, for example. In the survey, businesses were asked about their expectations over the coming three months with respect to employment. Nearly two thirds (65.8%) said they expect the number of employees to stay the same, with 15% seeing these numbers rise. That means more than 80% of businesses do not foresee job losses over the coming three months.
Government support programs help to prop up those staffing levels. The same StatsCan survey showed that nearly two thirds (63.7%) of businesses reported being approved for support-program funding (or credit from external providers) in light of COVID-related challenges. Businesses in Quebec (72%) and PEI (67%) were most likely to be approved for funding or credit.
At the same time, however, revenues are falling. More than half of businesses said their revenues in April of this year were down 30% compared to April of last year. A further 35% said their revenues were down more than 50% on a year-over-year basis.
Small businesses are really hurting
Small businesses feel the COVID crunch in particular, as illustrated in a member survey released by the Canadian Federation of Independent Business on July 15.
Among its findings:
- three quarters of small businesses have taken on debt as a result of COVID-19
- a majority of those with debt (68 per cent) estimate it will take more than a year to pay off
- to finance COVID-19 revenue shortfalls and extra costs, small business entrepreneurs rely on personal savings (37 per cent), credit cards (34 per cent), bank loans (18 per cent), retirement savings (11 per cent), mortgages (9 per cent) and loans from families and friends (9 per cent).
The collective contributions of small business to our economy are of course enormous. By helping nourish them back to financial health, we can bolster the national economy for everyone. “The more we can do to support local, the faster we can all recover from the economic meltdown that came with COVID-19,” said Laura Jones, Executive Vice-President at CFIB in releasing their study.
The road ahead?
The impacts of COVID on businesses are deep and widespread. As Bank of Canada Governor Tiff Macklem said on July 15, while announcing that interest rates would stay the same, “the early signs from the reopening phase are positive, but we expect the recuperation phase to be bumpy and protracted.”
So, in looking down that bumpy road, let’s remember that Canadians and our economy are resilient in the pandemic, particularly compared to the experiences of other countries. By buckling down we can move ahead, together.
Steven Bright, a longtime client of the firm, has worked in and written about financial services for more than 25 years. You can find him on LinkedIn.