7.5 million Americans lost their extended unemployment benefits in September. The question remains, how will this impact the labor shortage plaguing the majority of small businesses? Fortunately, we don't have to wait to find out. Twenty-two states have ended their employment benefits early, and the numbers are in.
Let's start with the bad news, in these twenty-two states, consumer spending dropped. This is bad for local businesses and couldn't come at a worse time. A new research paper from Harvard University found that these twenty-two states experienced an average of 20% decrease in week-over-week consumer spending, compared to states that kept benefits in place.
Eliminated Benefits will mean millions of Americans will finally be available to work. Right?
You wouldn't be alone in this thought process. Although, the data from this study shows that only 4.4% more workers in those early-out states gained employment compared to their colleagues in states that kept benefits in place. For every eight workers that lost benefits in the early out states, only one went on to gain employment.
What does this mean for my business?
Well, for starters, it means weathering the storm a little longer. Even though 7.5 million Americans lose a significant portion of their income, we shouldn't expect a flood of applicants after September 6th. Potential employees re-entering the workforce are demanding more than ever before, and small businesses often find themselves unable to keep up.
It also means being prepared to weather a potential decrease in income due to consumer spending declines (approximately 20%).
What can be done?
Fortunately, Congress has released and/or renewed many programs to offset the catastrophic effects Covid-19 is having on small businesses.
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