The economic toll of the Covid-19 pandemic has been difficult to measure, but new Federal Reserve estimates suggest it was not as bad as feared for smaller businesses.
The pandemic caused the permanent closure of some 200,000 U.S. stores above historic levels during the first year of the viral outbreak, according to a study released Thursday by Fed economists. In recent years, approximately 600,000 establishments have closed permanently for a year, or 8.5%, according to the study.
According to Fed economists, who surveyed companies with employees, individual companies account for about two-thirds (or about 130,000) of the additional closures if historical patterns are maintained. Other closed establishments are units of major companies (e.g., Gap or Pizza Hut) that closed some locations while remaining in the companies.
According to the Fed study, barbershops, nail salons and other personal service providers appear to be the hardest hit, accounting for more than 100,000 store closures beyond historically normal levels between March 2020 and February 2021.
Many small businesses continue to struggle to stay afloat, but the new estimate suggests that U.S. business failures have been smaller than some economists expected. An earlier study estimated that more than 400,000 small businesses had closed during the first three months of the pandemic.