In Early 2020, Firms With Fewer Than 20 Employees Had the Highest Job-Loss Rate. One Quarter Later, Theirs Was the Closest to Normal

Census job-flow data by firm size: the smallest employers took the highest job-loss rate of the 2020 shock, then came back toward their normal first.

The first quarter of 2020

The Census Bureau’s Quarterly Workforce Indicators count the jobs lost at firms during each quarter as a share of their average employment. The figures are not seasonally adjusted, so the fair comparison is the same quarter in ordinary years; here that is the average of 2015 to 2019. In the first quarter of 2020, January to March, the rate across all private firms went from a usual 4.0% to 9.8%. By firm size the climb fell unevenly. Firms with fewer than 20 employees reached 14.8%, nearly double the 7.6% at firms with 500 or more. The rate fell with every step up in size, and the smallest firms’ rate was above the largest firms’ in 18 of the 19 industry sectors Census publishes; the exception was administrative and support services.

One measure needs care. In an ordinary first quarter the smallest firms lose jobs at a higher rate than any larger size: 6.1% on the 2015–2019 average, against 4.1% at 20 to 49 employees. Measured as the rise above each size’s own normal, firms with 20 to 49 employees moved slightly more, +9.4 points against +8.7. Above 50 employees the rise shrank with every step, to +4.1 points at 500 or more.

The smallest firms took the highest job-loss rate of early 2020, and were the first back near normal.

Not how 2008 went

The worst quarter of the 2008–09 recession in this data was October to December 2008. Measured against the same quarter in 2005 to 2007, the job-loss rate rose by 1.2 to 1.8 points at every size, and the smallest firms’ rise, +1.5, was not the largest. That shock was spread across the size bands. The 2020 one was not: it rose +8.7 points at under 20 employees and +4.1 at 500 or more.

The quarter after

April to June 2020 is where the size bands split the other way. The job-loss rate at firms with fewer than 20 employees came down to 6.9%, against a usual second quarter of 6.1%: 0.8 points above normal. At every larger size the rate was still 2.4 to 3.9 points above. By July to September the smallest firms were adding jobs on net at a rate of 4.5%, 5.0 points above their usual third quarter, the furthest above normal of any size, with 20 to 49 employees next at 4.2.

What to take from this if you run a small one

If you run a business with a handful of people, the first quarter of 2020 probably felt like the floor giving way, and the data says that was not your imagination: no size of firm lost jobs at a higher rate. It also says the job-loss rate came back toward normal fastest at your size. The data does not say why. It counts jobs, not decisions, and it cannot tell a shop that let people go and called them back from one that closed and another that opened. What it does show is that the smallest employers’ job-loss rate was the first back near normal after the 2020 shock. The practical question is the one that applies before the next one: what would you need to have in place to bring people back within a quarter, rather than not at all?

Three limits worth holding. These are rates for size bands, not the same firms followed over time, so they cannot say whether a given business recovered. The figures are not seasonally adjusted, which is why every comparison here is to the same quarter in ordinary years. And they cover private employers only; owners with no employees are outside them.

Published by The Lonely Entrepreneur — the community and coaching platform for entrepreneurs who are building alone. lonelyentrepreneur.com

This article is for educational purposes and is not a substitute for professional financial or legal advice.