The Impact of COVID-19 on Small Business Employment and Hours: Real-Time Estimates with Homebase Data

Joint with Etienne Lalé (UQÀM) and Lien Ta (Drexel)

We use worker-firm data from Homebase, a scheduling and time clock software provider, to construct new real-time estimates of the impact of the COVID-19 pandemic on employment and hours worked of small businesses. We match the Homebase data to Safegraph Places of Interest to obtain consistent NAICS industry codes for every business. This allows us to build estimates that can be directly compared to monthly estimates from the BLS' Current Employment Statistics.  

The primary focus of our analysis is on small businesses with less than 50 employees in service-providing sectors that are among the hardest hit by the pandemic: Leisure & Hospitality, Retail Trade, Education & Health Services, and Other Services. We find four key results: 

(1) Small business employment in the four sectors contracted by an estimated 17.8 million between mid-February and mid-April – a staggering 60% decline – with more than half of the decline due to business closures.

(2) Small business employment in the four sectors recovered by an estimated 8.5 million between mid-April and mid-June and more than half of the closed businesses have reopened, but since mid-June this recovery has stalled. 

(3) Small businesses have rehired a large share of previously furloughed workers but their employment remains almost 20-30% below pre-pandemic levels, with businesses that reopened later having recovered less of their pre-pandemic employment.

(4) Average weekly hours worked of job stayers declined sharply in the second half of March but have since fully recovered.

The estimates highlight the key role that small business closures and reopenings play not only for the dramatic decline in service sector employment but also for the recovery that has come to a halt in mid-June. Unless many of the still closed businesses reopen and rehiring picks up again, service sector employment will remain persistently lower.

Last updated: August 5, 2020