Covid-19 fee for US business? 200,000 additional closures in the first year of the Pandemic

The economic number of the Covid-19 pandemic was difficult to measure, but new estimates from the Federal Reserve suggest it was not as bad as it feared for smaller businesses.

The pandemic has led to the permanent closure of about 200,000 U.S. units above historic levels in the first year of the viral outbreak, according to a study released Thursday by Fed economists. In recent years, about 600,000 units have closed permanently per year, or about 8.5%, according to the study.

Individual companies account for about two-thirds – or about 130,000 – of the additional closures if historical patterns are maintained, according to Fed economists, who have examined business with employees. Other closed units are units of major companies – say, a Gap or Pizza Hut – that closed some locations while remaining in business.

Hairdressers, nail salons and other personal service providers appear to be the hardest hit, according to the Fed, which represents more than 100,000 unit closures beyond normal historical levels between March 2020 and February 2021.

Many small businesses continue to struggle to stay afloat, but the new estimate suggests that US business failures have been smaller than some economists expected. A previous study estimated that more than 400,000 small businesses closed in the first three months of the pandemic.

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