Small Business, Big Impact: How Arizona Entrepreneurs are Coping with Coronavirus

Author(s):
Jennifer Pullen, Senior Research Economist
Published:
11-02-2020

Small businesses in Arizona continue to struggle with the impacts of the Coronavirus pandemic but sentiments regarding the future are improving according to the Census Bureau’s survey of small businesses.

The Small Business Pulse Survey provides weekly insights into the challenges small businesses are facing during the Coronavirus pandemic. The survey contains detailed trend information on how small business owners view their daily operations. Data for Tucson is not available, but exploring the Phoenix Metropolitan Statistical Area (MSA) and state-level data may provide some insight into what to expect in Southern Arizona.

Small businesses throughout the nation have indicated a steady improvement in their overall sentiment since the beginning of the pandemic. Arizona and the Phoenix MSA also posted improved sentiment since the end of April but the measurement has been more volatile (Figure 1).

The overall sentiment index measures the overall effect of the pandemic on businesses. The index ranges between -1 and +1. The more negative the value the larger the negative effect of the pandemic. A value of zero indicates little to no effect, while positive values indicate a positive effect. Note that no data was collected between 06/27/2020 and 08/09/2020.

Figure 1: Overall Sentiment Index

The Census Small Business Pulse Survey also reports weekly data on revenue loss for small businesses, defined as those with less than 100 employees. The latest data reported for the week of October 4th indicated that 30.2% of small businesses in Arizona reported a decline in revenue during the previous week.

The map in Figure 2 highlights the recent declines in revenue for the western states. Arizona small businesses outperformed those in California and Texas. However, Arizona was slightly worse than the national average (-29.9%).

For the Phoenix MSA, 28.3% of small businesses reported declining revenues during the week. Unfortunately, the Small Business Pulse Survey does not include data for the Tucson MSA.

Figure 2: Percent of Small Businesses Experiencing a Decline in Revenue/Sales/Receipts

The coronavirus pandemic has caused a nation-wide decline in employment across most industries, in particular the travel and tourism sector. Census began tracking the impact of the pandemic at the end of April, during which time there was a reduction in paid employees for 27.5% of small businesses nationwide. Arizona and the Phoenix MSA small businesses posted similar declines in employment at 26.8% and 25.0% respectively. The latest data, as of October 4th, shows a significant reduction in the percentage of small businesses with a decline in the number of paid employees (Figure 3).

Figure 3: Percent of Small Businesses with a Decline in Number of Paid Employees

Several federal, state, and local assistance programs have been made available to small businesses since the onset of the coronavirus pandemic. The most widely utilized program, the Paycheck Protection Program (PPP), established by the CARES Act, provided funds to small businesses to pay up to 8 weeks of payroll costs and benefits. According to the latest data from the Pulse Survey over 70% of small businesses surveyed had requested financial assistance from the PPP (Figure 4).

Nearly 25% of small businesses in Arizona and the Phoenix MSA had also requested assistance from the Economic Injury Disaster Loans program (EIDL). The EIDL program helps small businesses to meet their financial obligations and operating expenses that were lost due to the coronavirus.

Several additional financial sources are listed in Figure 4 including the Small Business Administration Loan Forgiveness program. To date, only about 20% of small businesses have not applied for financial assistance. Hover over the column above each source listed on the graph to view the full label.  

Figure 4: Percent of Financial Assistance Requested by Source of Funds

Nearly 40% of Arizona small businesses think it will take more than six months until they return to normal levels of operation. An additional 6.7% believe their business will never return to normal levels of operation (Figure 5).

Compared to the U.S., slightly more small businesses in Arizona and the Phoenix MSA indicated that the coronavirus has had little to no effect on operation levels. Further, more small businesses in Arizona and the Phoenix MSA have returned to normal levels of operations than nationally.

Figure 5: Time Until Business Returns to Normal Level of Operation

The expected recovery index summarizes the length of the expected recovery for small businesses. The index ranges between -1 and 0. A more negative value indicates that the business will need time to recover, zero indicates little or no recovery period.

The expected recovery index for small businesses in Arizona and the Phoenix MSA is currently -0.5, which is an improvement from a low of -0.6 (Figure 6). Small businesses in Arizona and the Phoenix MSA currently have an expected recovery index that is closer to zero than the nation, indicating a shorter recovery period. Note that no data was collected between 06/27/2020 and 08/09/2020.

Figure 6: Expected Recovery Index

Many small businesses across the nation are still feeling the economic impacts of the coronavirus pandemic. However, the results from the Small Business Pulse Survey indicate a slow but steady recovery in sentiment, employment, and finances. The weekly data provided by the Census Bureau can be accessed by visiting the Small Business Pulse Survey. The MAP Dashboard will continue to provide periodic updates. Stay tuned for an article on how households are faring. 

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