Yesterday, the Federal Reserve published its fourth Beige Book report of 2020, summarizing current economic conditions and cataloging the economic devastation wrought by the pandemic. The commentary confirmed what America’s Recovery Fund Coalition (ARFC) has been saying since its inception: the Paycheck Protection Program (PPP) is not enough to sustain America’s economic recovery.
According to the general summary “Employment continued to decrease in all Districts, including steep losses in most Districts, as social distancing and business closures affected employment at many firms” and “the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery.”
The Federal Reserve Bank of Cleveland offered a starker picture in its regional summary:
“Employment declined in a broad range of sectors as layoffs were widespread and hiring was limited to a handful of firms. Half of contacts reported decreasing staff levels during the current period, compared with about 40 percent that did so in March. Furthermore, only one-third of contacts who reduced staff levels expect to rehire close to the full number of separated staff when their businesses reopen. This expectation suggests employment is unlikely to climb back to pre-pandemic levels quickly after businesses reopen.”
The Beige Book report coincides with an effort by Congress to “relax PPP restrictions,” according to POLITICO. A newly introduced bill would lower the threshold businesses must meet to make PPP loans forgivable by mandating 60 percent of a loan go toward payroll, down from the current 75 percent threshold.
However, an analysis by ARFC released this week shows most small businesses spend about half that on payroll, even when including non-wage benefits.
The takeaway of all this? America’s Recovery Fund is the best option for giving businesses the certainty they need to rehire and reopen, and small tweaks around the edges of PPP are not the solution for a sustained economic recovery.