Unlike 2001 Or 2008

Small Business Gets Help

Finally, the Fed plans to set up a “Main Street Lending Program” where it will funnel money to small businesses interest free for 6 months. The money can be paid back over 4 years. This plan also uses SPVs. We previously did an article saying small business was in dire straits. The situation gets better with free access to capital and a potential fiscal stimulus. We will be watching the March ADP report to see how quickly small firms shed jobs. Obviously, the elephant in the room is how long the economic shutdown lasts. The good news is the number of new daily cases in Italy has been stabilizing. America is a few weeks behind Italy. As the number of daily new cases start to fall in April or May in America, there will be increased discussions to reopen the economy. Wuhan plans to reopen on April 8th.

If small firms are hit the hardest and recover the slowest by/from this recession, it will be the 2nd recession in a row that occurs. As you can see from the chart above, large firms were hit the hardest by the 2001 recession and recovered the slowest. That was a mild recession for all firms outside of tech. The 2007-2009 recession was a disaster for small and medium sized firms as their net job growth didn’t recover the recessionary losses until 8 years after the recession.

Where The Job Losses Will Be

The issue with this economic shutdown is it’s different from the typical recession which hurts a particular area of the economy. In the early 2000s, you had tech and telecom firms get hurt. In the late 2000s, you had homebuilders, real estate, banks, and investment banks get hurt, along with home buyers. The fact that a house is most consumers’ biggest asset made it a big deal. Plus, the banks nearly failed. This current recession could be worse because every area of the economy is impacted and they are impacted hard. The only saving grace is it should be short lived. We don’t know that for sure, but we do know that Wuhan is reopening after about 2.5 months of being closed.

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