The U.S. economic recovery will be inextricably tied to the recovery of the small-business sector, according to a new report from IHS Markit, a world leader in critical information, analytics and solutions. Given its substantial footprint in the U.S. economy, any recovery the U.S. economy would benefit from a robust recovery of the small-business sector.
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“How many small businesses will be able to reopen and regain their footing will be key to an economic rebound, due to the critical role small businesses play in terms of jobs and driving economic growth,” said Ben Herzon, senior economist, IHS Markit. “However, small businesses face a more challenging future than large companies, because they don’t tend to have cash reserves or access to credit to make their way through the storm.”
The importance of small businesses is clear in terms of jobs, according to the new report Small Business and Economic Recovery. In 2019, there were 10 million establishments with under 50 employees, the measure IHS Markit used to define small business, accounting for 44 percent of total private sector employment. Small businesses played a key role in the long economic expansion between 2009 and 2019 when 1.1 million new small businesses were established.
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“Total private employment during the last economic expansion rose by 20.4 million, with employment among small businesses accounting for eight million new jobs – close to 40 percent of that total,” said Jim Diffley, senior economist, IHS Markit. “That businesses with less than 50 employees, averaging six employees each accounted for such a large share of total growth in jobs is a testament to the dynamism of small business in America and why its role in recovery will be so significant.”
“The important role of small business has been one of the hallmarks of the American economy, and the restoration of that sector will do much to determine the pace and strength of the U.S. recovery,” Diffley added. The IHS Markit study found that small business played a significant role across every major sector of the U.S. economy. Small business accounts for over 60 percent of employment in services, real estate, food services, and construction.
