Editor's note: This story is part of Southwest Michigan Second Wave's On the Ground Kalamazoo series and our ongoing COVID-19 coverage. If you have a story of how the community is responding to the pandemic please let us know here.
With the coronavirus affecting commerce, travel, consumer spending and life in general, what lies ahead for businesses in Kalamazoo?
We put that question and a few others to two of the sharpest business minds in West Michigan, Timothy Bartik, senior economist at the W.E. Upjohn Institute for Employment Research, and John Schmitt, senior business consultant at the Michigan Small Business Development Center at Western Michigan University.
“Right now with the uncertainty of COVID, the future for many small businesses is running on two fronts,” Schmitt says. “First is the immediate or short-term. Most of our small businesses, particularly retail, are not considered ‘life-essential’ businesses and have to close or pivot to a new way of doing business: selling online for instance.”
Michigan Gov. Gretchen Whitmer has ordered all but businesses that are essential to life closed in order to prevent people from gathering and potentially spreading the coronavirus (COVID-19). An exception has been businesses that provide pick-up, carry-out, drive-thru or product-delivery service.
“For my many restaurant/brewery clients, they have to make the really difficult decision of closing or providing carry-out or delivery service,” Schmitt says. “Right now, there is a growing concern for many of my clients in regard to the safety/health of their workforce, forcing many essential businesses to consider closing.”
He says the second front is the long-term impact. The effects of this virus will be felt in the small business community for many months ahead. And while there are “safety net” programs rolling out from the federal, state, and local governments who recognize the potentially devastating impact of COVID-19 on the small business community, and while he counsels many of his clients to begin planning how they will resume their business, “It is very difficult at this point in time for a business owner to really know what the economic climate will be in three, six or 12 months,” he says. “Businesses are reaching out to their landlords, lenders, suppliers, etc. to try and get some short-term relief.”
He says COVID-19 has impacted all businesses regardless of size because of that.
With the coronavirus everywhere, what lies ahead for businesses here?
Bartik says, “This will be a challenging period until we get control of the pandemic and have sufficient testing capacity and medical system capacity that we can begin to resume more normal activities, including business activities. Then the question is how badly this shakes consumer and business confidence, which will tend to significantly extend the recession.”
He says wise policy choices can help better control the pandemic, and they will help public health and the economy.
“Wise policy choices can also help support small businesses better and can prevent a disastrous fall in state and local public spending, which would also extend the recession,” Bartik says. “We want a V-shaped recovery after the pandemic, and policy must aim at that goal.”
A “V-shaped” recovery is one in which there has been a sharp drop but very brief period of economic decline, as has been witnessed by the historic decline in the U.S. stock markets, followed quickly by a strong recovery.
Schmitt says he is seeing a cooperative environment between industries for the most part.
“COVID changed all aspects of our lives so suddenly that many of us are still reeling from this impact,” he says. “Small businesses are in that same position.”
One thing that has been a ray of sunshine during these past few weeks, he says, has been the widespread acknowledgment of the devastating impact the pandemic is having on the small business community, and service industry in particular. That has resulted in “many examples of profound kindness extended to these owners.” And that has been returned, with some essential businesses agreeing to stay open, exposing them and their workers to illness.
What concerns them the most about what is happening?
“How quickly this economic tsunami has hit our small business economy,” Schmitt says. “A fact of life for many small businesses before COVID hit is that they don’t have ‘deep pockets’ to weather the storm.”
Timothy Bartik, senior economist at the W.E. Upjohn Institute for Employment Research
Bartik says, “The fact that we have been so slow on a national scale to mobilize appropriate resources to minimize the pandemic. Followed by that, the small business loan provisions in the recently enacted $2 trillion CARES bill is too small and too convoluted, although it is a good first start. The main one was the $350 billion Payroll Protection Plan. And finally, there has been little attention to helping deal with the large decline in state and local tax revenue, which will lead to economically damaging spending cuts over the next year.”
As part of the CARES Act, The Paycheck Protection Program provides forgivable loans to small businesses to help cover up to eight weeks of payroll costs, interest on mortgages, rent, and utilities.
What should business people be paying attention to?
“Businesses, especially small businesses, should be pointing out ways to improve the Payroll Protection Plan loan/forgivable loan package, and make it more usable,” Bartik says. “And I think businesses should recognize that state and local economies won't recover adequate demand if state and local governments are slashing their budgets by 20 percent over the next year. The federal government needs to step up to the plate and support our system of federalism with appropriately generous and flexible federal aid to state and local governments.”
Schmitt says, “There are many programs rolling out but keep in mind that the response to this crisis has been extraordinarily fast and programs that had certain ‘rules’ and forms to fill out sometimes change in the span of 24 hours. These programs are now on the street but patience is required by all parties because of the suddenness of the COVID crisis.”
He says small business owners also need to find a good source of up-to-date information regarding those programs.
Among the many resources small business owners can use to help get direction are: The Small Business Association of Michigan, SCORE and the Michigan Small Business Development Center. He suggested that business people visit the Small Business Administration website to sign up for daily updates on programs that are often changing.
What is being missed here? What have you noticed that others may not have?
“I think what I have been highlighting that is often missed is the potential disaster down the road in a few months, when the state and local budget cuts start damaging the economy,” Bartik says. “Let's deal with the present crisis, but let's also look to the future.”
In any economy, good or bad, there is and will be opportunities, Schmitt says.
“Right now the focus, and rightly so, has been on staying safe,” he says. “The small business community is in survival mode right now but I counsel clients to begin thinking about how they are going to re-enter the economy. Now is the time to plan-focus on what made your business better than your competitors and analyze how you may have to change, in some ways, how you did business before the crisis and pivot to a new way of conducting business while retaining what made your business special.”
What can people do to help themselves?
“Try to remain calm (easier said than done),” Schmitt says, “and do not be afraid to reach out and ask for help--you may be surprised how many want to help you.”
Bartik says, “Follow public health directives to minimize the pandemic. If we can reduce the reproduction rate of the virus to below 1,
the pandemic diminishes over time and goes away. If each person who has the virus transmit it to less than one other person, the pandemic dies out. If the reproduction rate is 0.5, for instance, that means 10 virus carriers have spread it to 5 others, who spread it tp 2.5 others, who spread it to 1.25 others, etc.”
He says businesses also need to be creative in doing online and takeout sales.”
What is something positive that may come from all this?
“We may recognize that we need to improve our social safety net for both the unemployed and for small businesses,” Bartik says. “On the economic side, I believe that we may recognize the need for adequate domestic manufacturing capacity to deal with health care needs. If I were a Michigan manufacturer who bends metal or molds plastic, I would be thinking about how I can do that in health care industries such as medical instruments, which the U.S. will want to significantly invest in.”
Schmitt says, “This has forced many of us to slow down and reflect on many things. For me, that has been a good thing. I am forced to learn new ways of doing my work. Learning new things can help me grow as a person. Finally, I have witnessed many acts of just plain honest goodness from people whether it be a simple smile or someone buying something and leaving it at the door.”