Changes in Small Business Revenues by ZIP code

Many popular economic indicators (GDP, CPI, Unemployment, etc.) were created decades ago and still are used as the main navigation tool for many governments around the Globe in decision making. But these indicators are slow and most of them are past-looking. It might take months before government officials can observe what has happened to economy and decisions made might be too late and damage to the economy might be irreversible.

But how government officials could do the decision making a rapidly changing environment? COVID-19 situation is a good example. It’s clear to everyone, that decisions had to be made and those had to be fast and right ones otherwise, consequences to the economy or (and) people might be catastrophic. Decision making in such an environment is like trying to navigate a car in the city blindfolded. And even after you made all navigation choices you still wouldn’t know whether you reached your destination, reach the wrong destination or crashed for months.

OpportunityInsights is a team of researchers and policy analysts supported by many known names like Bill & Melinda Gates Foundation, Harvard University, Chan Zuckerberg Initiative, is partnering with many private companies to bring actionable data and insights to the public as fast as possible and even down to a specific area (ZIP code). This, if used properly can significantly improve state decision making, target financial AID exactly those places where it’s really needed.

Research shows that “high-wage workers experienced a “V-shaped” recession that lasted a few weeks in terms of employment loss, whereas low-wage workers experienced much larger job losses that persisted for several months”.

Figure 1. Source: OpportunityInsights

Secondly, research shows that “high-income individuals reduced spending sharply in mid-March 2020, particularly in areas with high rates of COVID-19 infection and in sectors that require in-person interaction. This reduction in spending greatly reduced the revenues of businesses that cater to high-income households in person, notably small businesses in affluent ZIP codes. These businesses laid off many of their employees, leading to widespread job losses especially among low-wage workers in affluent areas”.

Figure 2. Source: OpportunityInsights

Research also ilustrates, that government decisions have not had all desired effects. E.g.:

  • “Stimulus payments to low-income households increased consumer spending sharply, but little of this increased spending flowed to businesses most affected by the COVID-19 shock, dampening its impacts on employment.”
  • “Paycheck Protection Program loans increased employment at small businesses by only 2%, implying a cost of $377,000 per job saved.”

“These results suggest that traditional macroeconomic tools – stimulating demand or providing liquidity to businesses – have diminished capacity to restore employment when consumer spending is constrained by health concerns. During a pandemic, it may be more fruitful to mitigate economic hardship through social insurance.”

Also, research breaks the belief, that a recovered stock market indicates a recovering economy.

Figure 3: Source Yahoo Finance

Need not to forget, that most small business are not listed on the stock market. Furthermore, stock market in 2020 is driven by tech giants, which are just striving during pandemic – increased web usage, increased gadget sales, increased online e-shopping and demand for new web-services.

Research by OpportunityInsights illustrates how public statistics constructed from private-sector data can support many research and policy analyses and show direction for government decision-makers.

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