The Impact of COVID-19 on Small Business Employment and Hours: Real-Time Estimates With Homebase Data

We use worker-firm matched data from Homebase to construct new real-time estimates of the impact of the COVID-19 pandemic on employment and hours worked of small businesses. We find four key results: (1) employment of small businesses in four of the hardest hit service sectors contracted by an estimated 18.1 million between mid-February and mid-April – a staggering 60% decline – with more than half of the decline due to business closures; (2) since mid-April, employment has recovered by 7.4 million and almost half of the closed businesses have reopened; (3) small businesses have rehired a large share of previously furloughed workers but their employment remains about 20% below pre-pandemic levels; (4) average weekly hours of job stayers declined sharply in the second half of March but have since largely recovered. The estimates highlight the key role that small business closures and reopenings play not only for the dramatic decline in service sector employment but also for the recovery. At the same time, our analysis indicates that this recovery is already slowing down and that unless many of the still closed businesses reopen, employment will remain persistently below pre-pandemic levels.