Goldman Sachs released the results of a survey of over 1,700 American small businesses today. The conclusions are not surprising. Both small business owners and their employees are struggling. But there are also hints of optimism.
Less than half in the survey reported being fully open. For 68%, the current crisis will permanently change their business model. The median number of employees has dropped from 11 to 6. The good news is that many have managed to retain more employees on the payroll thanks to government-backed loan assistance.
A full 91% of those surveyed applied for the Paycheck Protection Program. Despite some of the funds being slow to arrive, 71% of those who were approved already are confident they will survive.
This relatively high level of confidence is more important than you might think. The vast amount of debt being taken on, in businesses and governments, requires a positive outlook to be sustainable. If the confidence of investors falls, they will unload debt-related bonds and securities from their portfolio with potentially disastrous consequences. If the confidence of consumers falls, they will save much more than they spend, hurting businesses, the economy, and investor confidence.
The delicate balancing act of policymakers will continue. They have to invest enough in financial aid programs to keep businesses going while not taking on so much debt that investors become skeptical. Much of this may depend on how fast the economy recovers. Opinions on this are all over the place. The Economist recently published a summary of economists’ GDP growth forecasts for 2020. The estimates range from negative 9% to around zero for most large economies.