December 4, 2020: PPP Expiration Costs 232,000 Jobs

Gusto Editors

December 4, 2020

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Post-PPP fallout

The Paycheck Protection Program (PPP) disbursed over $500 billion in loans to help small businesses keep their employees on payroll. Now that the program’s “Covered Period” is expiring for many borrowers, a new data report from Gusto economist Luke Pardue shows a significant blow to headcount: 

Many businesses are now reaching the time period required to maintain payroll levels, and are doing so at an especially fragile time in the economy: employment gains among small businesses are crawling along, COVID-19 cases are reaching daily levels exceeding those in the spring, and colder weather threatens to wipe out 1.4-2.8 million jobs in the Retail and Leisure and Hospitality industries.

We’ve analyzed the differences in the exact week that small businesses complete their PPP forgiveness requirements to calculate the effect of these criteria on a firm’s hiring and termination behavior. We find that, as the PPP Covered Period expired, companies reduced active employment by a statistically significant 0.43 percent. Off of a baseline net hiring rate of 0.22 percent, this change represents a 200% drop in the net hiring rate. This reduction in employment is due largely to a spike in terminations the week that the covered period expires. From this finding, we use publicly available data on all PPP recipients to extrapolate that 232,000 jobs were lost as companies no longer need to maintain pre-COVID-19 headcount levels to receive PPP loan forgiveness.  

Without the PPP’s headcount requirement, terminations are once again spiking as hiring rates drop, and small businesses still face the lingering effects of closures earlier this year—as well as a daunting winter season. The case is clear for enacting a new stimulus package, and for making remaining unused PPP funds ($134 billion) available to business owners once again. 

Read the full report here.

EIDL expense tracking made easy

Alongside the PPP, the Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) program has been an essential lifeline for many small business owners during the pandemic.

EIDL loans are designed to support businesses that have been impacted by disasters by providing funds for working capital. In other words, the loans can be used to pay bills, fixed debts, payroll, and accounts payable. To ensure and demonstrate that you are spending the money according to the terms, it’s important to keep a clear and accurate record. 

That’s why we partnered with Andi Smiles to create this simple EIDL loan tracker. Use it to keep your loan spending on track and make reporting a breeze. Happy tracking!

Gift back

Small businesses need our support right now, and there are many ways you can show up for them. Just one is to give a small business your patronage as you shop for family and friends this holiday season.

We’ve created an online gift guide featuring 12 small businesses served by Gusto that we think are worthy of your attention.

Shop the full guide here.

Picks from our partners: IFundWomen 2021 Jumpstart Grant Program

IFundWomen is the go-to funding marketplace for women-owned businesses and the people who want to support them with access to capital, coaching, and connections.

Gusto and IFundWomen have teamed up to support four early-stage women-owned small businesses, each with a $2,500 grant to help them jumpstart a year of growth in 2021. In addition, all qualified applicants will receive three months of free Gusto payroll services. Applications are being accepted through December 30, 2020.

Apply here.

Top relief options for the week

  • New Mexico’s Small Business CARES Relief Grant Program was created in November to provide $100 million in grant funding to New Mexico small businesses that are experiencing financial hardship due to the pandemic.
  • Port of Everett, Washington is offering a third round of federal pandemic relief grants to its commercial tenants. Individual grants of up to $5,000 are available to eligible businesses that have been closed or are operating at a reduced capacity due to circumstances or restrictions due to COVID-19.
  • Pure Michigan Small Business Relief Initiative will use federal CARES Act funding to support small businesses in Michigan facing financial hardships due to COVID-19. Eligible businesses can apply for a grant of up to $15,000 starting December 15.
  • See more relief options in our Small Business Relief Finder.

Want more small business news and resources? Check out past editions in our archive.

Gusto Editors Gusto Editors, contributing authors on Gusto, provide actionable tips and expert advice on HR and payroll for successful business management.
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