On Friday, the US Federal Reserve had issued a statement saying that a large number of small businesses in the United States would not be able to sustain the long path towards an economic recovery amid the pandemic-led recession, pouring fresh scorns over prospects of an earlier-than-expected economic recovery that followed an utterly downbeat economic projections announced on Wednesday’s FOMC Minutes.
In point of fact, on Wednesday’s FOMC Minutes, Fed Chair Powell had projected a 6.5 per cent contraction for the US economy by end-2020, significantly more slanderous than the Trump Administration’s target of a growth of 3 per cent, while the Fed policymakers had forecasted an unemployment rate of 9.7 per cent by the end of the year, down from a five-decade-low 13.7 per cent in May.
US economic recovery to depend on survival of small businesses
Meanwhile, citing that the “long slog” ahead for the US economic recovery would depend largely on the survival of small-scale businesses, the Federal Reserve said in its biannual monetary policy report to US Congress on Friday, “The nature of the economic recovery that follows the COVID-19 crisis will depend in part on the survival of small businesses.
The pandemic poses acute risks to the survival of many small businesses (whose) widespread failure would adversely alter the economic landscape of local communities and potentially slow the economic recovery and future labour productivity growth.
” Nonetheless, despite the US Congress’s recently approved relief package of $660 billion to cover payrolls of smaller businesses, roughly three-fourth of US small businesses had applied for which, Fed was quoted saying on its Friday’s report to the US Congress that still some industries would require persistent aids after the termination of the program this summer.
Aside from that, adding further strains to a recessed US economy, the US Federal Reserve had also added that roughly 30% to 40% US small businesses, impacted the most by social distancing measures, had terminated operations since February this year, while spending at restaurants had still been down to half as of early June.
Concomitantly, raising a red flag over the fates of many US small businesses despite hundreds of billions of dollars in relief bills, Fed said, “Small business failures not only destroy jobs but erase the productive knowledge within the firms, deplete the assets of business owners, alter the character of communities and neighbourhoods, and, in some cases, deprive the country of innovations. ”