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Mapped: The State of Small Business Recovery in America

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Small Business Recovery

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Mapped: The State of Small Business Recovery in America

In the business news cycle, headlines are often dominated by large corporations, macroeconomic news, or government action.

While mom and pop might not always be in focus, collectively small businesses are a powerful and influential piece of the economy. In fact, 99.9% of all businesses in the U.S. qualify as small businesses, collectively employing almost half (47.3%) of the nation’s private workforce.

Unfortunately, they’ve also been one of the hardest-hit sectors of the economy amid the pandemic. From the CARES Act to the new budget proposal, billions of dollars have been allocated towards helping small businesses to get back on their feet.

Small Business Recovery in 50 Metro Areas

During the pandemic, many small businesses have either swiftly pivoted to survive, or struggled to stay afloat. This map pulls data from Opportunity Insights to examine the small business recovery rate in 50 metro areas across America.

So, has the situation improved since the last time we examined this data? The short answer is no—on a national scale, 34% of small businesses are closed compared to January 2020.

San Francisco is one of the most affected metro areas, with a 48% closure rate of small businesses. New York City has spiralled the most since the end of September 2020.

U.S. Metro Area% Change in # of
Small Businesses Open
(As of Sep 25, 2020)
% Change in # of
Small Businesses Open
(As of Apr 23, 2021)
7-month change (p.p.)
Albuquerque-23%-34%-11
Atlanta-26%-35%-9
Austin-32%-38%-6
Bakersfield-31%-35%-4
Baltimore-28%-35%-7
Boston-33%-47%-14
Charlotte-18%-28%-10
Chicago-27%-38%-11
Cleveland-26%-34%-8
Colorado Springs-23%-28%-5
Columbus-21%-28%-7
Dallas-Fort Worth-21%-28%-7
Denver-25%-29%-4
Detroit-28%-38%-10
El Paso-25%-26%-1
Fresno-26%-30%-4
Honolulu-41%-25%+16
Houston-30%-34%-4
Indianapolis-25%-34%-9
Jacksonville-18%-28%-10
Kansas City-15%-26%-11
Las Vegas-22%-30%-8
Los Angeles-27%-34%-7
Louisville-23%-35%-12
Memphis-21%-24%-3
Miami-23%-34%-11
Milwaukee-22%-27%-5
Minneapolis-21%-29%-8
Nashville-21%-26%-5
New Orleans-45%-39%+6
New York City-21%-42%-21
Oakland-32%-35%-3
Oklahoma City-26%-35%-9
Philadelphia-24%-31%-7
Phoenix-19%-31%-12
Portland-34%-36%-2
Raleigh-16%-29%-13
Sacramento-33%-34%-1
Salt Lake City-18%-23%-5
San Antonio-34%-40%-6
San Diego-28%-38%-10
San Francisco-49%-48%+2
San Jose-35%-44%-9
Seattle-28%-30%-2
Tampa-22%-40%-18
Tucson-27%-28%-1
Tulsa-23%-32%-9
Virginia Beach--36%0
Washington DC-37%-47%-10
Wichita-15%-28%-13

Data as of Apr 23, 2021 and indexed to Jan 4-31, 2020.

On the flip side, Honolulu has seen the most improvement. As travel and tourism numbers into Hawaii have steadily risen up with lifted nationwide restrictions, there has been a 16 p.p. increase in open businesses compared to September 2020.

Road to a K-Shaped Recovery

As of April 25, 2021, nearly 42% of the U.S. population has received at least one dose of a COVID-19 vaccine. However, even with this rapid vaccine rollout, various segments of the economy aren’t recovering at the same pace.

Take for instance the stark difference between professional services and the leisure and hospitality sector. Though small business revenues in both segments have yet to return to pre-pandemic levels, the latter has much more catching up to do:

Small Business Recovery Supplemental - Business Revenues

This uneven phenomena is known as a K-shaped recovery, where some industries see more improvement compared to others that stagnate in the aftermath of a recession.

The Entrepreneurial Spirit Endures

Despite these continued hardships, it appears that many Americans have not been deterred from starting their own businesses.

Many small businesses require an Employer Identification Number (EIN) which makes EIN applications a good proxy for business formation activity. Despite an initial dip in the early months of the pandemic, there has been a dramatic spike in EIN business applications.

ein business applications

Even in the face of a global pandemic, the perseverance of such metrics prove that the innovative American spirit is unwavering, and spells better days to come for small business recovery.

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Visualized: The Power of a Sustainable Investment Dollar

Do sustainable investments make a difference? From carbon emissions to board diversity, we break down their impact across three industries.

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Sustainable Investment

Visualizing the Power of a Sustainable Investment Dollar

Sustainable investments are booming.

Between January and November 2020 alone, investments in sustainable ETF and mutual funds grew 96%. The UN Principles of Responsible Investment now has over 3,000 signatories representing over $100 trillion in assets. The U.S. Commodity Futures Trading Commission established a Climate Risk Unit to analyze climate risk across derivative markets, and as of March 2021, new sustainability disclosures have come into effect in Europe.

But how do we know if sustainable investments have made a difference?

To answer this question, the above infographic from MSCI examines the effect of a sustainable investment dollar by looking at real-world examples.

A Sustainable vs. Unsustainable Dollar

To start, investing legend Benjamin Graham has compared the stock market to a “voting machine.” Just as consumers vote with their purchasing decisions, investors vote with their investment dollars. Especially in the short term, as more dollars flow to sustainable companies, this builds their exposure and access to capital.

In the long term, meanwhile, the market can be compared to a weighing machine. The market recognizes companies with profitable business models that improve their intrinsic value over time. Ultimately, this allows sustainable companies to expand and continue operating.

Given the rising momentum in both green assets and climate targets, here is how investment dollars have influenced and driven change across three industries.

1. Clean Energy vs. Fossil Fuel

Over the last several years, the energy sector has been associated with many of the problems causing climate change. For this reason, many investors are seeking out greener energy alternatives. But how does moving investment dollars from an ESG laggard to an ESG leader support the environment and society?

First, here is a brief explainer of ESG laggards and leaders:

  • ESG laggards: companies with the weakest environmental, social, and governance (ESG) performance in their sector.
  • ESG leaders: companies with the strongest environmental, social, and governance (ESG) performance in their sector.
Industry laggard: U.S. oil & gas companyIndustry leader: U.S. utilities company
Scale of carbon-intensive business lines equal to 73% of its operation47% lower CO2 emissions than the industry average
This is the equivalent of adding 26 million cars on the road annuallyThis is the equivalent of removing 9.9 million cars off the road annually
1 of 20 oil and gas companies are responsible for contributing to one third of GHG emissions since 1965Uses 3X as many renewable sources than industry average
3X fewer jobs are created vs. energy efficient sector, resulting in lower productivityThis is roughly the same as saving over 9 million pounds of coal burned
MSCI ESG Rating: CCCMSCI ESG Rating: AAA

Source: MSCI ESG Research

Based on the above example, investors have the ability to finance powerful green initiatives that reduce emissions by almost half, relative to their peers.

2. Safe vs. Unsafe Working Conditions

Weak safety protocols are a key sustainability issue for the industrial sector. Here’s how two companies compare:

Industry laggard: South African mining companyIndustry leader: U.S. mining company
11 fatalities in 2019Zero fatalities in 2019
Faced lawsuits from miners surrounding lung diseases contracted from dust exposure in gold mines
Settlement cost: $350 million
Board-level oversight monitors health and safety performance
Lags behind peers in high incident ratesLeads peers in low incident rates
Lags behind peers in setting incident reduction targetsLeads industry in lost time incident rate & total recordable injury rate
MSCI ESG Rating: CCCMSCI ESG Rating: A

Source: MSCI ESG Research

Despite the risks involved in the sector, investors can choose to support companies that take greater precautions to protect their workers.

3. Building Trust vs. Losing Trust

Over the last several years, the financial sector has faced increased scrutiny over fraudulent activities. Moving investment dollars from an ESG laggard to ESG leader may make a difference:

Industry laggard: U.S. bankIndustry leader: Dutch bank
$3 billion settlement in creating fictitious accounts to meet aggressive sales targetsSustainable finance portfolio valued at over $20 billion
Drop in top-tier bank ratings13% annual increase in climate finance
Board effectiveness questionedIncludes over 60 green loans, mobilizing environmentally friendly projects
Resignation of board membersOver 55% of board is female
MSCI ESG Rating: CCCMSCI ESG Rating: A

Source: MSCI ESG Research

From board diversity to green loans, a sustainable investment dollar supports companies that are actively advancing society and the environment.

Sustainable Investment: The Time to Act

Recently, investor dollars and shareholder activism have been closely linked.

Between 2018 and 2020, large institutional investors filed 217 shareholder proposals on climate change alone, putting increased pressure on companies. Meanwhile, 270 proposals were filed on corporate political activity and 228 on fair labor and equal employment opportunity over the same timeframe. Across all ESG proposals, $2 trillion in assets were pushing for more equitable corporate action.

Through the power of a dollar, investors can send a clear signal to companies: the time for sustainable investing is now.

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Markets

China’s Economy: 40 Years of Soaring Exports

China’s economy today is completely different than 40 years ago; in 2021 the country makes up the highest share of exports globally.

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China's Economy

Animated Chart: 40 Years of Soaring Exports in China

China has the second highest GDP in the world, and it exports 15% of all the world’s goods. But how did this come to be?

A mere 40 years ago, China’s economy was in an entirely different situation, making up less than 1% of global exports and still in the infancy stages of building its economy. The above animated chart from the UNCTAD showcases China’s rise to global trade dominance over time.

Timeline: The Rise to Power

The China of the mid-20th century looks remarkably different when compared to the modern-day nation. Prior to the 1980s, China was going through a period of social upheaval, poverty, and dictatorship under Mao Zedong.

The 1970s

Beginning in the late 1970s, China’s share of global exports stood at less than 1%. The country had few trade hubs and little industry. In 1979, for example, Shenzhen was a city of just around 30,000 inhabitants.

In fact, China (excluding Taiwan* and Hong Kong) did not even show up in the top 10 global exporters until 1997 when it hit a 3.3% share of global exports.

YearShare of Global ExportsRank
20004.0%#7
20057.3%#3
201010.3%#1
201513.7%#1
202014.7%#1

*Editor’s note: The above data comes from the UN, which lists Taiwan as a separate region of China for political reasons.

The 1980s

In the 1980s, several cities and regions, like the Pearl River Delta, were designated as Special Economic Zones. These SEZs had tax incentives that worked to attract foreign investment.

Additionally, in 1989, the Coastal Development Strategy was implemented to use strategic regions along the country’s coast as catalysts for economic development.

The 1990s and Onwards

By the 1990s, the world saw the rise of global value chains and transnational production lines, with China offering a cheap manufacturing hub due to low labor costs.

Rounding out the ‘90s, the Western Development Strategy was implemented in 1999, dubbed the “Open Up the West” program. This program worked to build up infrastructure and education to retain talent in China’s economy, with the goal of attracting further foreign investment.

Finally, China officially joined the World Trade Organization in 2001 which allowed the country to progress full steam ahead.

Made in China

Today China is a trade giant and manufacturing behemoth. Only the U.S. and Germany come close to its share of global exports, sitting at 8.1% and 7.8% respectively.

RankCountryShare of Global Exports (2020)
#1🇨🇳 China14.7%
#2🇺🇸 U.S. 8.1%
#3🇩🇪 Germany7.8%
#4🇳🇱 Netherlands3.8%
#5🇯🇵 Japan3.6%
#6🇭🇰 Hong Kong SAR3.1%
#7🇰🇷 South Korea2.9%
#8🇮🇹 Italy2.8%
#9🇫🇷 France2.8%
#10🇧🇪 Belgium2.4%

China’s manufacturing industry has become dominant in producing just about anything from commonplace household items to integral pieces in automotive manufacturing. Some staples of Chinese manufacturing are:

  • Precision instruments
  • Semiconductors
  • Industrial machinery for computers and smartphones

COVID-19 made China’s integral role in the global economy even more visceral, as major delays in the supply chain occurred when the virus hit the country.

An Economic Superpower

In 2021, China’s trade recovery from the crisis has bested most other countries—in Q1 2021, its exports grew by almost 50% compared to the previous year’s quarter, to around $710 billion.

And the country is not slowing down any time soon. Further plans for economic development are well under way, like Made in China 2025, with the goal of becoming a dominant player in global high-tech manufacturing. Additionally, the famous One Belt, One Road initiative has been funding infrastructure projects globally over the past decade, and the country is also a founding member of the RCEP—which is soon to be the world’s biggest trading bloc.

However, China still faces a series of challenges, such as:

  • Population decline
  • The onset of labor saving technology
  • Trade wars with U.S. and sanctions from other trade partners, like Europe
  • The emergence of ASEAN trade powers, like Vietnam

A declining population has many implications like a shrinking workforce and domestic market. Additionally, many companies are setting up shop in less costly manufacturing hubs like Vietnam.

Furthermore, inexpensive innovations in labor-saving technologies, such as robotics and automation, have already begun to undermine the cheap manual labor that has made China the world’s manufacturer.

All of these elements and more could potentially spell a slowing of growth in China’s export dominance. However, while the future for China may not be certain, currently, global trade and production could not function without it.

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