A Record Number of Businesses Formed During The Pandemic—Now Some Are Struggling | Global News Avenue

New businesses emerged at record levels during the pandemic but may now falter in the face of economic pressures.

Private nonfarm payrolls data released ADP data on Wednesday showed that job growth was strongest at companies with 500 or more employees, while companies with 20 to 49 employees reported 29,000 layoffs.

Diane Swonk, chief economist at KPMG, said the slowdown in small business hiring could be a sign that the record number of new businesses launched during the pandemic are struggling.

“Gains are being driven by big companies. Small businesses are getting squeezed,” Swonk wrote in a post on social media platform X. “New business formation has surged in recent years. More of these businesses are now closing due to rising costs and interest rates. This means that assumptions about job growth from these new businesses will be revised downwards.”

A record number of businesses were formed in July 2020, according to the Census Bureau. Inflation has since surged to its highest level in nearly four decades, and the Fed has worked to control it by increasing its influence. federal funds rate The highest since 2001.

Economists say high federal funds rates are particularly difficult for small businesses. The federal funds rate affects a variety of borrowing costs, and small businesses often rely on short-term loans for funding. When borrowing becomes more expensive, it becomes harder to obtain and can make it harder for a business to hire or retain employees.