New data has emerged showing that 60% of temporary business closures due to the COVID pandemic in the U.S. have become permanent, signalling that the worst of the pandemic’s economic toll is yet to come.
The data comes from Yelp, who published its latest Local Economic Impact Report stating that 163,735 businesses in total have closed their doors due to the COVID-19 pandemic.
While this is down from 180,000 businesses forced to close early on in the pandemic, Yelp noted that the latest figures mark a 23% increase over closures studied in the middle of July.
More significantly, Yelp’s research study claims that as many as 97,966 temporary business closures have now, or will soon become permanent, accounting for around 60% of the number of temporarily closed businesses.
That is 34% higher than the number of businesses forced to close permanently measured by Yelp in its mid-July economic report.
Worst hit, by far, is the hospitality and dining industry, which averaged 61% permanent closures, followed by shopping and retail with 58%, beauty and spas with 42%, bars and nightlife with 54% and fitness which reported permanent closures of 43%.
Justin Normal, vice president of data science at Yelp has told CNBC that “overall, Yelp’s data shows that business closures have continued to rise with a 35% increase in permanent closures since our last report in mid-July.”
“Despite the hard hit small businesses have certainly taken, we’ve seen that home, local, professional and automotive services have been able to withstand the effects of the pandemic better than other industries,” he said.
The retail industry followed the decline of restaurants, with 17,503 of the 30,374 temporary closures becoming permanent. The report states that this, too, is 10% higher than its July report. Clothing and home decoration stores have reported the highest rates of permanent closures in the retail sector.
Bars, restaurants and the rest of the hospitality industry has been massively impacted by the pandemic, with a reported 61% of temporary closures becoming permanent. Authors of the report state that “bars and nightlife, an industry six-times smaller than restaurants, has endured an especially high closure rate, with an increasing percentage of closures being permanent. As of the end of August, there were 6,451 total business closures, of which 3,499 were permanently closed.”
The rate of permanent closures for bars and nightlife venues has increased 10% since Yelp’s latest July report.
In reference to the hospitality industry, Norman said that “the continued rollout of indoor dining, especially in metros like New York City, will be worth watching as it will be critical for businesses to maintain the right balance of practicing social distancing and other responsible safety measures to ensure they can stay open.”
In terms of a potential recovery, Norman said that “it’s hard to say when we can expect business closures to stabilize,” while adding that “we’ve continued to see businesses successfully adapt to these uncertain times over the last six months thanks to their own hard work, innovation and local policy changes.”
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