US Paycheck Protection Reached Some of Its Brands, But Lost the Most Vulnerable

(Reuters) – The Paycheck Protection Program appears to have thrown a critical safety net under the US mid- and upper-middle-income jobs, but faltered when it comes to lower-paid jobs and industries hardest hit by the coronavirus pandemic, according to a Reuters analysis of the loan details.

Analysis of the data on nearly 4.9 million PPP loans released last week by the Trump administration showed that the program was controversial because several larger, more well-connected borrowers took advantage of it even though it was designed to help small businesses. vulnerable, partially hit their program. objective.

Separating US industries into groups of about 60, each ranked by average annual salary, Reuters analysis showed that employers in the middle of the salary scale received a whopping share of PPP loans in both dollar and dollar terms. the amount of loans disbursed.

The intermediate group includes a diverse set of industries, such as car dealers, electrical and heating installers of buildings, and cargo transportation companies, which account for about 16.5% of the US workforce and a similar proportion of establishments. The group received approximately 25% of the more than $ 520 billion in PPP loans disbursed as of June 30, and about 20% of the number of loans

The next highest-paid group, with average annual wages of about $ 74,000 and including doctors’ offices, equipment wholesalers, and accountants, included less than 13% of the 101 million workers covered by the analysis, but received more than 18% of the PPP loans.

Analyzing how many jobs were saved in each category is more difficult. For example, workers in the lowest wage category earn on average just under $ 25,000 per year, so any given amount of funding would support more than their wages.

Businesses across the country reported that the money held some 51 million jobs overall, though a random check by Reuters triggered numerous red flags, including a large number of jobs recorded as being kept with very small loans.

PPP loans are primarily intended for companies with 500 or fewer employees to cover the payroll and are forgivable – in fact, they are converted into government grants, provided most of the money is used to pay employees.

Still, the program appears to have provided proportionally less support to the lower-wage industries, a group that includes restaurants, golf clubs and ski resorts, and other leisure services affected by the coronavirus recession. Those industries accounted for approximately 38% of employees, but received less than a quarter of APP funds. The group also accounted for about 35% of U.S. small business establishments, but only about 30% of PPP loans.

For the analysis, Reuters divided the industries into five groups classified by annual salary using details from the first three months of 2019 from the US Quarterly Census of Employment and Wages.The QCEW report for the first quarter of each year includes categories for the number of employees in each establishment, which allows to exclude those with more than 500 and calculate the average annual payment rates for the rest.

Data for 2020 is not yet available.

More help is needed

Despite questions about how funds have been disbursed, economists and Federal Reserve officials have credited the PPP for helping to prevent disposable income from falling too low in recent months and to prevent the worst-case-style results from occurring. the Depression.

The recently released bankruptcy data for June reinforces the point. Although Chapter 13 bankruptcies used by the largest companies to restructure their businesses increased 40% from the previous year, general commercial bankruptcy filings fell 13%.

“The companies say we got PPP and it’s allowing us to stay afloat,” Atlanta Fed President Raphael Bostic said last week, recounting conversations with businessmen from his southern US Fed district.

However, he said, “the smallest of the small” businesses, particularly in towns and rural areas, may be at greater risk, and even more so among restaurants and small stores that are central to life outside of urban America. .

It is a group that said it may need more help as the pandemic continues and officials debate what financial supports to keep over time. There is still around $ 140 billion in PPP money available, but it will expire in a few weeks, as do other coronavirus relief efforts passed earlier this year in legislation like the CARES Act.

Policymakers have worried many employers in low-wage and more vulnerable sectors who appear to have given up on seeking PPP assistance because they had no banking relationships, were confused by the rules, or were uncomfortable with borrowing, including if I could be forgiven. In addition, some employers in that group may have reasoned that other pandemic assistance programs, such as enhanced unemployment benefits, were a better option for their staff and they chose not to apply for loans.

The data released last week by the Small Business Administration had some gaps. No specific loan amounts were provided for transactions greater than $ 150,000, covering 282,164 loans, or 13.5% of the total. For those loans, Reuters used the average amount for each category. Industry codes were provided for almost all transactions.

Other US data suggests that PPP helped prop up the economy, at least so far, even when it did not meet the highest targets. Some economists, for example, feel that it has led to declining unemployment claims, even though they remain high.

The manufacturing and construction industries in particular obtained 10% and 12% of the PPP dollars. However, the two sectors combined represent less than 10% of the 14.7 million net jobs lost from February to June.

The leisure and hospitality industry, by contrast, absorbed more than a third of the net jobs lost so far during the pandemic, but received less than 10% of PPP loans.