Survey reveals COVID-19 upended status quo

PNC Fall Outlook shows businesses were resilient via quick pivots, stimulus funds, but optimism took a hit.
Kurt Rankin

A semi-annual survey report from PNC shows economic confidence fell during the past six months as small and midsize businesses across the country made major changes to their operations and relied on stimulus funds as a lifeline to survive the COVID-19 pandemic.

PNC published its Fall 2020 Economic Outlook last month. The survey of 500 small and midsize business owners and executives was conducted by telephone from Aug. 1 to Sept. 8 among small and mid-sized businesses with self-reported revenue of $100,000 to $250 million.

Eight in 10 (79%) respondents reported they made adaptations to their business in response to COVID-19, including safety changes (69%) in the form of new policies and procedures (62%) or physical modifications (57%), while others have adopted work-from-home policies (33%). 

“Business owners have learned that the previous status quo won’t work now. The majority of businesses have reconfigured their operations and for many, these changes will be permanent,” said Gus Faucher, PNC chief economist. “Their confidence may be shaken, but we know through the history of this survey that business owners are resilient, and they know how to adapt to change.”

According to the survey, half (51%) of businesses report increased use of technology since the outbreak began. A third increased technology to improve workforce productivity. Nearly three in 10 (29%) added or increased the use of electronic or touchless payment systems, electronic/website-enabled sales (23%) or electronic banking/cash flow management services (21%); 19% increased use of fraud/identity protection tools.

The pandemic has forced many to shake up their product lineups to better align with consumers’ new habits. A third (33%) of business owners report making product-related changes, either in the way they sell or deliver their products and services (31%) or to the types of products and services they offer (13%).

The decline in business activity over recent months forced many to take drastic measures through workforce reductions; nearly four in 10 businesses have cut workers since the start of the pandemic, although for 87% of those, the decrease is considered temporary or a furlough. A majority (58%) of the businesses that had temporary layoffs or furloughs already have begun re-hiring.

Faucher said the worst might be over and economic activity is on the rebound, but the “new normal” doesn’t mean a return to robust job and business growth that existed early in 2020.

“After job losses of more than 22 million between February and April, by far the steepest employment downturn in history, the labor market has started to recover. The economy has added back nearly half of those lost jobs, but job growth will slow going forward. Unemployment will remain elevated for years to come as business owners continue to deal with the impacts of the pandemic,” he said.

He added technology may be the key to business survival, and the PNC survey showed that many owners are making the necessary investments.

Other key survey findings include: 

  • PPP a much-needed lifeline: Nearly all that applied for a Paycheck Protection Program loan consider the funding important (97%), and nearly seven in 10 say it is extremely important. Of those that applied, nearly 90% were approved. A majority (55%) say additional government stimulus funding is important for their business, with a third (32%) indicating it is extremely important.
  • Economic hopes dim: Business leader reaction to the COVID-19 pandemic and related economic conditions caused the steepest six-month decline in optimism in the 17-year history of the survey, dropping by half from spring 2020, to just 21% reporting optimism about the national economy. While the drop is one of the sharpest in survey history, optimism remains higher than it was during the Great Recession between 2008 and 2013, when it was in the single digits.
  • Election edification: Among those business owners expressing a partisan preference in the upcoming presidential election, Donald Trump supporters believe more strongly than Joe Biden supporters (76% vs. 49%) that their candidate of choice would have a positive impact on their own business if elected to the office.

Although PNC did not compile state-specific reports this year — other than for Pennsylvania, where it is headquartered — Kurt Rankin, vice president and economist for The PNC Financial Services Group, closely follows the Michigan region, and he said Michigan’s outlook is about on par with the national outlook or perhaps even slightly ahead, given the state’s more dramatic labor market recovery since April.

He said Michigan’s unemployment rate rocketed to 24% in April and Grand Rapids’ spiked to 24.2%, compared to the national jobless rate of 14.7% in April. But by July — the latest month those numbers were available on the federal, state and local levels as of Sept. 29 — Michigan’s unemployment rate was down to 8.7% and Grand Rapids’ was at 7.6%, compared to the national jobless rate of 10.2%.

“I think (the labor market) is really the critical measure of how the economy is progressing through the current state of affairs,” Rankin said, noting that Grand Rapids’ labor force participation rate is currently higher than it was a year ago, while the Michigan and U.S. rates are still below year-ago numbers.

“(In) Grand Rapids, once re-openings were allowed … the consumer has come back in force. Housing really never went away, which is a very strong indicator, to me, that small businesses should be encouraged, because even during this crisis, households are willing to lay out money to buy homes in a tight labor market. That’s a sign to me that consumer behavior is ready and willing to get back on track as much as the government is willing to let it,” Rankin said.

He added that while there’s “going to be more pessimism than a normal economic period, the fact that there is still optimism” is a good sign.

“It may not be time to be optimistic and risk-taking and full-steam-ahead, but as positive as this report could be interpreted from the national level, Michigan small business owners should be interpreted as a step ahead of that,” he said.

“(It’s) not just consumer readiness — which we have seen; consumer spending has come back strongly — but specific to Michigan and specific to Grand Rapids’ labor markets, jobs have come back more rapidly than at the national level. So (there’s) hard evidence there that as consumers are willing to spend, that creates jobs, and Michigan is at the forefront of that trend.”

Rankin added a caveat that the hardest-hit industries on the national level — retail; entertainment, leisure and hospitality; and manufacturing to some extent — were hit just as hard in Michigan, and their recovery — including re-hiring — will depend on factors such as their level of cash on hand pre-pandemic and how much relief they were able to obtain during the shutdown.

A PDF of the full national outlook survey results is available to view at

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