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Harvard Report Finds That One-Third of Connecticut Small Businesses Closed Their Doors in 2020

  • A research and policy institute based at Harvard University finds that Connecticut has the sixth greatest rate of small business closures and 11th highest loss of small business revenues since January
  • The figures could reflect permanent or temporary closures
  • Job postings have increased in Connecticut, but unemployment remains elevated

Connecticut’s small business closure rate is one of the highest in the nation, according to figures from a nonpartisan research and policy institute based at Harvard University. However, it is unclear whether the numbers reflect permanent or temporary closures.

Opportunity Tracker, which analyzes how the COVID-19 pandemic has affected communities, determined that the number of small businesses open in Connecticut was down 33.8 percent on Nov. 30 compared to January. This was the sixth steepest decline in the United States.

A low of 46.8 percent fewer small businesses were open during the pandemic. It recovered to a 21.9 percent decline at the start of July, fell to a 40 percent drop in August, and has hovered around one-third lower since September. Despite the revenue shortfalls, overall consumer spending in Connecticut was up 4.9 percent for the week ending Dec. 6.

The tracker bases its designation of a business as closed or open on credit card transactions, so it could reflect either a temporary closure or a permanent one. A business is considered closed if at least three consecutive days have passed with no credit card transactions.

Connecticut’s reopening plan permitted most businesses to resume operations with limited capacities and public health safeguards during the summer. The state briefly advanced to Phase 3, which further relaxed restrictions, though this was soon rolled back due to increasing COVID-19 infections.

Small business revenues on Nov. 30 were down 39.3 percent from January, the 11th highest drop in the U.S. Though revenues spiked 14.7 percent above January levels in February, they fell 50 percent at the start of the pandemic, remained depressed despite a summer bump, and have been trending downward since October.

New London County had the highest rate of small business closures, with 41.6 percent fewer businesses open compared to January; revenues were down more than 40 percent. Hartford County has fared best, with 24.5 percent fewer small businesses owner and a 16 percent decrease in revenues.

Job postings in Connecticut for the week ending Dec. 11 were 3.2 percent higher than in January. However, employment rates as of Oct. 15 were 5.4 percent lower while there were 0.35 initial unemployment claims per 100 people for the week ending Nov. 21, nearly twice the pre-pandemic ratio.

Connecticut has recovered just shy of two-thirds of the jobs it lost in the pandemic. In November, the state lost 1,600 jobs and the unemployment rate rose more than two points from October to 8.2 percent. Kurt Westby, commissioner of the Connecticut Department of Labor, says the job losses are a result of diminished economic activity in the fall but that there is an “underlying resilience” in the state’s economy that could signal a robust recovery once vaccines are widely distributed.

New Haven-based DataCore Partners expressed more concern with the numbers, saying they are the sharpest job declines in Connecticut since World War II and that it could take up to a decade for the state’s labor market to recover. A University of Connecticut think tank released a report with a similar warning in October.

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