A new economic impact report from Yelp shows that a majority of businesses on the platform that closed throughout the COVID-19 pandemic will not be reopening.
Data show as many as 163,735 businesses on Yelp closed between March 1 and August 31, when state-enforced lockdowns over the U.S. began forcing businesses to close their doors. According to Yelp's figures, 97,966 of those businesses will not be reopening.
\”Overall, Yelp's data implies that business closures have continued to increase with a 34% increase in permanent closures since our last report in mid-July,\” Justin Norman, vice president of data science at Yelp, told CNBC.
The closures haven't impacted all sectors from the economy equally, however. Yelp's report implies that some professions – lawyers, architects, accountants, physicians, and real estate agents – have been able to weather the pandemic storm more effectively, representing just two to three businesses closed per thousand.
Demand for many local services has also remained high. Auto providers, plumbers and independent contractors have closed at higher rates than doctors and lawyers – representing six to seven business closures out of every thousand – but cheaper than the five business sectors hit hardest: restaurants, bars, retail, fitness and also the beauty industry.
Here are highlights in the report:
Restaurants – particularly Mexican restaurants, breakfast and brunch joints, burger and sandwich shops and dessert places – still get pounded by lockdowns. As many as 32,109 restaurants on Yelp had closed by the end of August, 19,590 of which were permanent .
Places that offer foods conducive for delivery have fared a little better, including coffee shops and bakeries, delis, food trucks and pizza joints.
Bars and nightlife, an industry six times smaller than restaurants, have suffered a particularly high closure rate. By August 31, there were 6,451 business closures on Yelp, 3,499 which were permanent .
\”The share of permanent closures within bars and nightlife have raised by 10% since our Economic Average Report in July,\” the report said.
Shopping and retail businesses followed close behind restaurants as a whole closures, with 30,374, 58 percent of which are permanent .
\”Both men’s and women's clothing, in addition to home decor, have the highest rate of business closures,\” the report found.
The Beauty and Fitness Industries
A total of 16,585 beauty businesses on Yelp have closed, 7,002 of which won't reopen . The fitness industry, meanwhile, has suffered a 23 percent increase in closures since July, along with a total of 6,024 closures, 2,616 of which are permanent.
Lockdowns Exacerbated Inequality
Small businesses, which comprise the majority of Yelp's business revenue, have suffered tremendously under the lockdowns. Meanwhile, big businesses not typically found on Yelp have fared far better. Indeed, many have benefited from the response to the pandemic.
While we've heard phrases like \”in this together\” and \”we're all in the same boat\” throughout the pandemic, the truth is Americans didn't suffer through lockdowns equally. Some have been destroyed by forced closures while others have benefited from them.
It works out lockdowns were not just inhumane;
these were deeply unjust.
Stock guru and television personality Jim Cramer wasn't wrong as he observed this summer that the pandemic resulted in \”one of the greatest wealth transfers ever.\” Cramer noticed that while smaller businesses were \”dropping like flies,\” corporations were growing stronger as well as their stock prices were swelling.
Data bear out these claims.
Greg Buzek, the founder and President of IHL Group, wrote that smaller retailers saw about a quarter of a trillion dollars shift to large retailers throughout the first three months of the pandemic.
\”IHL estimates that more than $250 billion alone shifted from smaller retailers to larger retailers due to lockdowns in North America alone, forcing over 285,000 small businesses out of business,\” Buzek wrote.
This confirms what Dan Sanchez and I wrote in June: America's small businesses have been horribly abused throughout this pandemic. Through no fault of their own, many small business owners saw their dreams increase in smoke as bigger retailers and online stores thrived. What's perhaps worse is the fact that for months they were told to stop barking while their basic freedom – the opportunity to earn a living – was violated.
Meanwhile corporate America grew fat. Companies like Target set new sales records as their market share swelled from the sidelined competition, along with a flood of capital flowed to the largest corporations, which seemed to be the safest havens for investors' cash. As Peter R. Orszag of Bloomberg News observed, it was the corporate version of the Matthew effect: The strong got stronger.
Meanwhile, because they were benefiting from the pandemic, corporate America inundated us having a steady stream of pro-lockdown mass messaging, played to somber piano and containing predictable phrases – \”rise above,\” \”stay apart,\” \”we're in this together.\”
Catchphrases cannot mask the matter that economic lockdowns made inequality in America much worse. Millions of Americans lost jobs and countless businesses were closed or instructed to the brink of closure.
The means to fix the problem, we were told, was Washington, D.C. Trillions of dollars were pumped in to the economy by the Federal Reserve to invest in bailouts and send checks to Americans. The bailouts were a huge success – for the rich. Six months into the pandemic, Wall Street keeps setting new records.
It turns out lockdowns were not just inhumane; they were deeply unjust.
The Lingering Results of Lockdowns
It would be easy to look at the stock market and think America has weathered the pandemic fine. This would be a mistake.
There is a concept in economics known as regime uncertainty. Coined by Robert Higgs, the word describes \”a pervasive lack of confidence among investors in their ability to foresee the extent to which future government actions will alter their private-property rights.\”
Capital investment – whether by an entrepreneur starting a hardware store or perhaps a venture capital group investing an amount in a business – is the supply of wealth creation. But individuals are less likely to invest their capital in places their home rights are insecure.
Higgs argues that certain of the reasons the Great Depression lasted such a long time was regime uncertainty. Depression-era Americans did not have much faith that Franklin Roosevelt would secure their rights of property. FDR, after all, tried to pass a 100 percent tax rate via executive order. That leads to a high degree of uncertainty.
Uncertainty can range from erratic tax rates to regulatory barriers to outright property confiscation. Although some uncertainties are more harmful than others, few would argue that unilateral state-enforced lockdowns inject a higher degree of uncertainty into the American economy. It's not just the fact that businesses were shut down, it was also in the nature from the shutdowns, which were often arbitrary, unfairly applied and quickly became indefinite anyway. \”Fifteen days to slow the spread\” quickly changed to \”We'll inform you when it's safe to open.\”
Checks and Balances
Fortunately, the checks and balances embedded in the American system may help return a degree of economic certainty that's been lost in 2021.
A federal court recently ruled that Pennsylvania’s economic lockdown was unconstitutional, noting that an economy is not \”a machine that may be shut down and restarted when needed by government. It is an organic system comprised of free people each pursuing their dreams.\”
Even in desperate situations, the authority of government isn't unfettered. The liberties protected by the Constitution are not fair-weather freedoms – in position when times are good but able to be cast aside in times of trouble. There isn't any question that this country has faced, and will face, emergencies of every sort. However the solution to a national crisis can never be permitted to supersede the commitment to individual liberty that stands because the foundation of the American experiment. The Constitution cannot accept the concept of a 'new normal' where the basic liberties of the people can be subordinated to open-ended emergency mitigation measures.
The court's ruling comes past too far to save the 97,966 businesses on Yelp that will never open again after closing throughout the COVID-19 pandemic. But it could offer protection to the businesses of tomorrow – and return a diploma of certainty to an economy that needs it.
Jonathan Miltimore is the Managing Editor of FEE.org. His writing/reporting has been the subject of articles in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Star Tribune.