Jul 27, 2020 - Economy

Rural small businesses may not survive another shutdown

Men wait at dawn to be the first in line to fill out unemployment forms near the U.S.-Mexico border in Imperial County, which has been hard-hit by the COVID-19 pandemic.

Men wait at dawn to be the first in line to fill out unemployment forms in rural Imperial County, California, which has been hard-hit by the COVID-19 pandemic. Photo: Mario Tama/Getty Images.

Coronavirus cases in rural communities have now surpassed the number of COVID-19 infections in big cities, and rural economies will have a harder time recovering from a second shutdown.

Why it matters: Without additional federal relief for rural regions, "people and businesses will not have enough confidence to return to their jobs and daily activities," Center for American Progress senior economist Olugbenga Ajilore argues in an analysis out on Monday. "The result will be a prolonged, deep recession."

What's happened: The $1,200 direct payments to households as part of the CARES Act, along with expanded unemployment insurance, revived spending and business revenues in April and May. Small businesses began to shut down again in late June as COVID-19 cases spiked, per CAP's analysis.

  • In southern rural communities characterized by large Black populations, household expenditures rebounded in May as southern states such as Georgia and South Carolina aggressively reopened. But that trend reversed in June with steep drops in the number of businesses and revenue.
  • Midwestern rural communities characterized by blue-collar jobs saw an even steeper drop in household spending, although it has since plateaued. Small businesses are struggling to stay open.
  • Western rural communities followed a similar pattern, with the number of open merchants and revenue both plummeting at the end of June as household spending plateaued.
Reproduced from Center for American Progress; Chart: Axios Visuals

Even rural areas with higher pre-pandemic economic success have been hit hard, including "Graying America" communities with large aging populations in the West, as well as the Northeast and Florida (see above).

The big picture: Rural America has a high-risk population and fewer safety-net programs for people who get sick. And many rural communities are still struggling to recover from the Great Recession.

The bottom line: Rural small businesses that weathered the initial coronavirus closures in the spring may not survive a second lockdown as cases spike.

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