The Federal Reserve chair Jerome Powell said on Friday there will be “pain” to come in the economy as a result of the central bank’s battle with inflation, and right now, small businesses are experiencing that pain on both sides of the fight.
Inflation has been the No. 1 concern of small businesses for some time, as high prices in raw materials, labor, energy and transportation cut into margins. Higher rents, and landlords feeling more aggressive the farther away the nation moves from the peak of Covid, have compounded the hit from inflation being felt on Main Street. While there are some signs of inflation easing across the economy, that’s because the Fed is intentionally cooling demand, and that has small business owners anticipating a sales decline.
What does it all add up to? According to a new national survey of small business owners by Alignable, a big jump in August in the percentage of small business owner who couldn’t pay full rent in August.
Nationally, apartment rental prices, which have soared, are among the inflation indicators that may have recently peaked. But the Alignable data shows that the rent inflation crisis for small businesses is actually getting worse. Forty percent of small business said they could not pay their rent in full this month, up 6% month over month and setting a record for 2022.
“I’ve been following this closely every month since March 2020, and I was shocked,” said Chuck Castro, head of research and communications for Alignable.
The percentage of small business owners unable to make rent hasn’t been this high since March 2021. “This is a number we would have expected right in the middle of the pandemic, when a third of places were shut down, everyone was wearing masks or not going out to restaurants,” Castro said.
Alignable’s poll was conducted from August 13-August 22 among 7,331 randomly selected small business owners.
The small business rent crisis could make the holiday quarter of the year, always the most important for consumer-facing Main Street entrepreneurs, a critical one for survival.
It is not new that inflation has become a much bigger concern than Covid on Main Street, but until it eases “and eases significantly,” Castro said, all the small business costs are adding up to another existential crisis for Main Street, highlighted by the concerns over rent.
Forty-five percent of small business owners surveyed by Alignable say they’re paying at least 50% more in rent than they did prior to Covid. Twenty-four percent say their landlords have doubled rent; 12% say they are now paying three times more.
Back to peak Covid concerns about business survival
The Alignable data also shows that many small business are still struggling to get back to pre-Covid revenue levels, just as the Fed is taking steps that are slowing overall demand. Castro said Alignable would hope that the numbers would be trending down among small business owners who say they have not returned to…
Read More: The rent crisis on Main Street just took a turn for the worse