PPP and the drop in unemployment
When the PPP launched, its aim was to help small businesses avoid laying off employees while their operations were shut down due to the coronavirus pandemic. That aim may be taking effect.
According to a recent Associated Press article, the U.S. unemployment rate fell to 13.3% in May from 14.7%, and 2.5 million jobs were added. While other factors may be in play when considering the reasons behind the decline, the Paycheck Protection Program seems to have played a significant role in this area.
A recent report by BBVA Research stated, in part, “...government support programs like the SBA PPP appear to have been effective in incentivizing rehiring even if firms are not seeing a pickup in revenues. For example, sectors that saw strong job gains included construction (464K), ambulatory health services (376K), retail(368K), manufacturing (225K), and administrative and waste services (109K).”
As far as BBVA’s own contribution to implementing the program, as of late May, the bank funded approximately $3.3 billion small business PPP loans in less than 60 days, processing more than 22,000 applications and impacting approximately 360,000 jobs. The job statistic is certainly one to highlight, according to BBVA USA Small- to Medium-Enterprise Director Elizabeth Dobers, as this is exactly what the PPP was designed to do.
(It) saved and created a lot of jobs.
“Since PPP allowed companies who had up to 500 employees in one location, I am confident that those payroll dollars helped enormously with dropping unemployment numbers,” she said. “Putting small businesses back to work saved and created a lot of jobs.”
The PPP, a key small business relief component of the CARES Act, allows businesses with fewer than 500 employees to borrow money from government guaranteed lenders to fund up to 2.5 times their monthly payroll and certain other employee expenses, including health insurance and retirement plans. If all employees are retained throughout the designated time period and funds are used for certain eligible expenses, businesses may be eligible to have their loan balances forgiven.
Moving forward, according to BBVA Research, there seems to be an upward trend in the economy overall.
“It seems fair to assume that the economy has reached bottom and the recovery is underway.”