Market Perspective

Market Perspective: The Economic Impact of the Coronavirus

March 22, 2020
The C2FO Team

C2FO’s head of capital markets identifies key economic indicators for U.S. small businesses to watch. 

The impacts of the coronavirus pandemic are reverberating in every aspect of the global economy. As the U.S. economy pumps the brakes in reaction to financial uncertainty, small businesses will bear the brunt of these hardships. 

Small- and medium-sized businesses account for 83% of the U.S. economy’s employment, according to recent Deutsche Bank Research estimates. As a true driver of the nation’s innovation and competitiveness, small businesses account for nearly half of U.S economic activity.

Ashish Jain, senior vice president and head of capital markets for C2FO, highlights three  economic indicators small businesses should be aware of when considering the impact of this unprecedented situation.


Economists are bracing for a never-before-seen surge in jobless claims. Last week, applications for unemployment benefits jumped by 70,000, to 281,000. That’s the highest number of claims since September 2017 and larger than any week-over-week increase during the Great Recession.

 Jain said those numbers are expected to rise even more this week as state and local governments continue to order the closure of public gathering spots.

 “Next week, you’ll start seeing the full force of food, retail and service jobs laying off employees in large numbers. You’re seeing it now in major cities in California and New York. The layoffs are a function of the governments and states urging residents to stay in and shut down all businesses,” Jain said.

Bank of America estimates initial jobless claims to spike to three million for the week ending March 21, the largest weekly increase on record.

To put these numbers in perspective, Jain recalls the beginnings of the Great Recession, the last time mass layoffs and furloughs hit the country.  

“In the summer of 2007 — when the initial cracks in the façade were starting to form — there were around 300,000 initial jobless claims. As global financial firms began to collapse, the economy hit a huge turning point. In 2008, jobless claims rose to 500,000 and steadily increased each week, peaking at 665,000 in 2009.” Jain said, adding, “To get into the millions is unheard of.” 

Cash Flow

Having enough cash on hand to survive a global supply chain disruption is nearly impossible for small businesses. To offset the consequences of COVID-19, businesses are seeking liquidity to address critical needs. 

Nearly half of small businesses in the country have 27 or fewer days of a cash buffer to cover expenses if revenue suddenly stops.

“These are worrisome numbers, but the government is taking unprecedented measures to promote fiscal stimulus,” Jain said.

The federal government is signing off on a plethora of fiscal initiatives in an effort to shore up small businesses. 

In an aggressive move, the Federal Reserve cut its benchmark interest rate to zero, launched more than $700 billion in quantitative easing and activated several emergency facilities to support liquidity.

Meanwhile, Congress is preparing to pass an economic stimulus package valued at more than $1 trillion, with payments to small businesses totaling more than $300 billion. The loans would be made available through banks and credit unions certified by the Small Business Administration.

As the government takes historic action to battle the effects of the virus, Jain emphasized banks are not the problem in this crisis and can act as part of the solution.

“Banks are doing two positive things right now. The first is suspending all stock buybacks, so they’ll be using their cash to lend into the economy to support small business. Second, the government is looking to ease some of the capital restrictions that banks have,” Jain said. “But here’s the thing: that takes time.” 

The slow, drawn-out process of bank lending could take 15 to 60 days and the new rules set in place post-financial crisis will take time to come to fruition. 

“The mindset is in the right place, but it doesn’t happen with the snap of a finger. C2FO’s platform can help ease the process. We enable small businesses to get cash quickly and efficiently,” Jain said. “We get cash to suppliers faster than any other platform or vehicle.”  

Forecasting Repercussions

Although the exact percentage varies, one analyst-agnostic prediction holds true: the economic repercussions for the U.S. economy will be among the worst the nation has seen in its history. 

Oxford Economics expects the U.S. economy to shrink at an annual rate of 12% between April and June, while JPMorgan Chase predicts a second-quarter contraction of 14%. 

By comparison, during the worst quarter of the Great Recession in late 2008, the economy shrank by 8.4%. 

In a Catch-22, efforts to rapidly contain the outbreak — travel restrictions, layoffs and quarantines — are responsible for the contraction. 

Jain said that the severity of the measures directly correlates with a sharper economic rebound. 

“This is a short and deep contraction because the current conditions are driven by an exogenous shock, rather than a long, painful build-up like The Great Recession. With a short and deep contraction, the recovery can be swift,” Jain said. 

He estimates the fourth quarter of 2020 could see positive growth of at least 8%.    

Bank of America estimates the economy will level out once quarantines begin to lift — likely between May and July.


Key Takeaways

Like 9/11 or the financial crisis of 2008, the COVID-19 pandemic will reshape society in lasting ways as businesses large and small work to navigate uncharted territory. 

The silver lining — and there is one — is that moments of crisis often present immense opportunities to grow, innovate and build stronger communities in our personal and professional lives. 

Want to take control of your cash flow?

Early payment through C2FO can help.

Related Reading