L'ATTITUDE NETWORK NEWS

A Look at the Big Picture

This issue of Network News is focused on the current state of the U.S. Latino business community and the U.S. Latino workforce. We hope you find this information valuable to you personally. We invite you to let us know if you have personal insight or experiences that could be helpful to our Analysis fo where we are, and how we get from here back to our robust economic growth pattern prior to the pandemic.

There are 30 million small businesses in the United States. It has been estimated that 24% of all small businesses are in danger of never re- opening – that’s 7,200,000.

The government’s first loan program worth $349 billion was fully depleted with loans that were made to just 5% of U.S. small businesses – 1.6 million of the 30 million. In Michigan, for example, only 2.8% of all small businesses in the state received a loan, even though 21% of that state’s entire workforce has filed for unemployment

It appears that most very small businesses didn’t make it to the front of the line when banks determined how to prioritize the applications. It seems that, at best, the loan program might have saved about 200,000 of the 7,200,000 in danger of never re-opening. That leaves 7 million that may close forever.

With the approval of another $380 billion in the second round of loans, another 1.8 million could benefit. Still, between the two initiatives, only 11% of all small businesses will have benefitted. Unfortunately, the result is even more sad for U.S. Latino-owned businesses. As Ashley Harrington, Federal Advocacy Director and Senior Counsel of the Center for Responsible Lending has said, businesses of color were locked out of round one, and the new proposal fails to provide that they will have fair access to the new $310 billion.

1 of every 7 small businesses in our country is Latino-owned. Even if we assume U.S. Latino-owners were not disproportionately disadvantaged in the loan program (which it appears they have been), the math is simple – 1 million Latino-owned businesses may not re-open.

Given there are nearly 5 million Latino-owned small businesses, that is a loss of 20% of that total. That translates to a loss to the economy of 1.6 million U.S. Latino owners and employees now out of work

U.S. Latino Unemployment

According to the Hispanic Small Business Report from Claritas, 36% of Latino-owned businesses earn most or all of their revenue online, which compares to just 18% of all other small businesses. That could be an advantage in our current mode of social distancing.

Further, the study indicated that 40% of Latino-owned businesses report that most or all of their revenue comes from business-to-business sales. That could be an advantage only if the businesses they sell to are those that are able to be open during social distancing

The U.S. Latino workforce in our country is made up of:

• 5 million Business Owners
• 5.5 million Business Professionals
• 26.4 million Workers (3.8 million of whom are Restaurant employees)

If the 20% unemployment rate across the total American workforce is applied to the U.S. Latino workforce cohort, 20% of 36 million is 7,200,000 unemployed U.S. Latinos due to Coronavirus

A View of the U.S. Latino Business Community

Following are the industry sectors with the largest percentage of the first Paycheck Protection Program loans approved through April 13.These industries account for about 25 million of the 36 million total U.S. Latino workforce

• Construction companies appear to be the largest beneficiary, collecting about 14% of funds. 3,500,000 U.S. Latinos are employed in this sector.
• Accommodation and food services ranks fifth, receiving 9.2% of all funds. 3,600,000 U.S. Latinos are employed in this sector.
• Ranking sixth at 8.6% of all funds is Retail Trade, which also has about 3,600,000 employees.

The geographic distribution of these funds does not paint a clear picture about how U.S. Latino-owned firms fared. Nebraska and North Dakota had the highest number of small businesses per thousand approved for a loan. Using that same metric of businesses per thousand, the following states received the lowest percentage. These states are also among the most heavily U.S. Latino populated

• California
• Arizona
• Florida
• New York

It should be noted that due to the size of those states, the total amount of money loaned was large, even if the percentage of businesses per thousand was low.

However, a comparison of Texas and California further blurs the analysis. Texas was at just under 150 businesses per thousand that received funds, while California was the very lowest at only 58.5 per thousand.

The SBA has reported that 85% of the loans were for $350,000 or less, which on the surface seems to indicate a positive metric for our country’s smaller businesses. However, the total amount of money they received was only 29% of all money loaned. That underscores the fact these loans only reached 5% of the truly “small” business sector as there wasn’t enough to widely distribute after 47% of the loan dollars went to loans of $1 million or more; and loans of $5 million or more accounted for another 9.2% of the money.

The government definition of small business is under 500 employees. Based on available data, businesses with fewer than 20 employees received only 18% of the money. It appears that, with the vast majority of Latino-owned businesses employing fewer than 10 employees, only a very small number, if any, Latino-owned businesses benefitted from the first Paycheck Protection Program.

What About Jobs?

701,000 jobs were lost between February and March. The Institute for Women’s Policy Research says that nearly 60% of those losses were experienced by women

The American Hotel and Lodging Industry predicted as many as 4 million people working in the hotel industry could lose their job.

UBS predicted 1 in 5 restaurants could close.

Jobs are being lost daily as sales in some sectors are dramatically being impacted. The Commerce Department reported that in March:

• Sales at clothing stores plunged by more than 50%
• Vehicle sales decreased 25.6%
• Industrial production had its biggest monthly drop since 1946
• Retail sales in total had the biggest month-over-month decline since records began in 1992.

Some retail categories actually posted gains, however. Americans spent more on food, building materials, and health & personal care. Sales at non-store retailers, a category that includes internet merchants, rose 3.1%. Grocery store sales not surprisingly jumped 26.9%.

According to the 2019 Bank of America Hispanic Small Business Owner Spotlight, 51% of U.S. Latino business owners had planned to hire new workers in 2020. But 58% of U.S. Latino entrepreneurs said their big challenge was finding and retaining workers. Let’s look ahead.

When U.S. Latino owned businesses return to a position of growth and need talent, there will be a ready pool of U.S. Latino talent available IF, as noted earlier, as many as 5 million could be unemployed. Among them will be entrepreneurs who could not survive the closure during the pandemic. In general, these people are more technology savvy than average business owners, and tend to be younger. This will be our country’s most promising labor pool for our economic recovery

For Many, Credit Cards are Buying Time Until Recovery

A growing number of Americans are paying rent by credit card. Entrata Inc., a digital property-management platform, showed a 13% increase in credit card usage in April compared to the first three months of the year. The number of tenants paying rent with a credit card during the first week of April rose 30% compared with the same period in March, according to processing company, Zego Inc

Why the U.S. Latino Cohort is Critical to Economic Recovery

According to the Hispanic Small Business Report from Claritas, 36% of Latino-owned businesses earn most or all of their revenue online, which compares to just 18% of all other small businesses. That could be an advantage in our current mode of social distancing.

According to a Nielson study, U.S. Latino spending has been growing faster than non-Latino since 2017. Out of 15 different departments within a regular retail store, 13 of them experienced growth from U.S. Latino consumers versus only 8 that saw an increase form Non-Latino consumers in 2018.

U.S. Latinos have been responsible for the majority of net new revenue growth across nearly every sector of the economy, from cars to cosmetics.

This New Mainstream Economy and where we go from here as a country will be a major focus of L’ATTITUDE 2020. This year’s theme is: The Restart and Rebound of the New Mainstream Economy. We hope to have details about this year’s event finalized in the near future, but we do already know that attendance will be available both in-person and online. Be watching for more information.