Small Business Experiences as the Paycheck Protection Program Ends: Evidence from Covered Period Expiration
29 Pages Posted: 23 Dec 2020 Last revised: 22 Feb 2021
Date Written: December 22, 2020
Over $500 billion in government-guaranteed loans were disbursed to small businesses through the Paycheck Protection Program (PPP), a key element of the federal government’s fiscal stimulus efforts during the coronavirus-induced recession. While much research has focused on the employment effects of this program as it was rolled out in the spring, I investigate firms’ experiences as they roll off of the headcount requirements needed to receive loan forgiveness. I use detailed payroll microdata, along with information on the date when each firm’s requirements expire, to estimate the employment effects as PPP ends. I find that, as the PPP covered period expired, companies reduced active employment by a statistically significant 0.41% per week and 1.6% in the four weeks post-expiration. This reduction in employment is due largely to a spike in terminations the weeks after the covered period expires, is larger in certain industries hit hard by the pandemic, and is concentrated among firms located in counties that experienced relatively worse coronavirus case growth. I estimate that, in aggregate, 907,200 jobs were lost within the four weeks after firms’ covered periods expired, as companies no longer need to maintain pre-COVID-19 headcount levels to receive PPP loan forgiveness.
Keywords: Paycheck Protection Program, PPP, COVID-19, Labor Economics, Public Finance
JEL Classification: E24, E62, H12, H25, H32
Suggested Citation: Suggested Citation