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The sudden devastation and ensuing rebound in the economy during the coronavirus pandemic has left Wall Street scrambling for the freshest clues on how fast the U.S. is recovering — and they are turning to some unlikely sources.
One of them is a Homebase, a previously little known San Francisco company that has cultivated a small but growing number of fans among economists, stock-market pros and even senior Federal Reserve leaders trying to make sense of it all. Homebase provides cloud-based software to Main Street businesses to allow them to track how many hours their employees work.
What makes Homebase’s data so useful is the company clientele largely consists of small bars, restaurants and retailers, the businesses hit hardest by the coronavirus. Job losses in those sectors alone totaled nearly 7 million in March and April, representing about one-third of all job losses in the U.S. in the early stages of the pandemic.
So what does the company’s latest data show?
The swift rebound in employment in May and June appears to have plateaued in July owing to fresh outbreaks of coronavirus cases in a number of states that’s led them to reimpose business restrictions.
California, for instance, has barred indoor dining and locked down much of its economy again, putting renewed pressure on restaurants and brick-and-mortar retailers. Texas and Florida have also partly restricted certain businesses.
“I wouldn’t be surprised if you see a stalling out in employment in those sectors in July,” said Ray Sandza, Homebase’s vice president of data and analytics, in an interview with MarketWatch. These sectors had only regained about 2.5 million of the lost jobs as of the end of June.
The information gleaned from Homebase’s time-tracking software was one of the few labor-market indicators that pointed to a big rebound in hiring in May even as Wall Street DJIA, -0.23% economists predicted another huge decline in employment. That helped the company win even more plaudits.
“It is so timely,” said chief international economist James Knightley of ING. “You can see the trends coming through.”
Read:Jobless claims fall again, but layoffs might rise soon amid new coronavirus wave
Why didn’t other indicators show the same improvement?
The vast majority of economic reports are produced by the federal government and come out monthly with a time lag. The only major government report published each week is initial jobless claims, which tracks how many people apply for unemployment benefits.
Read: Soaring demand for federal jobless benefits points to fresh fissures in the economy
The problem is, jobless claims only reveal how many jobs are lost. It doesn’t reveal how many people are hired or go back to work.
Small businesses, what’s more, have always been a sort of black hole for government bean-counters. It’s hard to get a sense of what’s going on at thousands of companies with 20 to 30 employees. Most of them fly under the government’s radar.
That’s where the Homebase comes in.
The company’s data is about as current as anything available, revealing how many people are working each week and how many hours they are putting in. Some 60,000 businesses with 1 million workers are monitored.
Granted, the company’s clientele is limited to just a few major segments of the economy, but the fate of restaurants and retailers will go a long way in determining how quickly the U.S. recovers and the coronavirus recession ends.
To get an even broader look at employment trends, it helps to combine the data from Homebase with Kronos, another time-tracking company that covers medium-sized small businesses in a wider number of industries. Kronos covers 30,000 businesses with 3.2 million employees.
Both Homebase and Kronos data show that employment growth tapered off in early July, but it’s too soon to tell whether it remains that way. The answer will largely be determined by how quickly states manage to get the coronavirus under control again.
Read:Coronavirus spike in the dog days of summer saps economy of momentum
Yet even if the viral outbreak subsides, Sandza said small businesses are going to need more support from the government for months or longer. Only four-fifths of the businesses that were open in January are open now and many are in danger of failing with so many customers staying away and practicing social distancing. A massive federal small-business aid program ends soon and it’s unclear what will take its place.
Read:U.S. Treasury secretary Mnuchin backs extending small-business relief
“These small businesses continue to need help. Let’s keep helping them,” Sandza said.
