World Economy

A reality check on small businesses and the federal shutdown impact

While much of the attention has focused on Washington, D.C., small-business owners elsewhere in the country were often just as disrupted by the recent shutdown.

The South Atlantic Census division, which includes Washington, D.C., but also Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia, might be expected to be the most affected by the government shutdown, but the region is so large that the effects centered in D.C. are mitigated by the lack of impact elsewhere. Some 18 percent of small-business owners in this region were affected by the shutdown at least “a good amount,” just above the overall average.

Still, only 21 percent of federal workers are concentrated in D.C., with the vast majority spread throughout the country. In some regions that rely more heavily on federal jobs and programs, the shutdown turned out to cause more problems for small businesses.

The East South Central division, which includes Alabama, Kentucky, Mississippi and Tennessee, had the highest percentage of small-business owners who reported being affected by the shutdown. A full quarter (25 percent) of small-business owners in this area said they were affected “a great deal” or “a good amount.”

The high population of federal workers in Huntsville, Alabama — home to NASA’s Marshall Space Flight Center, an Army base and dozens of other federal agencies — meant local businesses who normally count those workers as customers were left in a lurch. In neighboring Mississippi, Agriculture Department workers, Coast Guard members stationed along the Gulf and other federal workers were left without pay.

One small-business owner in the health-care industry in Alabama reported a “greater demand for free health-care services” as a result of the shutdown, noting that his business had been affected “a great deal.” He took action himself by calling a location politician to discuss the effects.

In communities like these across the country, the trickle-down of consumer spending, and the sudden lack of it, by workers with otherwise stable government jobs can have a disproportionate effect on the local economy.

Most people in the general public agree that the federal shutdown has had an impact. Nearly half of people (48 percent) say a government shutdown is a “major concern” for their community, and another 35 percent say it’s a minor concern. Just 14 percent say it’s not a concern at all.

Small businesses often have a symbiotic relationship with their local communities. When their communities are affected, they are affected too.

— By Laura Wronski, senior research scientist, and Jon Cohen, chief research officer, SurveyMonkey

The CNBC/SurveyMonkey Small Business Survey is conducted quarterly using SurveyMonkey‘s online platform and based on its survey methodology.

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