Ask HN: Are Small Businesses Still at Risk in the Current Recession?

https://news.ycombinator.com/item?id=35259405

by FlamingMoe • 3 years ago

1 2 3 years ago

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Ask HN - Are Small Businesses Still at Risk in the Current Recession?

I was just a teenager during the peak of the 2008 recession, and I witnessed the devastating impact it had on my dad and uncle, who owned separate and unrelated businesses. They both lost their companies during that time and never fully recovered, both financially and emotionally.

The current recession seems very different. Inflation and high interest rates have significantly increased the cost of living for most people, and we've seen numerous layoffs at some of the largest corporations. However, it appears that small business owners haven't been affected in the same way as they were in 2008. In fact, most small businesses I'm familiar with have been expanding and actively recruiting new employees in recent months.

So, my question is: Are small businesses still in danger from the ongoing recession, and it just hasn't caught up to them yet? Or is this recession fundamentally different from 2008, and small businesses won't face the same level of hardship?

PaulHoule• 3 years ago

Economic forecasting is hard even for economists.

We are not even in a recession yet, there has not been a sustained drop in GDP or employment. It's true that "big tech" has been laying large numbers of people off but that hasn't spread to the rest of the economy.

It seems the danger today is that the Fed wants to raise interest rates to reduce inflation. That slows down the economy in numerous ways, first by discouraging investment, but because raising interest rates directly cost borrowers money (say you have a variable interest rate mortgage you can barely afford right now) and have the effect on banks that we've seen with SVB.

If the fed keeps raising interest rates there will be more pain in terms of unemployment, business failures, and what you are worried about. If they don't then there will be more inflation which might be easy to live with in the short term but erodes the value of financial assets in the long term. (If wages went up with the cost of living you might not be too uncomfortable for a time but saving for retirement might not work anymore.)

The future doesn't have to be like in the past but historically it has taken serious economic pain to end inflation. See

https://en.wikipedia.org/wiki/Early_1980s_recession

chiefalchemist• 3 years ago

Are we in a recession? There rumour is we're heading in that direction, but it's not official, at least not yet.

The point being, this might be a better question in 12 to 24+ months.

That said, Covid took out a number of SMBs. Perhaps those that remain are strong and can weather a recession better. We'll see?

Ask HN: Are Small Businesses Still at Risk in the Current Recession?

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