The pandemic fog of war is lifting, and with it the prospects for business recovery in America’s downtown districts as new data points to strong rebound trends in the face of high inflation.
Tracking the health of small- to medium-sized businesses (SMBs) that provide roughly half of all U.S. private-sector jobs, the March edition of the Main Street Index, a collaboration between PYMNTS and Melio, shows a vigor returning to America’s main thoroughfares after two years in the making.
Get the study: Main Street Economic Health Survey
In the latest quarterly measurement of Main Street activity, PYMNTS found that the index has edged up 1.6% quarter over quarter and now stands 18.5% above the lowest reading taken during the pandemic, with an estimated index value of 6.2% being the highest since Q1 2020.
What this shows is four consecutive quarters of growth for Main Street businesses, and although some segments continue to lag, the findings put looming recession fears in a different light.
The pandemic was a payday for wages, which experienced impressive growth.
“Wages are the element which grew the most compared to Q4 2019, while employment trails,” the study reported. “Wages stand over 9% above their 2019 Q4 levels, [and] employment overall scored a 4.5% increase compared to the last pre-pandemic reading.”
This aligns with sentiments seen in the Q4 2021 index, which found 53% of Main Street businesses seeing 2021 sales increasing, “and business owners have optimism that the economic recovery that took hold in 2021 will continue gathering momentum in 2022.”
Certain Sectors Roaring Back to Life
Recovery is happening across the country, but not evenly. Some regions and segments are logging double-digit gains in key metrics, while others are taking a longer route to recovery.
Per the March index, three out of nine segments still stand below their pre-pandemic levels.
Fitness venues are the furthest below, at 3.4%, although the sub-index is predicted to grow at an annualized 10% in Q1 2022.
Retail stands 1.8% below its Q4 2017 value, and the building/construction segment is 16% higher now that the last pre-pandemic reading, per the new data.
Among businesses with the most upbeat outlooks for 2022 are professional services, expecting over 20% compound annual growth in 2022.
Hard-hit by lockdowns and restrictions, fitness and building are also anticipating a stronger performance this year, with fitness expected to grow more than 10% and building/remodeling right behind at 9.4%. However, fitness venues trailed pre-pandemic levels by 3.4% in Q1 2022.
Despite any weak spots, PYMNTS found that annualized quarterly growth of the Main Street index outpaced gross domestic product (GDP) in Q2 and Q3 last year, only trailing overall economic improvement in Q4.
Regional Views, National Outlook
Looking at regional recoveries, a dispersed pattern finds some parts of the country returning to pre-pandemic commercial activity faster than others, which was not unexpected.
While the Northeast recorded the steepest drop — 15% — in the first quarter of the pandemic, the new study found the Northeast registering the fastest comeback from pandemic lows, yet “has been the worst performer so far in 2022.”
On a cumulative annualized basis, the Mountain and Pacific West regions, at 8.8% and 7.7% growth respectively, are standouts in new 2022 data detailing the Main Street recovery.
While inflation is at alarming levelsm and with “recession” now appearing in more headlines, the latest Main Street Index is showing quarterly growth that contradicts an imminent recession.
As the study stated, “Current estimates for Q1 2022 indicate the U.S. GDP will grow at an annualized 1.8%, while we estimate main street to show a much stronger expansion (6.3%).”