People massively chased their dream and started new businesses, and that is wonderful. Then there’s the issue of large-scale PPP loan fraud.
By Wolf Richter for WOLF STREET.
The historic over-night explosion of layoffs last spring, the tsunami of free money from the government for people and businesses alike, whether they needed it or not, whether they were fraudulent or not, and people’s reactions to that free money have upended all kinds of economic dynamics. And the double-spike in applications to start new businesses is one of them.
The 440,165 applications filed in March with the IRS for an “Employer Identification Number” (EIN) were up 47% from February 2020, the last month before the Pandemic. In Q1, applications jumped by 62% from a year ago. In July last year, business applications had nearly doubled year-over-year, producing a historic spike that faded through December, then re-spiked in January for a double-WTF moment – and we’ll get into potential reasons in a moment.
This data from the Census Bureau is not based on surveys, but on actual applications by new businesses for a federal EIN, with which the IRS tracks businesses for tax purposes.
Excluded are EIN applications that are not related to typical business formations, such as EIN applications “for tax liens, estates, trusts, or certain financial filings, applications with no state-county geocodes, applications from certain agricultural, public entities, and applications in certain industries (e.g. private households, civic and social organizations).”
The job-creating machines.
From the information in the EIN application, the Census Bureau estimates which businesses have a “high propensity” of having a significant payroll (“High-Propensity Business Applications” or HBA) and might therefore become job-creating machines.
In March, there were 153,186 applications that the Census Bureau deemed to be HBAs, up 35% from February last year. In Q1, HBA applications jumped by 47% in Q1 compared to last year. That massive spike last July faded through December, but then applications re-spiked in January. Note that it took this spike to get to and surpass the number of applications before the Financial Crisis:
The real job-creating machines.
Within the HBAs are the “Business Applications with Planned Wages” (WBA). These are businesses that already have a planned date for paying wages. They have hired people and have funding in place and are ready to pay wages and grow their payroll and become significant employers.
In March, 53,213 business applications of this type were filed, up 37% from February last year. The Q1 total was up by 50% compared to Q1 last year. But note that even the huge spike in July didn’t bring applications by these job creating machines back to levels that prevailed before the Financial Crisis:
Most of the applications are by businesses with a low propensity to create jobs.
The chart below of total business applications (red), high-propensity business applications (purple), and business applications with planned wages (green), all on the same scale, shows the reality that most business applications are for businesses that won’t have a significant payroll. They might employ the owner and eventually maybe a few other people, and often enough, they remain one-man or one-woman shops throughout their existence. That’s a great way to go, but they essentially create just one job:
Retail trade dominates.
Brick-and-mortar retail took a horrendous beating during the lockdowns, as large retailers that sold food and everything else, such as Walmart and Costco, were allowed to stay open, while retailers that didn’t sell food had to close. These retailers that had to close had already been beaten down before the Pandemic by the competition from ecommerce. Many big-box stores filed for bankruptcy. Little shops went quietly, walking away from their lease, maybe working out a deal with the landlord, and then closing the shop.
But online sales boomed, and business applications in the retail trade – likely by people planning to ride the boom in online sales – experienced a historic spike. At the peak in July, there were 120,000 applications by businesses in the retail trade, or 22% of all applications during that month, and triple the number of applications before the pandemic.
In March, business applications in the retail trade, at 81,469, where still roughly double the levels in 2019 (red line in the chart below). Nothing else came close. This is interesting because in the years before, retail trade applications ran roughly on the same level as professional services applications (green line), but then during the Pandemic just blew through the ceiling. Also note that all categories have that double spike:
The chart above shows the top seven industries, by number of business applications in March, plus the increase from 2019:
- Retail (red): 81,469, nearly double from 2019
- Professionally services (green): 54,385, +38% from 2019
- Construction (black): 38,312, +16%
- Transportation & warehousing (light blue): 37,092, +83% Many are trying to ride the red-hot ecommerce boom with its final-mile delivery requirements, and the boom in deliveries of food and meals.
- Administration and support (yellow): 30,480, +50%
- Accommodation and food services (gray): 25,540, +66%
- Health Care and Social Assistance (brown): 24,674, +33%
Entrepreneurs try to make a go of it.
There are many legitimate and exciting reasons for a surge in business applications during the unemployment crisis, including that people had time, and some extra cash from the government to finally chase after their dream and strike out on their own and start a company. I know several people who’ve done exactly that, and that’s exciting and wonderful to see.
Anything having to do with the internet – whether retail or delivery or posting YouTube videos and making money from ads – would naturally be a primary target during the lockdowns. And lots of people did that. This type of fired-up entrepreneurial energy is one of the best things to come out of this crisis.
But there’s another side.
I don’t remember anything that has ever drawn so much fraud to itself, like an industrial magnet attracting ferrous scrap metal, as the federal government programs to support the unemployed and struggling businesses.
When it comes to this twin-spike in business applications, the forgivable Payroll Protection Program (PPP) loans and Economic Injury Disaster loans come to mind immediately – especially since the spike into July, and then the renewed spike this year, are timed with the two PPP generations.
Businesses that applied for the PPP loans had to submit documentation of wages paid over specified periods. The first-generation PPP program ended on August 8, 2020. The second-generation PPP program started this year and remains open.
The dates were structured so that it would be impossible by honest people to create a business entity after the announcement, pay wages for long enough to qualify for a PPP loan, and then apply for a PPP loan. Applicants had to submit historical wage documentation to the lenders whose job it was to check all this out.
What we now know is that these PPP loan applications were rife with misstatements and fraud. Fintech companies have plowed into PPP loans with reckless abandon. A Bloomberg analysis in October found that Fintech outfits were connected to 75% of the PPP fraud cases alleged by the US Justice Department at the time, though they only arranged 15% of the number of total loans.
Once fraud by the borrower is involved, it no longer matters what the original requirements were because they’re being bypassed by the fraudster to begin with.
The Project On Government Oversight (POGO) reported today: “The Justice Department has brought criminal charges against at least 209 individuals in 119 cases related to Paycheck Protection Program (PPP) fraud since banks and other lenders began processing loan applications on behalf of the Small Business Administration on April 3, 2020. And these cases are just the beginning.”
POGO’s analysis of the first batch of PPP fraud cases found that in at least:
- 107 of the cases, accused individuals allegedly falsified payroll documentation to justify either getting a loan or getting a bigger loan then they were eligible for;
- 93 of the cases, accused individuals allegedly created fake tax documents used for verifying details in loan applications;
- 41 of the cases, accused individuals allegedly created bogus companies to get loans;
- 28 of the cases, accused individuals allegedly used defunct companies to get loans;
- 20 of the cases, accused individuals used stolen identities or aliases while applying for loans;
- 12 of the cases, accused individuals allegedly falsified ownership of existing legitimate businesses;
- 28 of the cases, accused individuals also obtained Economic Injury Disaster loans (some of these individuals have been accused of fraudulently obtaining these loans as well).
So on one hand, this spike in EIN applications is the result of an exciting surge in entrepreneurial energy by a large number of people striking out on their own and getting their ducks in a row to start a new business, which is wonderful to see. On the other hand, this spike appears to include large-scale and systematic efforts at fraud, the extent of which – beyond some titillating nuggets emerging from investigations – we may never be able to fully fathom.
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Two WTF article in one week and on back to back day, is that a new record Wolf? I have a feeling if that’s the record it will be easily broken in the next 6 months….We’re at the verge of the roaring 20s and if new normal is right, without the hangover from the 30s…What a time to be alive!
see, Wolf is starting up his extension to Wolfstreet.com, soon, there will be a WTF@Wolfstreet.com as some kind of sister site, where crazy moments like these are recorded for posterity, either as a sign of the insanity of the times, or the commemoration of the new normal.
One can simplify – the DNS services say that wtfstreet.com is available!
Yes, another roaring 20’s! But I’m not so sure what happens after that. It’s entirely possible that the 2020’s mirror the 1920’s, and that the 2030’s —unfortunately— mirror the 1930’s.
I got suspicion that 21st century will mirror 20th century. Lots of similarities happening.
Ha ha. Could be,but we have 10 more years of good life. The show must go on!!!
Did the roaring 20s start with the level of debt and speculation we already have? Exactly.
If only stocks started the 2020s at valuations like they did the 1920s.
If only gold was still $20/ounce.
If only Congress and the Fed couldn’t simply print-and-spend money for their cronies, without immediate and painful consequences.
Soon the WTF articles will have their own WTF chart.
GFC hit and we tanked…..yep started a 2nd business. That’s how Americans roll.
Thanks for the article Wolf.
Reeks of fraud or crap data. Or are people yet again proving how stupid they are clamoring at the latest thing? Continually we hear about desperate businesses struggling (bs from the media?), and then here are supposedly a bunch of people jumping in to start them. If it was a surge to replace failed businesses as the economy reopens that would be one thing, but, that all the same business categories show the same aberrant upward spikes is insane and highly unlikely to be natural.
Did the government, at least, require an ID for the PPP loans?
“On the other hand, this spike appears to include large-scale and systematic efforts at fraud, the extent of which – beyond some titillating nuggets emerging from investigations – we may never be able to fully fathom.”
Well, it looks like at least an EID was required (see every chart above).
And tax/payroll records.
But the problem was wholesale forgery of required documents, with apparently little to no due diligence verification of the submitted documents before real cash money (in large amounts) got dispersed.
But, hey, isn’t even financial crime an economic stimulus, Keynesians?
Just another bridge to nowhere?
In theory, hopefully, there should be a gvt office, somewhere, trying to claw some of this back. The stats towards the end of the post indicate this…but at what scale?
Anybody want to Google up a link?
Nope.
Because the #1 criteria for PPP loans was… Are you a Donor to Trump.
https://apnews.com/article/00a34243825661313f2cb6a0f6a21720
AP is no longer a credible source on political matters. Sorry.
Ditto NY Times, Washington Post, Washington Times, Fox News, CNN, CNBC and nearly every other corporate-owned, advertising-revenue-based media business.
So where do you get your ‘information?’ Facebook?
How sad I feel to agree with you re AP et alia you mention WS!
Long long time newspaper reader, starting in early 1950s and continuing until a few years ago, including reading the old gray ladies ( NYT & @P ) front to back – for relaxation LOL 50 years ago.
As to where to get information, CB? Now retired, I read about a dozen ”dailies” around the globe regularly, including many ”Posts”, HK, Israel, Turkey, Jakarta, then many ”Times” such as Japan, Singapore, then get into some ”semi-official” rags such as RT. There is also an increasing availability of actual data from research reports, some of which appears to be fairly rigorous.
Between them all, and the others clearly propaganda, eventually the truth comes out IMHO; though to be sure it is absolutely necessary to read ”between the lines” of all, as was taught in every college and even in high school back in the days when a high school education was worthy of that name.
As far as guv mint going after PPP fraud, etc., my long term experience is that they will sooner and later; as is now showing with their pursuit of Stone,,, the sooner will be for those on the right,,, and the later will be for those on the left the next time the right has the power,,, i.e. the next swing of the pendulum.
“The high-end sushi restaurant and hotel chain co-founded by actor Robert De Niro accepted as much as $27.7 million in taxpayer-backed loans from the Paycheck Protection Program,”
“Harvard University, backed by a $40 billion endowment, is facing criticism for taking in nearly $9 million from the coronavirus relief package.”
“Firm tied to House Speaker’s spouse listed as receiving loan between $350,000 and $1m from taxpayer-funded programme.”
We all can play cherry picking game.
Well here you go the Brooking institute found another 10 billion to Trump lobbyist’s…
https://www.brookings.edu/research/addressing-the-other-covid-crisis-corruption/
Yup, Brookings Institute, another beauty.
Cherry picking and slanting game can go on ad infinitum.
My friend inherited some shares of a small nonpublic bank that’s been around a hundred years in the backwater of NY. She listened to the stock holders meeting and they told that the PPP loans had been a nice revenue generator for the bank. There is so much stimulus out there I think it’s going to take a while to see what the economy really is. Too much easy money is masking reality.
I recently applied for the second round of PPP. One takes a photo of driver’s license and sends it in with the application, along with a tax return and proof that you had the same business expenses in Feb, 2020 that you are claiming to have now.
Been two weeks and haven’t heard a thing. And I have someone working at a nonprofit to “help” me. No direct contact with this particular bank allowed. I doubt if I will ever get the loan.
I read an article from Man Yin To a research Analyst – his charts show the Nasdaq at frightening highs. If there is a major crash, what will the fed do?
Weimer PUS boy Powell will walk on water and turn toilet paper into dollar and save the market. Remember FED got your back and they will never fail
And that water will turn not to wine, but to oily, greasy, cheesy fedspeak to quash ANY fuffled wall$treat featherbedders.
One has to wonder just how many of THEM are on any of the above lists of fraud?
…. or recipients of any ‘churn’ produced thereof ….
Simple Print More Money
Anecdotal but meaningful: I do SCORE mentoring for small business owners, and we saw a yuuuge increase in the number of people asking for help in starting a business last summer. I call these “accidental entrepreneurs,” who never thought about starting a business until they were laid off during the pandemic — and almost all are going to be one-man/woman shops.
Most of them were trying to get in on the PPP funds, but without a record of paying employees they generally didn’t qualify. We’re seeing a little bit of a tapering off of the requests, but until we get back to some sense of full employment, I suspect the flow will continue.
Employer of last resort. Full employment with paid jobs. Not the Feds responsibility. Responsibility of Congress.
There are definitely some creative tax writeoffs if you own a small business. Hats off to these entrepreneurs.
Candidate in CA50 took out a PPP on his business, and the next day his business donated the money to his campaign. He then bought a slew of vicious TV ads against his opponent, and he won.
Now that’s true creativity. Industrial Revolution 4.0.
I suspect most of the new “retail” industry businesses are delivery drivers. For somebody who was laid off from a service industry job, the migration to a delivery job is a no-brainer. Little start-up expense, and you start earning right away. Amazon employs a bunch of them.
I assume the Doordash deliver drivers are independent contractors as well, but I’m not sure about that.
Delivery businesses would be classified under “transportation and warehousing” (light blue in the last chart), not retail trade.
But just being a driver doesn’t require you to file for an EIN (you deal with your income and expenses on your individual tax return under your SS#). But if you start a business entity and maybe expect to hire drivers, then you might file for an EIN.
Incredible information that truly lives up to “what is really happening behind the scenes”. This along with all the other stuff is really leading up to some kind of major crescendo.
Then diminuendo.
The orchestral movements here are Entro Interrupto diseaso, followed with Alto Corrupto Magnifico, thence Prosecuto Infinitessisimo. Final section has yet to be written as the composer is coughing up blood.
I lost my job and I am now getting unemployment. Because of these benefits and an additional 300 per week I am making 1000 per week going on 1 year now. This safety net, and some savings has finally allowed me to open my own business. My kids have free health insurance from the state. I also was able to get food stamps and 2 rounds of stimulus from the government.
My wife also files for unemployment after filing a 12000 tax return for her “dog walking” business. She is receiving a government hand out as well.
I have about 500K in the bank.
This is the first time I have been on unemployment in 20 years. It’s nice to finally use this broken system. The government is finally paying ME. It feels good, it really does.
It is good to be a Prince ..Nigerian or otherwise.. in the Time of Covid!
Just opened a new business application as howlwolfstreet ;)
Best Friday eva!!!
People will find any way to exploit any given situation. If they are going to give free money to businesses, then new businesses will begin to spout up everywhere, and close down just as fast.
I am afraid we have entered the new dark age……
Trying to connect the dots, business without payroll, and retail, and then you dropped the key term, internet, and it all came together. Maybe a lot of regular retail businesses spent the money on upgrading to tech retailer. Maybe you are just selling buggy whips to the Amish, while people in California want them too. Transportation is now even with construction, before it was well below. Maybe this the second coming of internet merchantilism.
“Maybe this the second coming of internet merchantilism.”.
Up there with candle shops, (shoppes), exotic teas, bridal services, stuff that isn’t needed; and it all reeks of desperation. Thinking about it, the economy of needed products and services is just so efficient and nimble there isn’t much room for startups. The problem is just getting cash into people’s bank accounts in a way that makes sense, is fair, and leaves room for people to contribute to society.
Yet Alabama Amazon workers declined to unionise last week. I guess they don’t feel a need for a living wage and acceptable working conditions.
Ah, what do I know? I just build stuff and try to stay retired. None of this makes sense to me anymore. I’ve just never figured out why it’s okay for the 1% and their family dynasties to prosper, and when Joe Schmuck gets a few bucks everyone screams inflation and deficits.
“Yet Alabama Amazon workers declined to unionise last week. I guess they don’t feel a need for a living wage and acceptable working conditions.”
They start out at over twice the federal minimum wage, with base pay of $15.50 plus some benefits.
Working conditions were a big part of the complaint. Seems Amazon could improve a lot in that department.
Yeah and guess what Dr Evil came came back with to address his worker’s concern on working condition? You guessed it, use AI so you can now work all your body parts. There’s no hope for this guy, tone deaf to the N degree just like Zuckerbot. Just waiting for the moment when he announce attaching laser beams to the sharks..
“We’re developing new automated staffing schedules that use sophisticated algorithms to rotate employees among jobs that use different muscle-tendon groups to decrease repetitive motion and help protect employees from MSD risks,” he wrote. “This new technology is central to a job rotation program that we’re rolling out throughout 2021.””
My son-in-law works in a Walmart fulfillment warehouse in Porter, Texas. It’s hard work and loading trucks is timed with performance goals. Pay is about the same as at Amazon’s locations.
Last year, the workers were dropping like flies because the warehouse is not air conditioned and during the hot summer here, and it was over 125 F inside the warehouse. WM management finally got funds from corporate to install AC. But it took a call to OSHA to get it done.
Working in warehouses is hard stuff and no different at Amazon’s. Seems like corporate big wigs need some education on what’s going on in their operations. Maybe if they went out in the field occasionally, they could learn something.
Workers conditions protest should go full circle to Covid protection, from day one. At the onset of the pandemic a worker in a NY? fulfillment center staged a walkout and he was fired. The MSM has never given us data on worker infections, deaths, [only that minorities show up large in infection rates, no reason given] just as CDC and WH promote the program of prophylatic measures in order to prevent overwhelming [corporate] hospital ICUs incl nonprofits, all hooked to the Health Insurance/Medicaid umbilical cord. One reason the stock market loves it, no liability was ever suggested (and meatpacking plants like Smithfield[Chinese owned] hire immigrant labor.) Then Wall St got another gift, Congress bailed out workers on the cuff, using deficit spending. Taxes will be raised, just not in your lifetime. The downside to deficits is inflation and corporations all have pricing power, and can offshore labor, or automate. Even the oil companies can gouge their customers. With so much s&*t happening, the MSM focuses on white cops shooting black perps. This is 2008 all over again. BS would have been Sec of Labor but that would tilt the thin Senate majority, wink wink. AAs are next week and Nomadland [part time Amazon worker living in her van] is on the fasttrack. Like Civil Rights, once the cause goes mainstream you can forget about it. sigh
So why buy anything from Walmart if they are abusing their workers? Same with Amazon. People are contributing to this abuse in buying their products. I have a lot of other reasons too numerous to mention. I’ve put them both on my vendor boycott list. I will not even buy a book from Amazon nor read that rag that they own called the WP or shop at Whole Foods. I bought a PC zoom camera in May 2020 because micro center had a run on their supply chain. Amazon hacked my credit card that I used to make the purchase, rolling up unauthorized charges. They also enrolled me in Prime w/o my authorization and sold my name and home phone to telemarketers. It took a major hassle to get off of it. These people are slimeballs of the highest order.
Paulo,
Read my reply to your last anti-American diatribe from your holier-than-though POV that was totally unrelated to anything in the article. You have a grudge and need to make yourself feel better by writing this stuff. OK, I get that. But I’ve had it up to here with them. So I want to see that you can keep your comments on track.
Maybe some Very Persuasive ex-FBI agents hired by Billionaire Bezos convinced the plebes that it would be UnWise to form a union.These things happen just like Bezos convincing local officials to alter trafficlight in front of Warehouse so les workers stop for less time thus cutting down the access time allowed to organizers??Because Bezos isnt rich enough!! :-)
Perhaps Bezos will be willing to pay employees more money if they would cut off thei rright arm below the elbow and have a an amped prosthetic extension adapted to the new bionic arm.
The new one would be more powerful than three men and would be able to extend up to higher heights to get items.
Future humans with special prosthetic adaptations will get paid more than there purely human co-workers. Amped legs would also work well, with an enhanced brain function chip implanted.
Tons of new air BnB’s
Wolf,
Enquiring minds want to know, what did you do with your PPP loan? Bitcoin, Gamestop, Robinhood?
Dogecoin and NFTs ?
Read the guy that started Dogecoin created it as a joke…well $40B later that’s one expensive joke on someone else’s money.
It just goes to show that the charlatan Elon Musk could pimp dog crap and his sycophants would buy it.
Hey, hey, hey, careful with too glibly putting down all of that.
GameStop, even though it may have become a bit richly priced, is a far more promising outfit than most give it credit for. They are more than just that ‘mall retailer’ left behind by the times that many see, they have instituted ambitious top level staff changes, they’ve now wiped out their debt, and I suspect they are brewing some much bigger plans based on their recently much strengthened position (both financially and reputationally).
Bitcoin, although I also see it as largely speculative, is an excellent vehicle in this environment. My take is that so long as we remain in a speculative environment then Bitcoin will continue to do well, so buying the dips and selling the rips is more or less like milking a cow. It works until it runs dry, but so far it’s chugging along.
Yeah, but when the cow goes dry you at least get some hamburger. When milking Bitcoin dips and rips, when it goes dry you are are the hamburger.
Yeah, Yancey, some day it will go the other way. Then buying the dip will no longer be a rewarding exercise.
As noted, though, my estimation is that the type of environment we are in currently will cause people (and institutions) to continue to broadly bid up Bitcoin (and other cryptos). So, barring other events, until people next start liquidating and seeking safety, I expect that things like Bitcoin will continue to do pretty well. A bit of common sense risk management in terms of initial allocation and reallocation of any gains along the way should shield against the worst of the hamburger scenarios.
Buying Bitcoin is not in and of itself grounds for any suspicion of mad cow disease.
“Roaring 20s” my hairy butt. Jpm record earnings based on loan loss reserves taken back. Yoy revs down 4 percent. The economy outside of dogturd coins and Lumber is grade A limp. Potemkin village makes you feel better?
Dear Howlstreet readers,
If you think this is the final WTF article, then you are wrong. A cliche “tip of the iceberg”. A lot is going on in the business, stocks, bitcoins and everywhere. So, there must be a WTF on every article here. we will get used to it. If you talk about these even to your close friends, they might think you are “the other party”, “against poor people” and “insane”.
Retail is very easy. Just open a shop where no body comes. Ask for PPP and close the business. Other must be also equally easier. Just hire your friend, sister in law and her nanny in a business to promote gardening. PO box entity. WFH so every one is at their home. Phone based business. Selling seeds no body wants.
Out of touch!!Seeds are a Hot commodity ad Whitchmer tried to outlaw them in last two years,more offgridtypes,more victory gardeners.People dont want mystery frankenfoods engineered with Gd knows what.Thats why CA Tried to make GM labels the law not too long ago.Of couse it was defeated.Amazons seed prices are insane and many seeds are out at local stores,Amazon,and elsewhere.Save those seeds and exchange them.Why does Gates have a massive seed storage facility?Start gardening now!! :-)
I sat next to two beefy guys at a local drinking establishment. Both builders. They were talking about plants etc. etc. I thought they both decided to grow weed. But no. Both were doing regular gardening!
If these guys are growing turnips, anything is possible.
Glad you reminded me with your comment w.
Seed Savers Exchange is a wonderful non profit org that provides a venue for folks to sell, buy, and trade seeds person to person as well as through the company.
The intent, and it works, is to ensure the survival of thousands of ”open pollinated” varieties that will reproduce exactly generation after generation.
We purchased many heirloom varieties from there/them and got excellent results both short and long term, and found that especially with tomatoes and garlics, varieties planted in the same place year after year became ever more delicious as well as more ”hardy.”
I encourage everyone who can to do their very best to grow as much of their food as possible using open pollinated varieties, and SAVE the SEEDS.
It’s really very easy.
Wow, nice, I haven’t seen this website before.
And what? No Amazon itchy fingers?
PPP is an example of terrible law making. I am not sure if the reason was the haste, or the lobbyism which brought us there, probably a combination. The grant function of PPP loans should have been structured differently. PPP should have have been only converted into a grant at the maximum of the amount that the 2020 revenue declared in 2021’s tax return is below 2019 revenue. This would have been very easy to integrate into the IRS processing. And this would mean only companies that really had a bad 2020 would get free money and both the legal and fraudulent graft would have been eliminated.
Yes. And that way it would have only functioned as a “loan” if a particular business had a really bad March, April and May and then made up for that and then some afterward.
We received PPP. All things considered, I give it a “C” as govt policy. When our customers shut off the new equipment taps last spring, our business was in free fall.
The PPP loan kept everyone on the payroll through the roughest spots. Without it, we would have survived, but at major cost to our 75+ employees, and to the business in the form of turnover on important people. We would have had to make deep and painful cuts to stay solvent.
The intent of the program was to avoid these painful cuts which ripple through the economy and send things spiraling out of control.
Was it hasty, uncertain, and rife with fraud…yeah probably. But it did work as a form of policy that was basically “shooting from the hip”.
Fraud is the order business in America. The MIC has fraud codified into its contracts by not requiring any accountability and better still no downside . The fraud allowed is specific and you have to have an an invite. If you don’t get the invite a puffed up prosecutor with a politician in the wing will announce on the nightly news we are a nation of laws as they haul off the un-invited perp. With this reality in hand I say God bless the new fraudsters . We do need a new dynamic in our old worn existing fraud machine.
Sorry but I just can’t buy this sudden growth in new startups as organic.
A sudden increase to take advantage of PPP. Yes 100%.
The PPP was the only sudden new money on the poker table.
We do need a new dynamic in our old worn existing fraud machine.
I guess most folks are really following the “ savvy financial bigwigs here” by ( not wasting a good Crises “!!!
The issue at hand though is the amount of wasted money, energy and good will of the compliant public.
It is a massive shame that a plan to counter or face and alleviate a health, Economic or for that matter any crisis does NOT seem to be on any planning radar of our government/s over inflated staffing and personnel’s!! Why?
What is the role of a F$@&)g government in times like these?
Why do we pay these scum inflated wages?!
Or is it more prudent to ask why do we employ them at all?
Surely a more targeted way of spending all these resources could’ve been found and arrived at in a reasonable time span!
How is it that in this day and age , a so called “ functioning democracy “ doesn’t have the means to look after it’s population?!
Many questions, still hang in the air,
How can we trust these corrupted minds to navigate us when the real crisis emerges?!
Any answers?!
Yep. The U.S. borrowed $6 trillion for this and we have almost nothing to show for it.
I haven’t seen this mentioned but I know several people who were laid off who started a “consultant” business with no clients just so they wouldn’t have a gap in employment on LinkedIn or their resume. As soon as the job market improves, they plan on getting a job at another company. That could partially explain business applications tracking layoffs (in addition to people starting real businesses with the extra case and the fraud).
First thing you do when you lose your engineering job – update your Linkedin profile to your new consulting company.
After one year out, nobody will hire them.
Not true ME!
Known several well qualified through experience folks providing professional services through consulting who have been hired back after the debacle of the years of 2007-9 (12?).
Some who literally goofed off in the Caribbean, etc., had to take a cut in pay,,, many who really worked and stayed with the developments in the field, including keeping their computer skills updated, even for six years or so, went right back to the same or even better positions.
1) Your sample vs Dr Kevin Hassett statistic.
2) Most of those who lose their high paying jobs, stock options and dividends will not recover to their old status..
3) The economy is strong, the economy is strong, but there is
no margin of error for being wrong.
4) Those ex big shots unemployed in Houston can tell u that gambling that nothing will go wrong,
when u have no moats, but u have high liabilities, with no income, can be painful.
5) QQQ is up, with no supply bars on the horizon.
6) QQQ made a new all time high, because the economy is strong ==> BU.
7) QQQ might (!!) miss a right shoulder…
8) BU can send QQQ to Mar 2021 low, and bounce back up,
to a lower high, a LPSY.
9) QQQ might form a small H&S pattern.
10) The next correction Sept low might followed by a strong bounce to a higher low.
11) Possibly a large H&S pattern PnF will send QQQ much lower targets.
12) There is nothing wrong with the economy. There is also
nothing wrong preparing for risk options.
13) If they come they will not shock u. You will know how to respond, because u do it when the economy is still strong.
I was laid off by ARCO in the mid-1990’s. I started a consulting firm shortly after that. By the early 2000’s, I had turned it into a SUB S Corp and ran it for the next 18 years. Very successful and now retired.
Anyone with ambition, drive, and skills can do this if they make the customer a #1 priority.
Yes, there are lots of failures in “instant consulting”, and lots of reasons for that, but the most common reason is most people are LAZY!
The most common reason for failure is initially underestimating the overhead costs of running a successful business. Under-capitalization is next. Sometimes – sometimes you can make up for those by working very long hours 6 days a week.
You don’t need to file for an EIN if you just start consulting (real or not). You don’t need to do anything. If you get a consulting contract, great, and you still don’t need to file for an EIN, but you get to do a Schedule C and associated schedules and forms and worksheets on your personal tax return and write off your home office expenses and a bunch of other stuff.
1) Applications are strong, because the economy is strong.
2) MSFT, AMZN & FB… are so strong, stronger than the rest combine.
4) If NDX correct until the end of the month NDX monthly will have one large buying tail and three long selling tails, until earning reports, or : one hanging man at the top of the chart and three shooting stars to the moon.
5) The financial sector is safe and strong. With low NPL, because everybody pay, XLF and BRK made a new all time high.
6) Trades rewarded PNC weekly with a DM13 gift.
7) BAC became an ugly pregnant Harami. WFC popup into Feb 10/ 18 2020 microscopic Harami, that opened pandemic gap, above Xmas 2018 low and
above Aug 2020 low.
8) XLF is due for a small correction.correct. BAC might get it’s DM13, forming perhaps a H&S pattern, or even move higher, because we are still stimulated.
9) If the next correction is deep, the sugar high spike will end with an ugly fight…
The economy is strong? LOL.
It requires massive stimulus, QE, and ZIRP to stay afloat. Not sure how that constitutes “strong.”
I view the U.S. and global economies as akin to the ER patient with an IV tube firmly plastered into his arm. Instead of a saline solution, he is getting Free Money via Stimmy Checks, no-repay PPP Loans, Unemployment Bennies in excess of job lost, No Cost Money from Blackstone Powell, and a ton of hot air from Washington (technically, air in IV line not a good thing!!!).
Without this constant flow of liquid (Liquidity, get it?!) GOVERNMENT SUBSIDIES VIA THE PRINTING PRESS, the patient would be headed for the Morgue. AND THAT IS WHERE HE OR SHE IS GOING AS SOON AS THE IV LINE FILLS UP WITH MORE AIR. We are probably just weeks away from a “Got Ya” moment for the ER patients.
Applications are strong because it doesn’t cost anything to get an EIN.
The electrical part of any project, building a new airport, new hotel, a warehouse, an industrial plant… is about 1/3 of the total cost.
By saving the heating/ cooling systems, they might save half of the electrical part.
And the added bonus of no monthly electric bill for HVAC. Suprise. This is nothing new ???
1) On the cusp of recession, a flourishing small business expand, because the economy is strong, and reward their employees with an expensive air condition system, by borrowing heavily from the bank.
2) Within a year they went BK, because of their spending binge. 3) Their landlord kept the air condition system after eviction, either to sell to the liquidators, or for the next tenant, because it’s part of the building fixture.
Very sad. Moves of desperation in an economy where even established businesses can’t find employees thanks to debt-based government handouts.
Add to that the inevitable future waves of COVID-19 caused by new variants as Canada is experiencing right now [and Brazil and India], variants not stopped by current vaccines or even by widespread natural immunity as acquired in Brazil from previous waves there.
1) WTF : divorce applications plunging too?
2) Couples are stuck in the house, with no MIL from each side around, less unfriendly interventions, less coalitions behind the back against the other side.
3) The difficult economic situation and uncertainties help the marriage institution. .
4) Child support dropped. Cash flow to ex dropped. The gov stimulus
and forgiveness certainly will stop. Husbands pocket never stop. Husbands do what it take to fill it every month, ex don’t. Their cash is gone.
5) Violence and abuse in the house are rising, but the police don’t care. The divorce court on sabbatical, but online divorces are booming.
6) The Pareto top ladies pay an unemployed ex’s support.
7) Houston energy sector the big shot ex might never find a job
paying job, after one year without calls for referrals by any potential employers, because he lost his skills.
8) The weak economy and the uncertainties is a strong incentive to family, marriage and religion.
#7……no job for step daughter-in-law in Houston after 13 months of layoff from oil company. And, no prospects in sight. At 50+ years old (and single), she will be waiting tables at Denny’s soon (maybe).
Why waiting tables? Why Houston ( family/kids? )
What does she enjoy doing?
I used SCORE 30+ years ago to help us with our business start up.
Used them again back during the GFC for advice on our 2nd start up.
I hope she does well. I know from experience the risk taking gets
more difficult with age.
She’s an oil & gas accountant and that’s a specialty here in oil country. But she was making $120K/yr and now things are “soft”.
1. Nobody’s hiring her specialty due to companies slimming down
2. She’s too old and the younger accountants are paid less
3. Family here (son, us, cousins, etc.)
4. She owns a home with a mortgage (probably will sell it soon)
5. What she likes to do is what she was doing.
6. When mortgage forbearance ends, she will be forced to make decisions.
“We have met the enemy and he is us” POGO
8) After the fight, a little begging and hugging rejuvenate love.
GREAT POST!!!
Thanks!
Query”
1. How many new EINs are from re-formed businesses, that is, people who’d to shut down a business because of the pandemic and now want to restart the business but need to do so as a new entity?
2. How many EINs are people who used to be employees and are now independent contractors and/or engaged in the gig economy?
The first is middling good news, the latter not at all.
Hart Liss,
#1. If you shut down a business and then later start a new business, you started a new business. There are always business shutdowns, especially in the startup space. The number of “exits” as they’re called is large, and in bad years exceed the number of entrants.
But if you just put your business on hold and then restart it (like a restaurant during the lockdown), you don’t need a new EIN.
#2. You don’t need an EIN at all if you’re a contract worker, Uber driver, gig worker, etc. You use your SS#.