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On July 6, the Small Business Association (SBA) resumed accepting applications for the Paycheck Protection Program (PPP). While the program has been heralded by many as a lifeline for small businesses, more recently, many have questioned both the true beneficiaries of the policy and the accuracy of the data.

That is, the SBA released a database of businesses receiving PPP loans–separating businesses that received less than $150,000 from those that received more than $150,000–which details company names, loan amounts (in the form of a range), and the number of jobs retained as a result of the loan. Since the release of this data, Pioneer has released a PPP Loan Tracker, a public tool that displays data on loan recipients and lenders by industry, municipality, and state average.

The data highlights some interesting trends in Massachusetts’ PPP loan data by the size of the recipient firm, with small businesses being the initial intended target of the program.

Table: Massachusetts PPP Loan Summary Statistics
Large Businesses (Over $150k Loan)Small Businesses (Under $150k Loan)
Small Businesses (Under $150k Loan)18,17794,774
Total Dollar Amount Loaned$12.2 billion$3.5 billion
Average Loan Amount per Business$672,021.04$37,254.43
Jobs Retained740,747402,764
Jobs Retained per Employer40.58 jobs4.25 jobs
Amount loaned per Job Retained$16,559.50$8,763.62

Breaking down the numbers

Although the program is administered by the Small Business Association, in truth, economic protections extended far beyond single-store owners. Technically, firms must have fewer than 500 employees to qualify for a loan, but in practice, companies that exceed that mark still qualify in the case that they do not have more than 500 employees per location. Since the purpose of the Paycheck Protection Program was to alleviate costs for small businesses, it is not surprising that the total number of businesses receiving smaller loans (less than $150,000) greatly exceeds the number of large businesses.

What is of interest, however, is that “larger” businesses, referring to those that received a loan greater or equal to $150,000, were awarded approximately four times the amount of their smaller counterparts, while having fewer than two times the total number of employees. While larger firms may have greater overhead costs than smaller firms, thus qualifying for greater loan amounts, it is undoubtedly noteworthy that approximately $12.2 billion of the $15.7 billion distributed–77% of total funds–went to larger loans, and likely larger businesses.

Companies that qualified for a loan of $150,000 or more seemed to benefit from the program more than smaller businesses, accruing approximately 77% of total PPP funding while only accounting for 16% of the total businesses that borrowed. More significantly, PPP loan dollars seem to be about half as efficient for large businesses relative to small businesses, as the SBA loaned $8,763 per job retained for small businesses and $16,559 per job saved among big businesses. In other words, the aid provided to small businesses was nearly twice as effective in saving jobs.

Although the jobs retained numbers reported by the U.S. Treasury have undergone great scrutiny for containing data errors or possible manipulation, the information made available suggests certain noteworthy trends. It is, once again, no surprise that according to SBA data, large businesses apparently retained significantly more employees than smaller businesses, and the average number of jobs retained for a large business was about ten times greater than small businesses–about 40 employees per large business and 4 employees per small business. The average loan size for large and small businesses were $672,021 and $37,254, respectively.

Potential for Data Errors

Following the initial release of the data, concerns were raised about both methodological and technical aspects of the data, as many businesses reported that the data was inaccurate. More explicitly, the SBA did not release a detailed methodology regarding how it calculated the number of “jobs retained” per employer, a number intended to measure the impact of the loans on the businesses that received them. At first glance, there appear to be issues of data entry, evidenced by an electrical contracting company which reportedly received a loan between $5-10 million that is recorded as retaining zero jobs. If similar errors occur throughout the data set, the impact of the PPP program on job retention may be difficult to calculate.

In addition to these data errors, there appears to be a significant discrepancy between firm employment data and the recorded amount of jobs saved by the program. According to–a Pioneer tool that displays state and local employment data from the Massachusetts Labor Market Information database along with the “Your-economy Time Series” (YTS) data,  formulated by the University of Wisconsin–many businesses’ jobs retained figures appear to be significantly inflated from their 2018 levels according to YTS.

For example, a drywall and insulation company (NAICS code 238310) only had four employees according to 2018 YTS data, but reportedly retained 82 jobs through its PPP loan. Another example comes from a machine manufacturing shop (NAICS code 332710) that is recorded by the SBA to have retained 102 jobs, a figure that is more than ten times greater than the YTS data, which indicates the same company had only ten full-time employees in 2018. These variances seem to occur randomly, as many other businesses report jobs retained numbers that are relatively consistent with 2018 employment.

On a macro level, there were even more notable discrepancies between 2018 YTS employment data and PPP “jobs retained” figures. In a sample of 334 businesses from around the state, YTS data counted 10,314 jobs in 2018, while SBA “jobs retained” data from the beginning of July reported saving 16,794 jobs among these businesses. Data from the BLS appears to directly contradict this, as the SBA figures imply an unprecedented 62.8% growth in employment from YTS 2018 numbers, as total employment for June 2020 is down 17% from 2019 average total employment in Massachusetts.

Looking Forward

According to the SBA, which has been promoting the efficacy of the Paycheck Protection Program, the PPP in Massachusetts saved a combined total of over 1.1 million jobs, numbers once again inconsistent with Massachusetts unemployment data. For context, Massachusetts’ total unemployment for the month of June was 638,068, resulting in an unemployment rate of 17.4%–the highest in the nation. The SBA data indirectly claims that the program is single-handedly responsible for keeping 31.1% of the Commonwealth’s workforce employed that might otherwise not be, a finding that most likely indicates some level of inflation of ‘jobs retained’ figures.

Confirmation of more reliable “jobs retained” figures may come following the loan forgiveness application process, in which companies must detail if their number of employees or total payroll decreased. Given that the recently updated conditions of the program grant employers until the end of the calendar year to report data, the actual number of jobs retained as a result of the PPP will not be fully known for a number of months.

It remains challenging to assess the exact effectiveness of the program in the face of the ongoing COVID-19 pandemic, especially considering reported inaccuracies and the unconfirmed methodology determining the number of jobs retained by individual PPP loans. While some have championed the program’s success at protecting the majority of small business owners, others have pointed to serious flaws in the program’s implementation and reporting. In sum, both widespread inflation of the jobs retained figures and obvious data entry errors significantly hinder the ability to assess the true efficacy of the program.

See the first post in this series (“Where Did the Largest PPP Loans Go? Assessing the distribution of loans by industry“), which presents the Massachusetts industries that benefited the most from PPP loans, and which ones may have been left behind.