How Main Street is recovering from Omicron— and 10 ways owners can fast-track a rebound

COVID’s two-year run has had a devastating impact on many small businesses and hourly workers, with the latest Omicron surge presenting further staffing issues and setbacks. 

To understand just how much Omicron has affected small businesses — and their particular outlook on the labor market — Homebase looked to our own hourly workforce data and surveys of small business owners and employees. Our findings suggest that Omicron’s impact has not only led to a significant decline in hours worked across the country, but also a decline in the optimism both owners and employees are feeling about the future. 

Fortunately, our research has also shown a quick recovery from the worst of Omicron. Our surveys have also uncovered 10 practical ways small business owners can combat COVID-induced staffing setbacks and build back a better, stronger team. 

Omicron led to significant challenges as we started 2022

Small businesses faced hourly work declines across the country. Homebase data showed a significant decline in employees working and hours worked, with total hours worked declining by approximately 10 percentage points from mid-December 2021 to mid-January 2022. These declines were seen in every top 50 Metropolitan Statistical Area (MSA). The leisure and entertainment and food and beverage industries were the hardest hit, with declines of 12% or greater in establishments in these industries. 

Figure 1. Decline in within-establishment hours worked due to Covid surges by industry (January 19, 2020 – January 19, 2021). 

These declines reflected both business slowdowns and staffing challenges. During January, approximately 31% of surveyed workers reported missing at least one shift due to Omicron.

During this period, optimism declined. Homebase surveys from November 2021 and January 2022 reflect that, following Omicron, fewer owners and employees are optimistic about the future. Owners, in particular, were twice as likely in January to say that things will be worse one year from now, compared with November. 

Small businesses have seen a recovery since mid-January

Hours worked rebounded in February in most of the top 50 MSAs. Homebase data showed an increase in employees working and hours worked in the vast majority of the top 50 Metropolitan Statistical Area (MSA) from mid-January 2021 to mid-February 2022. (The three cities that decreased relative to mid-January levels are Portland, Milwaukee, and Nashville.) Overall, the number of hours worked during this period increased by approximately 6 percentage points. (For more, see our February Main Street Health report.)

There have been sharp recoveries in many industries. But many, including food and beverage, remain below their pre-Omicron levels. The total number of hours worked in mid-February is still approximately 4 percentage points below the mid-December measure.

 Figure 2. Percent change in employees working (mid-February, 2022 v. mid-January, 2022)

Small businesses are still facing hiring and staffing challenges.  Our data show that job postings have largely returned to pre-Omicron levels since the beginning of 2022. But the number of applicants per job post continues to trend downward. The number of applicants per job post is approximately 16% lower than it was in mid-December, suggesting that employers may have a limited set of applicants to consider and compete for as they build back post-COVID teams. 

10 ways owners can combat staffing impacts to build a stronger, better team

A recent Homebase survey of 2,000 small business employees uncovered the top 10 factors most important to hourly workers considering a job offer:

1. Company leadership
2. Pay
3. Great co-workers
4. Flexible work hours
5. A predictable work schedule
6. Company culture
7. Learning and development opportunities
8. Company commitment to sustainability and the environment
9. A short commute
10. Health insurance

Interestingly, our research shows that hourly workers value company leadership over pay and place a high value on benefits like great co-workers and company culture — many benefits that tech-based solutions like Homebase can help business owners provide. 

Online scheduling and time tracking tools, for example, give employees peace of mind around schedule flexibility and predictability. In-app team messaging keeps teams connected and informed about everything from shift changes to development opportunities and company values. And pay advance features like Cash Out give small business employees early access to wages with zero interest or fees — at no extra cost to business owners. The Homebase app also comes with built-in feedback surveys, team recognition, and other tools to help owners lead with purpose and create a culture that sets their business apart. 

Bottom line? The staffing impacts of Omicron may stand to linger some, with less-optimistic workers applying for fewer hourly job openings in the near term. But — by making a concerted effort to consider, offer, and emphasize the factors most important to hourly workers — business owners can do a lot to attract and retain talent over the competition. All while setting themselves, and their teams, up for long-term success. 

Methodology

COVID impact data: To determine how Covid reduced hours worked, we linked Homebase data to Covid case count data from the New York Times at the county level. We then developed a within-establishment model that predicts how labor demand for establishments changes as a result of increasing Covid cases in the prior week. Our within-establishment models account for variation in firm staffing patterns, seasonality, Federal Holidays, county-level factors, time effects, and industry variation. We found that when Covid cases surged from the pandemic median to the 95th percentile or greater, our customers in the food &  beverage category were especially hard hit with a reduction of approximately 15% in hours worked. 

Employee and owner outlook surveys: Homebase surveyed approximately 2,000 small business owners and their employees in November of 2021 (pre-Omicron) and approximately 700 in January of 2022 (during Omicron), to determine how they perceive the current labor market — and to understand how their perceptions may be changing as a result of Omicron’s impact.