The economic rebound powering the S&P 500 Index to almost-daily records has left large swaths of Main Street behind, with millions of small businesses waiting to join the party.

The recovery may have plateaued for firms with fewer than 500 employees, recent data suggest. For the week ended April 18, 20% of small businesses reported a decrease in sales from the prior week, while about 13% saw an increase, according to the U.S. Census Bureau’s Small Business Pulse Survey. The majority reported no change. The return to growth seen since January, when more than 40% of respondents had revenue declines, has stalled in recent weeks.

The problem is that consumers spent most of their stimulus checks with large chains and e-commerce retailers, rather than with local shops, said Kenan Fikri, research director at Washington-based public policy group Economic Innovation Group. Small businesses won’t see a full recovery from the Covid-19 crisis until people feel more comfortable traveling and dining out, Fikri said.

“Slow and plodding is about right for us,” said Andrew Volk, co-owner of the Portland Hunt + Alpine Club restaurant in Maine, which is keeping capacity at 20% for safety reasons, even though the state allows up to 50%. “In Maine, where we are, things are not excellent. The case load is not going down. The vaccine rollout is going well, but it’s taking time.”

Flatlining
Small businesses have been the growth engine of the U.S. labor market, employing almost half of the private workforce before the pandemic. Tracking the “split-screen recovery,” as as Fikri calls it, is key to assessing the strength the current ride in the overall economy.

More than 12% of firms in the Census Bureau small business survey have experienced a 50% drop in operating capacity compared with pre-Covid-19 levels.

But the fortunes of small companies vary greatly based on their industry and their location, with firms in urban centers in the Northeast and California, where the virus and activity restrictions hit the hardest, most penalized.

Tough Environment
Data from Opportunity Insights, a research organization based at Harvard University, show total revenue for U.S. small businesses was down 26.4% as of April 14, compared with pre-pandemic January 2020.

However, while small-business revenue in Washington, D.C., dropped 59%, businesses in Oregon were down only 1.5%, Opportunity Insights data show.

—With assistance from Tom Contiliano.

This article was provided by Bloomberg News.