Illustration: Eniola Odetunde/Axios

The economic progress made by the U.S. over the last month is slowly falling apart. Three of the four most populous states in the country are seeing notable increases in confirmed cases of COVID-19, business activity is contracting, consumer confidence is retreating, bankruptcy filings are rising, and the stock market is falling.

Why it matters: Even before governors in various states announced new bar and restaurant restrictions on Friday, "high frequency data on service sector activity suggests businesses and consumers may already be responding to the surge in new cases," economists at asset manager Nomura wrote in a note to clients.

  • Economists at Deutsche Bank note, "states with faster case growth are now underperforming economically based on measures of small business activity, restaurant bookings and consumer spending."

The state of play: In March, as it became clear the coronavirus pandemic would severely impact U.S. businesses and consumers, the Fed stepped forward and led the way with extraordinary policy action — cutting rates from 1.50%–1.75% to near zero in a matter of weeks and announcing an unlimited quantitative easing program.

  • Congress followed, passing the largest spending bill in U.S. history, and already is on pace to borrow nearly $4 trillion for fiscal year 2020 (which ends Sept. 30).

Yes, but: There is growing evidence that the Fed's programs are not benefiting ordinary Americans and congressional action has missed the mark.

Where it stands: So far, the Paycheck Protection Program looks to have excluded many of the most needy businesses and close to 90% of the government's $500 billion loan program for bigger companies remains untapped.

  • Larger firms have preferred public markets — where they can borrow at record low rates thanks to the Fed's actions — over lending from Congress that requires executive compensation limits and freezes on layoffs.

What to watch: Economists at Jefferies point out, "Congress has to deliver the Phase 4 legislation in the narrow window between July 21-31."

  • July 21 is the first day both the House and Senate are back in session following the July recess, and July 31 marks the expiration of expanded traditional unemployment benefits and pandemic unemployment assistance, which was being utilized by around 12 million people, as of Thursday's report.

Go deeper: The (near) cashless society arrives

Go deeper

U.S. economy added 4.8 million jobs in June

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. economy added 4.8 million jobs last month, while the unemployment rate dropped to 11.1% from 13.3% in May, according to government data released Thursday.

The state of play: While the labor market showed more signs of recovery when the government’s survey period ended in early June, the lag means that more recent developments, like the surge in coronavirus cases and resultant closures in some states, aren't captured in this data.

Rising coronavirus cases pause U.S. economic recovery

People eat at the outdoor dining area of a restaurant in New York City. Photo: Wang Ying/Xinhua via Getty Images

Given the reporting lag for most traditional economic indicators, investors have turned to real-time data to assess the U.S. economy. Almost all of which shows business activity stalling or declining.

What's happening: Economists at Jefferies write in a note to clients that their in-house economic activity index has "flat-lined" and "has now been moving sideways for the past three weeks."

Consensus grows about the Fed's impact on equities

Data: Federal Reserve; Chart: Axios Visuals

Minutes from June's meeting of Fed policymakers was released on Wednesday and showed the central bank is still ready to provide support "for some time" to markets.

Why it matters: With coronavirus cases rising, recent economic data largely moving backwards, and companies' earnings and revenue guidance slipping, the Fed looks to be the driving force behind the march upwards of stock prices.