The Paycheck Protection Program (PPP) "appears to have missed the mark," S&P Global chief economist Beth Ann Bovino writes in a research report to be released today.
What it means: The PPP's first round largely skipped over states and industries that were the most in need, while the second round still has 39% of allocated cash remaining, even as many businesses are at risk of permanent closure.
- And data shows that only about one in three small businesses reported applying for PPP funds and less than one-third of those received the loans.
Why it matters: Even as governors allow businesses to reopen, skittish customers and social-distancing requirements mean many will be dealing with reduced demand for some time and few have the resources to do so on their own.
- A recent working paper from the National Bureau of Economic Research (NBER) finds that many small businesses are "financially fragile" and have only enough cash on hand to last for two weeks.
By the numbers: Bovino's analysis of the SBA's data finds the "bulk of the program seems to be benefiting states with fewer jobless claims."
- Eight of the 10 states that received the smallest loan amounts had the highest unemployment rates.
- Seven of 10 states that received the largest loan amounts had the lowest unemployment rates.
A similar theme is present in terms of industries — those hit hardest by the pandemic, in terms of job losses, received the least funding from the first program's total approved loans.
- Service industries, which accounted for an unprecedented 12.9 million jobs lost in April (62.9% of the 20.5 million), received just 36% of loans.
- Leisure and hospitality and retail lost 9.8 million jobs, or 48% of the total lost in April, but received only 19%.
- In contrast, goods-producing industries lost 2.3 million jobs (11% of the April total) but got 27%.
- Information services and financial industries lost 27% of jobs but got 36%.
Of note: These have somewhat improved in PPP's second round but remain tilted toward states and industries less affected by the pandemic.
Go deeper: The moving goalposts for PPP loans