Federal Reserve Bank Harker: US economy remains “mired” in crisis

Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday that months after the coronavirus arrived in the United States, the economy remains "mired" in crisis and policymakers need to create solutions that offer better support to struggling small businesses,

Reuters reports:

"Indeed, even as the economy is reopening in fits and starts, the pandemic’s effects are proving not to be just a brief setback," Harker said in remarks prepared for a webinar on small businesses organized by the Fed. "We are in a downturn that is both exceptionally painful and stubbornly long-lasting."

Harker said the Paycheck Protection Program, which offered loans to small businesses that could be converted to grants, was an "immense help" to millions of businesses. But the Fed official called the program a "blunt instrument," saying it fell short when it came to aiding businesses in areas hit hard by the virus.

"And so, when PPP loans became available, these business owners had no ability to access them," Harker said. "This is a problem that has disproportionately affected racial minorities and communities of color."

Key notes

• Fed's Harker says us economy remains 'mired in a crisis' months after coronavirus arrived in country.
• Harker says small business job losses disproportionately hit minorities, the young and the less-educated.
• Harker says we are in downturn that is both 'exceptionally painful and stubbornly long-lasting'.
• Harker says employment crisis would be worse without PPP but called the program a 'blunt instrument'.
• Harker says PPP loans did not flow easily to minorities or areas hard hit by coronavirus because many small businesses lacked banking relationships.

Market implications

Little here for the markets to respond to, although it underpins an underbelly of risk-off sentiment that has been brewing this week.

More on that here:

• S&P 500 Index bull-trap set-off, drops into the bear's lair as bank's earnings get underway