(Reuters) - 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, Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday.
“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.
For example, the state of Nebraska, which was less affected by the virus, received a higher rate of PPP loans than states such as New York, New Jersey or Pennsylvania, which were harder hit by the virus, he said. Part of the problem is that many of the smallest businesses in affected areas faced a harder time applying for the program because they did not have existing banking relationships, Harker said.
“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.”
Research from the Philadelphia Fed found that small business employees who lost jobs because of the pandemic were disproportionately people in racial or ethnic minorities, and more likely to be young and less educated, he said.
Reporting by Jonnelle Marte; editing by Jonathan Oatis