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. The most obvious is jobs data, which show 33.1 million Americans still receiving some form of unemployment benefits.Banks, flush with record new deposits from antsy customers, have significantly reduced loans and tightened lending standards.The U.S. savings rate in May was 23.2%, down from April's record 32.2%, but still nearly three times as high as before the pandemic.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