Billions of dollars in small business loans appear to have kept unemployment insurance claims from skyrocketing in some of the states benefiting the most from the program.

The Paycheck Protection Program, implemented by the U.S. Small Business Administration under the CARES Act passed by Congress in March, has served as a lifeline for small businesses that have faced mandatory closures, piecemeal reopenings and diminished demand after the virus took hold in mid-March. Congress has allocated a total of $660 billion to the program over two rounds of funding.

According to SBA data compiled by S&P Global Market Intelligence, high PPP funding is correlated with states that have been able to keep unemployment numbers low relative to other states. Six of the top 10 states in terms of total loan approvals as a percentage of small business payroll across that state — South Dakota (93%), Utah (93%), Nebraska (92%), Idaho (91%), Kansas (90%), and North Dakota (90%) — were also among the 10 states with the lowest insured unemployment rates for the week ended June 13.

"Whether looking at the number of PPP loans issued, the number of jobs retained according to the PPP data, or the dollar value of loans they all seem to have a similar positive relationship with the number of jobs recovered between April and May," Dante DeAntonio, senior economist for Moody's Analytics, said in an interview. DeAntonio added that a clearer picture will emerge after the June state-level unemployment data is released July 17.

Through the first two rounds of funding ended June 30, Florida and Hawaii, two tourism and hospitality/leisure-heavy states, led the way with a 96% PPP approval rate as a percentage of small business payroll, according to the SBA. Virginia (72%) and Massachusetts (73%), meanwhile, had the lowest approval over that span. Massachusetts (15.9%) ranked sixth-highest among states in terms of insured unemployment rate.

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While Hawaii businesses received PPP approvals that covered nearly all their payrolls, the state had the second-highest insured unemployment rate for the week ended June 13 at 21.3%. Nevada, a state heavily reliant on gambling revenue, had the highest unemployment rate as of that date at 21.4%. Nevada's PPP participation covered 86% of the state's small-business payroll, according to the SBA.

"In general, vacation destinations are the hardest hit locations at the moment and in the foreseeable future," Gad Levanon, vice president of labor markets for the think tank The Conference Board, said in an interview. "I think it will be a while before leisure, hospitality and air travel go back to normal."

In dollar terms, healthcare and social assistance ($67.36 billion) led the way for loans approved by sector, while professional, scientific and technical services ($66.43 billion) and construction ($64.57 billion) were not far behind. Healthcare (475,000 jobs added) and construction (158,000 jobs added) were also among industries that saw six-figure job gain totals in June.

According to data compiled at the start of June, accommodation and food services remained largely unchanged, accounting for 8.1% of PPP funding versus 8.0% a month prior and fifth among subsectors. The program allows for loan forgiveness given that employers keep or quickly rehire employees at maintained salary levels.

Weekly U.S. unemployment insurance claims have remained steady at roughly 1.5 million for each of the past three weeks, while total U.S. unemployment fell to 11.1% in June as a record 4.8 million jobs were added over that month. Still, jobless claims have totaled 48.7 million since the pandemic started to shutter businesses in March.

It is likely that some businesses went under before the PPP was an option, meaning that even if the program is successful, it will not help bring those businesses back, DeAntonio said. Consumer-driven sectors like restaurants, bars and travel-focused businesses are in for a long road ahead, especially with case counts ramping up again in many states, he said.

"In terms of how much of a solution PPP can be, I think the answer is likely 'not enough' as currently constructed. Some of that stems from the initial conception of PPP and the fact that initial loans weren’t dispensed until about a month after many of the non-essential business closures were put in place," DeAntonio said. "The adjustments made to the program recently to lower the payroll threshold and extend the window businesses have to use the funds will certainly help those that are still in business, but it still isn’t clear if it will be enough given that the crisis is likely to extend much longer than initially anticipated."

President Donald Trump on July 4 signed legislation to extend the PPP through Aug. 8, though the program has drawn considerable scrutiny in recent days for providing assistance to businesses that were already financially sound.