The US economy grew in the last quarter of 2020, but that wasn’t enough to pull the economy out of red for the year.
The U.S. economy continued to rebound in the last three months of 2020, but the weaker-than-expected boost was not enough to offset a contraction in the first quarter and a historic plunge in the second, leaving the world’s largest economy in the red for the year.
U.S. gross domestic product (GDP) – which measures the total production of goods and services – grew 4% on an annualized basis in the last three months of 2020, the U.S. Department of Commerce said Thursday.
The figure was lower than many analysts expected and reflects the trail of the surge in COVID-19 infections and the restrictions that are undermining business in the country at the end of 2020.
In the third quarter ending in September, economic growth jumped 33.4% on an annualized basis.
GDP increases in the third and fourth quarters were not enough to recoup the contractions of the first and second quarters of 2020 – when the economy shrank 5% and 31.4% respectively.
On an annual basis, the US economy contracted 3.5% in 2020 – the worst annual decline since 1946 and the first annual decline since 2009, when the country was reeling from the Great Recession.
Consumer spending, which accounts for about two-thirds of economic growth in the United States, rose 2.5% in the fourth quarter of 2020, compared to 41% in the third quarter.
A myriad of indicators have signaled a sharp deceleration in economic activity in the final months of 2020.
The economy shed 140,000 jobs in December, slowing down seven straight months of job creation. The unemployment rate last month was 6.7%, nearly double the rate just before the pandemic.
The leisure and hospitality sector, which includes restaurants and bars, was particularly hard hit, shedding nearly half a million jobs in December.
Federal Reserve Chairman Jerome Powell on Wednesday highlighted the carnage in the labor market and the disproportionate fallout on low wages and minority workers as he explicitly linked the progress of vaccination campaigns to the return of the healthy economy.
“There is nothing more important to the economy than getting people vaccinated,” said Powell, adding that he had received a COVID-19 vaccine and that he expects to receive a second soon. .
Many economists expect the economy to pick up later this year in the hopes that vaccination campaigns will hasten the return to business as usual and trigger months of pent-up demand for goods and services that have been derailed by the pandemic.
US President Joe Biden has proposed a massive new $ 1.9 trillion stimulus package to accelerate nationwide immunization initiatives and give more financial assistance to struggling households, small businesses and communities who suffered most of the economic fallout from the pandemic.
The measures include giving an additional $ 1,400 direct cash transfer to eligible Americans – in addition to the $ 600 stimulus checks included in December’s $ 900 billion virus aid round – and the increase in the federal weekly supplement to state unemployment benefits from $ 300 to $ 400.
Democrats now control both houses of Congress – which ultimately controls the nation’s tax and spending policies – but many Wall Street analysts expect horse trading with Republicans to shrink in size and size. scope of the stimulus proposed by Biden.