(Headline USA) Forced into a widespread shutdown blamed on the coronavirus, the U.S. economy grew at a 4% annual rate in the final three months of 2020 and shrank last year by the largest amount in 74 years.
For 2020 as a whole, a year when the coronavirus inflicted the worst economic freeze since the end of World War II, the economy contracted 3.5% and clouded the outlook for the coming year. The economic damage followed the introduction of the pandemic 10 months ago and the deep recession it triggered, with tens of millions of Americans left jobless.
“Amazing that the economy continued to grow at 4% in the 4th quarter despite the pandemic,” said Stephen Moore, economist and co-founder of the Committee to Unleash Prosperity. “Almost all of the growth was in the southern and mountain states with Republican governors. If Democratic governors in California, New York, and Illinois had not shut down their economies, the growth would have been closer to 8% nationwide.”
Thursday’s report from the government estimated that the nation’s gross domestic product — its total output of goods and services — slowed sharply in the October-December quarter from a record 33.4% surge in the July-September quarter.
That gain had followed a record-shattering 31.4% annual plunge in the April-June quarter, when the economy sank into a free-fall.
The outlook for 2021 remains hazy.
Economists warn that a sustained recovery won’t likely take hold until vaccines are distributed and administered nationwide and government-enacted rescue aid spreads through the economy — a process likely to take months.
On Thursday the government reported that while applications for unemployment benefits declined last week, they remained at a historically high 847,000, evidence that companies keep cutting jobs as the pandemic continues to rage.
Before the virus erupted in the United States in March, weekly applications for jobless aid had never topped 700,000, even during the Great Recession.
Even as the economy shrank last year, the stock market managed to rise sharply, with the S&P 500 index gaining 16%.
The disparity between the two reflected a time-tested adage: The stock market is a forward-looking indicator, with investors focused on prospects for future corporate profits and economic health rather than on the current state of the economy.
So even as the economy was sinking last year, investors looked ahead to hopes for vaccines and government aid and to solid company profits, especially among tech companies, which drove last year’s gains.
The pandemic’s blow to the economy early last spring ended the longest U.S. economic expansion on record — nearly 11 years.
The damage from the virus caused GDP to contract at a 5% annual rate in last year’s January-March quarter.
Since then, thousands of businesses have closed and nearly 10 million people remain out of work.
Adapted from reporting by Associated Press.