Stuck in the grip of a viral pandemic, the United States economy grew at a 4-percent 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 disease 2019 (Covid-19) inflicted the worst economic freeze since the end of World War II, the economy contracted 3.5 percent and clouded the outlook for the coming year. The economic damage followed the eruption of the pandemic 10 months ago and the deep recession it triggered, with tens of millions of Americans left jobless.
Thursday’s report from the Commerce Department 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 percent surge in the July-September quarter. That gain had followed a record-shattering annual plunge of 33.4 percent in the April-June quarter, when the economy sank into a free-fall.
The outlook for the 2021 economy 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.
“The economy is still struggling,” said Mark Zandi, chief economist at Moody’s Analytics. “How strong the economy is later this year will depend on how the virus evolves and the effectiveness of the vaccines and mitigation efforts.”
Zandi predicted that the economy will expand at a 4.4 percent annual rate in the current quarter and achieve annual growth rates later this year above 5 percent. But he cautioned that his forecast is based on the enactment of further federal economic relief, and he expects Biden initially to win congressional approval for only about half his $1.9 trillion proposal.
About 5 million jobs, Zandi estimates, will never return, forcing the unemployed in such industries as restaurants and bars to find work in other sectors.
“We have lost so many low-paying service jobs at restaurants, hotels and in transportation,” said Sung Won Sohn, an economics and business professor at Loyola Marymount University in Los Angeles. SOVEREIGNPH