The U.S. economy likely contracted at its sharpest pace since World War Two in 2020 as COVID-19 ravaged services businesses like restaurants and airlines, throwing millions of Americans out of work and into poverty, APA reports citing Reuters.
The Commerce Department’s snapshot of fourth-quarter gross domestic product on Thursday is also expected to show the recovery from the pandemic losing steam as the year wound down amid a resurgence in coronavirus infections and exhaustion of nearly $3 trillion in relief money from the government.
The Federal Reserve on Wednesday left its benchmark overnight interest rate near zero and pledged to continue injecting money into the economy through bond purchases, noting that “the pace of the recovery in economic activity and employment has moderated in recent months.”
President Joe Biden has unveiled a recovery plan worth $1.9 trillion, and could use the GDP report to lean on some lawmakers who have balked at the price tag soon after the government provided nearly $900 billion in additional stimulus at the end of December.
“Last year was awful for the economy,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “This was the first service industry recession in recent memory where a lot of jobs were lost.”
Economists are forecasting that the economy contracted by as much as 3.6% in 2020, the worst performance since 1946. That would follow 2.2% growth in 2019 and would be the first annual decline in GDP since the 2007-09 Great Recession.
In the fourth quarter, GDP is estimated to have expanded at a 4% annualized rate, according to a Reuters survey of economists. The virus and lack of another spending package curtailed consumer spending, and partially overshadowed robust manufacturing and the housing market.