The numbers for U.S. economic growth in 2020 are in, and as expected, they’re not good. Although things were looking up in the fourth quarter, the first two quarters were so bad that the economy shrunk the most since World War II.
2020 economic growth numbers
The Commerce Department reports that the U.S. gross domestic product, which is the total of all goods and services produced by the economy, grew to 4% during the fourth quarter. However, that missed the Dow Jones estimate of 4.3%.
For the full year, GDP declined 3.5%, and from the fourth quarter of 2019, the annualized pace fell 2.5%. According to CNN, the 3.5% decline is the worst year for U.S. economic growth since 1946. It also marked the first fall in GDP for the country since 2009, when it declined 2.5% during the financial crisis.
The economy entered recession in February, a month before the World Health Organization officially declared COVID-19 to be a pandemic. CNBC reports that the U.S. economy contracted 31.4% in the second quarter, marking a new record since the Great Depression. Then it rebounded to increase by 33.4% during the third quarter.
Growth in exports, consumer spending, residential investment and nonresidential fixed investment, and inventories boosted GDP during the fourth quarter. However, government spending declines at the federal, state and local levels held back economic growth in the fourth quarter of 2020.
What to expect in 2021
As 2020 ended, economic growth and activity appeared to slow, and economists expect the first part of 2021 to bring challenges. The rollout of the COVID-19 vaccines has been slower than expected, while the number of infections and activity restrictions will likely mean little growth in the first part of the year. Economists expect activity to rebound strongly later this year after the vaccines are more widely available, enabling the economy to return to a sense of normalcy.
The economy added 12.5 million jobs between May and November but lost 140,000 last month. The hospitality sector alone lost almost half a million jobs in December. The industry’s unemployment rate stood at 16.7% last month, versus 5.7% in February.
Federal Reserve Chairman Jerome Powell said on Wednesday that the economy’s recovery depends on the coronavirus’ path. Capital Economics Chief U.S. Economist Paul Ashworth said in a note that GDP growth could reach 6.5% in 2021 due to the COVID-19 vaccines and additional fiscal stimulus from the Joe Biden administration.