The U.S. economy contracted 3.5 percent in 2020 amid the COVID-19 pandemic, the largest annual decline of U.S. gross domestic product (GDP) since 1946, according to data released by the U.S. Commerce Department on Thursday.
The data also showed that the U.S. economy grew at an annual rate of 4 percent in the fourth quarter of 2020 amid a surge in COVID-19 cases, much slower than 33.4 percent in the previous quarter.
Despite a partial economic rebound in the second half of last year, the U.S. economy shrank 3.5 percent for the whole year of 2020, compared with an increase of 2.2 percent in 2019, according to the department. It also marked the first negative annual growth in U.S. GDP since 2009.
"Over the past year, the economy contracted 10 percent in the first half of the year and made up three-quarters of that decline in the second half," Jason Furman, professor at Harvard University and former economic adviser to President Barack Obama, said on Twitter.
"This is the largest decline in GDP since the demobilization from World War II in 1946, worse even than the 2.5 percent decline in 2009," Furman said, adding the U.S. economy ended 2020 about 5 percent below its trend level of output.
The data came as the United States has recorded more than 25.6 million COVID-19 cases with over 430,000 related deaths as of Thursday morning, according to Johns Hopkins University.
Jay Bryson, chief economist at Wells Fargo Securities, said the spike in COVID-19 cases in the last two months of 2020 led to the re-imposition of restrictions in some states as well as voluntary social distancing practices by many individuals, which weighed on consumer spending.
"We currently project that real GDP in Q1-2021 will be more or less flat relative to the fourth quarter of last year," Bryson wrote Thursday in an analysis, adding the economic outlook over the next few quarters remains critically dependent on the path of the pandemic and the pace of vaccinations.
"Assuming that the pandemic does not spiral out of control in coming weeks and the deployment of vaccines continues to ramp up, the economy should fully re-open later this year," Bryson wrote.
At a virtual press conference on Wednesday, Federal Reserve Chairman Jerome Powell said that the pace of recovery has "moderated" in recent months, with the weakness concentrated in the sectors most adversely affected by the resurgence of the virus and greater social distancing.
"The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved," Powell said, noting the economic downturn has not fallen equally on all Americans.
"In particular the high level of joblessness has been especially severe for low wage workers in the service sector and African-Americans and Hispanics," he said.
Joseph Brusuelas, chief economist at accounting and consulting firm RSM US LLP, said the latest quarterly GDP data represents "a major disappointment and a hit to the nascent recovery."
"That disappointment was largely a function of the resurgence in the pandemic and the long delay in another round of fiscal aid because of political polarization," Brusuelas said.
The U.S. Congress approved a 900-billion-U.S.-dollar COVID-19 relief package at the end of last year following months of deadlock over the size and scope of the package. But economists and some lawmakers say it isn't enough to bolster a ravaged economy.
U.S. President Joe Biden has unveiled a 1.9-trillion-dollar COVID-19 relief proposal, which draws opposition from a growing number of congressional Republicans. It's unclear whether the Biden administration would secure enough votes for a new massive relief package.
White House economic adviser Brian Deese recently warned that the United States risks falling into a "very serious economic hole" without decisive action, urging the Congress to approve more COVID-19 relief as soon as possible. ■