According to the first estimate data released by the U.S. Department of Commerce on the 28th, the real gross domestic product (GDP) of the United States shrank by 3.5% in 2020, the largest annual decline since 1946 due to the impact of the coronavirus pandemic.
This is also the first year-round contraction of the U.S. economy since the 2008 international financial crisis, highlighting the depth of economic damage caused by the pandemic.
According to the annual GDP sub-data, personal consumption expenditure, which has traditionally been the main engine of economic growth in the United States, fell by 3.9% throughout the year, the worst performance since 1932.
Corporate investment and exports were also hit, with fixed asset investment falling 1.8% and exports falling 13% throughout the year.
Mainly affected by the fiscal relief measures introduced in response to the pandemic, federal government spending increased by 4.4% throughout the year.
Judging from quarterly GDP, at the beginning of the outbreak, the U.S. economy contracted by 5% in the first quarter of last year.
The U.S. economy contracted by a record 31.4% in the second quarter of last year as states began to issue restrictions such as “stay-at-home orders” and social distancing since mid-March last year.
With states restarting the economy and resuming work and production from May and June, and with the support of the federal government’s fiscal rescue, the U.S. economy rebounded 33.4% in the third quarter of last year.
But with the surge in confirmed cases of COVID-19 in the United States last November, coupled with the lack of financial assistance, the economic growth rate of the United States slowed to 4% in the fourth quarter of last year.
From this point of view, whether the spread of the pandemic can be curbed is still a key factor determining the trend of the U.S. economy. Jay Bryson, chief economist of Wells Fargo Securities, said that the U.S. economy lost momentum at the end of last year because of the rebound of the pandemic in November and December last year, the reopening of lockdown restrictions in some states in the United States, the voluntary social distancing of many people, and the drag on personal consumption spending.
The Federal Reserve issued a statement after concluding its first regular monetary policy meeting this year saying that in recent months, the pace of economic activity and employment recovery in the United States has slowed down, especially in the sectors hardest hit by the pandemic.
The pandemic will continue to put pressure on economic activity, employment and inflation, and pose considerable risks to the economic outlook.
Federal Reserve Chairman Powell said that the Federal Reserve will continue to maintain a highly relaxed monetary policy position until the two goals of full employment and price stability are achieved, but the U.S. economy still has a “long way to go” from these two goals, and may take “it may take some time” to make substantial progress.
Jason Furman, a professor at Harvard University and former White House economic adviser, said that due to the fiscal bailout and consumption reduction, American households had accumulated about $1.6 trillion in savings by the end of 2020, plus the $900 billion economic rescue plan passed by the U.S. Congress at the end of last year, which is the 2021 U.S. economy.
The strong recovery has provided demand support, but how much demand will be released still depends on how quickly the American people return to previous consumption levels.
Furman pointed out that the greater uncertainty facing the U.S. economy is whether the unemployed can find new jobs as soon as possible. The roughly 5 million jobs lost in the U.S. amid the pandemic will never resume, and service workers like restaurants need to find another job, according to Mark Zandy, chief economist at Moody’s Analytics.
In order to curb the spread of the pandemic and promote economic recovery, the Biden administration recently proposed an economic rescue plan totaling $1.9 trillion, but it was opposed by many Republican congressmen.
In the future, the democratic and Republican parties will negotiate policy details.
Biden administration officials warned that if Congress does not act quickly to approve a new rescue plan, the U.S. economy may experience a longer and painful recession and leave long-term trauma.
Given that the recent pandemic situation in the United States has not improved significantly, Bryson expects that the economic growth of the United States in the first quarter of this year will be roughly the same as that in the fourth quarter of last year, and the economic growth in the next few quarters will depend on the trend of the pandemic and the progress of vaccination.
Economists expect the U.S. economy to grow by 4.3% this year, driven by additional economic relief measures and vaccinations, according to a survey conducted by the Wall Street Journal earlier this month.
The International Monetary Fund recently predicted that the U.S. economy will grow by 5.1% this year. Whether such expectations can be realized still depends on whether the pandemic situation in the United States will improve in the next few months.
