The US economy contracted at the fastest pace in 74 years in 2020, devastated by Covid-19 pandemic

The US economy slowed significantly in the last quarter of 2020, following strong rebound in Q3, as coronavirus pandemic hurt the labor sector and spending.

Gross Domestic Product grew at 4% in the fourth quarter, mainly in line with expectations, far slower than the record 33.4% growth in the previous three-month period, driven by resurgence in coronavirus infections and exhaustion of relief package worth $3 trillion.

The report from the Commerce Department showed the US economy contracted 3.5% in 2020, slowing at the highest pace since World War Two, in its first annual decline in GDP since 2007/09 recession, after growing 2.2% in 2019.

The fourth quarter’s contraction after a historic 33.4% growth in July-September period, left GDP 2.5% below its level at the end of 2019, with pessimistic outlook for the first quarter of 2021 as the virus is not yet under control that would further slow growth.

The economy plunged into recession last February and is expected to remain depressed at least until summer, when additional stimulus kicks and more Americans get vaccinated.

The labor sector has carried the highest impact of the coronavirus pandemic and remains under pressure that caused rising poverty, which rose by 2.4% to 11.8% in the second half of 2020.

The economy shed jobs in December for the first time in eight months, with only 1.4 million of the 22.2 million jobs lost in March and April have been recovered, with 18.3 million of Americans receiving unemployment benefits in early 2021.

On the other side, manufacturing and housing markets are the stars of the recovery, as a number of those who are still employed seek larger homes, while manufacturing share of GDP has increased to 11.9% at the end of 2020, from 11.6% in the same period in 2019.