US gross domestic product, the broadest measure of economic activity, is expected to have grown 4% on an annual basis between October and December.
In a normal year that would be something to celebrate – an A + for Trump’s final report. But 2020 wasn’t a normal year.
So if 33.4% isn’t good enough, 4% won’t make it either. It would only take the nation a small part of the way back to its pre-pandemic strength – which underscores how far we still have to go.
It’s also not a good sign for the recovery in 2021. The recovery of the US economy took a hit in the final quarter of 2020 as Covid-19 infections soared and various states reintroduced lockdown measures.
A bad sign for 2021
President Joe Biden inherited a battered recovery and a broken job market. The new administration will need an all-hands-on-deck approach to get the economy back on its feet this year after the pandemic hit on the breaks.
Rising infections and renewed restrictions on people and businesses dampen hopes for a recovery in the winter months.
The first quarter of 2021 “is likely to be even weaker without a sudden upturn in activities expected until the Covid restrictions are significantly relaxed,” said James Knightley, international chief economist at ING, also with more help for the unemployed.
Biden must first get the pandemic under control in order to put recovery on the right track.
What is the economy holding back?
Economists have been concerned about the state of the recovery for some time. Rising infections in the fall and a renewed spike in weekly unemployment benefits indicated another difficult period for the winter economy.
In terms of consumer and spending, retail sales had three consecutive months of no growth between October and December as major shopping events like Black Friday and Christmas failed to provide a reasonable boost. And the University of Michigan’s survey-based consumer sentiment index was still well below its pre-pandemic level, falling from its most recent high in October. Millions of Americans are left unemployed as a result of the crisis, and the economy cut 140,000 jobs in December – a big blow to the recovery. It was the first net job loss since April. The US economy thrives on consumer spending, and as long as Americans stop spending the way they used to – be it because of unemployment, lockdown, or caution – the pace of recovery will be slow.
The introduction of vaccines and the ultimate fight against the virus will really bring the economy back to pre-pandemic strength, according to economists. However, to date, only about 23.5 million vaccine doses have been administered in the United States.
In the meantime, those who lost their jobs or reduced their hours or wages as a result of the pandemic continue to need government help.
Trump signed a second stimulus package in December that expanded various programs to keep helping the unemployed. However, many economists believe that the delay in adopting further measures is slowing the pace of recovery. There is even more momentum on President Biden’s economic agenda, but whether his $ 1.9 trillion plan will pass in its original form remains to be seen.