American economy: worst year since 1946

The US economy shrank in 2020 by the largest percentage in 74 years but grew 4 percent in the last quarter.

For 2020 as a whole, US gross domestic product (GDP) decreased by 3.5 percent amid fallout from the COVID-19 pandemic, according to data released by the Commerce Department on Thursday. That was the largest annual decline since 1946.

It was the first time the US economy retracted since a 2.5 percent fall in 2009 following the 2008 global financial crisis.

The US economy grew at an annual rate of 4 percent in the fourth quarter of 2020, as economists had predicted. The number represents how much the economy would have grown had the fourth-quarter pace lasted for 12 months.

The GDP slumped by a record 31.4 percent on an annualized basis in the April-June quarter of 2020 following the initial pandemic lockdowns. In the July-September quarter, the number increased to a record 33.4 percent annualized pace. The October-December quarter marks a sharp slowdown from the third quarter's growth.

"The increase in fourth-quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States," the Commerce Department said.

The government's report was its first of three estimates of growth last quarter; the figure will be revised twice in February and March.

Hiring in the US has slowed for six straight months. The number of Americans applying for unemployment benefits decreased but remained at a historically high 847,000 last week, the Labor Department said Thursday. The number means that layoffs are continuing as the pandemic continues.

Overall, nearly 4.8 million Americans received traditional state unemployment benefits the week of Jan 16. That is a drop of nearly 5 million the previous week and far below a historic peak of nearly 25 million in May, when the virus outbreak nearly halted the economy, according to The Associated Press.

The decreased number marks a sign that some of the unemployed are finding new jobs and that others have exhausted their regular allotment of unemployment insurance — the number of people applying for extended state benefits increased more than 1.5 million for the week that ended Jan 9, up about 100,000 from the week before.

In the two years before the pandemic, weekly applications for jobless aid typically numbered between 200,000 and 250,000.

"The longer people are unemployed, the harder it is to get back into the work force," Kathy Bostjancic, chief US financial economist at Oxford Economics, told The Wall Street Journal on Thursday. "The longer this continues, the more there is a heightened risk of medium-term scarring."

Meanwhile, the US airline industry reported Thursday that 2020 was its worst year ever financially as the pandemic has undercut demand for travel.

The six largest US airlines reported a loss of $30.4 billion last year, according to the data from CNN. "The Covid-19 pandemic challenged our industry in ways we have never seen before," Robin Hayes, JetBlue's chief executive, said in a statement.