By Geoffrey Smith
Investing.com -- The U.S. economy slowed sharply in the final quarter of 2020 as a third wave of coronavirus infections caused states across the country to put tight restrictions on social gatherings and economic activity.
Gross domestic product expanded at an annualized rate of 4.0% in the three months through December, according to the Census Bureau’s first reading. The reading is likely to be revised over the coming weeks.
That contrasts with an annualized growth rate of 33% in the three months through September, when the economy broadly reopened after the first wave of infections and lockdowns.
The number was exactly in line with expectations ahead of time. It means that over 2020 as a whole, the economy contracted by 3.6%, its worst contraction since 1946.
The figures suggest that, in the second half of the year, the economy recovered around three-quarters of what it lost in output in the first half, Jason Furman, a senior fellow with the Peterson Institute, said via Twitter.
Most analysts expect the economy to bounce back strongly this year, with many noting that output and consumption have remained relatively resilient under the latest wave of lockdowns as businesses and consumers have adapted to the new circumstances. The International Monetary Fund on Tuesday raised its estimate for U.S. GDP growth in 2021 to 5.1%, having expected only a 3.1% rebound as recently as October.
At the same time, the Department of Labor reported a bigger-than-expected drop in the number of people filing initial claims for jobless benefits last week, although the number remained stubbornly high at 847,000. Analysts had expected claims a number of 875,000.
The improvement was not as large as seemed at first glance, however: the previous week’s figure was revised upward by 14,000 to 914,000.
The number of those making continuing claims for benefits, which comes with a one-week lag to the initial claims estimate, fell to its lowest since April at 4.77 million. Including those claiming under pandemic-specific programs, the total number of those claiming unemployment-related benefits as of January 9 rose by nearly 3 million to 18.28 million. That was due largely to a jump in claimants for Pandemic Unemployment Assistance.