The rate of the US economy’s rebound from the coronavirus-fuelled downturn slowed in the fourth quarter, weighed down by a deadly surge of cases over the holiday season.
Gross domestic product advanced 4 per cent on an annualised basis, according to figures published on Thursday by the US commerce department. Economic output advanced 1 per cent compared with the previous quarter, based on the measure used by other major economies.
Economists had expected the US economy to advance by an annualised 4 per cent, following a 33.4 per cent rise in the third quarter — the strongest annual rate of growth in postwar history following a deep contraction in the second quarter.
The US has proven to be one of the more resilient economies in the face of unprecedented shutdowns during the pandemic. Annual GDP will eclipse its level from the end of 2019 around the middle of this year, the IMF estimated this week. The group also raised its US growth forecast for 2021 by two percentage points to 5.1 per cent.
But a resurgence of coronavirus, which prompted a new round of tighter restrictions in some parts of the country, weighed on business activity during the final stretch of 2020 and has kept the labour market on an unsteady footing while the rollout of coronavirus vaccines ramps up.
New US jobless claims fell last week but remained historically elevated at a seasonally adjusted 847,000, according to the US Department of Labor, compared with 914,000 in the previous week and economists’ forecast of 875,000.
“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 in its report.
The coronavirus crisis has led to the worst annual contraction since the end of the second world war. The economy shrank by 3.5 per cent in 2020, after growing 2.2 per cent in 2019. GDP — the value of all goods and services produced by the economy — fell 2.5 per cent in 2009 in the wake of the financial crisis.
The Federal Reserve on Wednesday said the pace of the economic recovery and hiring had moderated in recent months “with weakness concentrated in the sectors most adversely affected by the pandemic”. US employment declined in December, primarily due to job losses in the leisure and hospitality sectors.
James Knightley, ING’s chief international economist, said growth of at least 5 per cent this year looked achievable. “There was undoubtedly a loss of momentum as Covid restrictions tightened, but early signs suggest 2021 is starting well with the latest $600 fiscal stimulus payment boosting spending, California starting to reopen and the vaccination programme gaining momentum,” he said.
The slowdown in the pace of growth in the fourth quarter added to pressure that has led US president Joe Biden to propose a $1.9tn fiscal stimulus plan, on top of $900bn already approved in December, to mitigate the hit to the economy in the first part of this year.
Mr Biden and his top officials are struggling to gain bipartisan backing for their plans, however, with Republicans pushing for a much lower price tag. That has led Democrats to consider ways to pass the bill on their own using their slim majority in the Senate.
Some Republicans do support provisions in the package, such as $1,400 direct payments to individuals, but White House officials on Thursday dismissed the idea of breaking up the legislation into separate pieces.
“The needs of the American people aren’t partial; we can’t do this piecemeal,” Brian Deese, the director of the National Economic Council, tweeted on Thursday morning.
Weekly jobless claims had climbed to a four-month high of 927,000 in early January, with delayed claims from the holiday season and a federal boost to unemployment aid probably contributing to the jump.
There were about 427,000 new claimants last week for federal Pandemic Unemployment Assistance benefits on an unadjusted basis, down from 447,000. The PUA programme provides aid to the self-employed and others who would not qualify for regular benefits.
All state and federal programmes had a combined 18m people claiming benefits as of January 9, according to unadjusted figures that are reported on a two-week delay. That marked a rise from 16m.
US stocks climbed on Thursday after the data was released. The benchmark S&P 500 advanced 0.8 per cent, and the tech-heavy Nasdaq Composite was up 0.6 per cent.
The yield on the 10-year Treasury note rose 0.03 percentage points to 1.04 per cent, as investors sold the debt.