US economy shrank 3.5% in last year after growing 4% last quarter

President Joe Biden signs executive orders on economy

President Joe Biden took executive action Friday to provide a stopgap measure of financial relief to millions of Americans while Congress begins to consider his much larger $1.9 trillion package to help those affected by the coronavirus pandemic.

WASHINGTON (AP) - Stuck in the grip of a viral pandemic, the U.S. economy grew at a 4% annual rate in the final three months of 2020 and shrank last year by the largest amount in 74 years.

For 2020 as a whole, a year when the coronavirus inflicted the worst economic freeze since the end of World War II, the economy contracted 3.5% and clouded the outlook for the coming year. The economic damage followed the eruption of the pandemic 10 months ago and the deep recession it triggered, with tens of millions of Americans left jobless.

Thursday's report from the Commerce Department estimated that the nation's gross domestic product — its total output of goods and services — slowed sharply in the October-December quarter from a record 33.4% surge in the July-September quarter. That gain had followed a record-shattering annual plunge of 33.4% in the April-June quarter, when the economy sank into a free-fall.

The pandemic's blow to the economy early last spring ended the longest U.S. economic expansion on record — nearly 11 years. The damage from the virus caused GDP to contract at a 5% annual rate in last year's January-March quarter. Since then, thousands of businesses have closed, nearly 10 million people remain out of work and more than 400,000 Americans have died from the virus.

The estimated drop in GDP for 2020 was the first such decline since a 2.5% fall in 2009, during the recession that followed the 2008 financial crisis. That was the deepest annual setback since the economy shrank 11.6% in 1946, when the economy was demobilizing after World War II. The most catastrophic annual contraction in records dating to 1930 was a 12.9% fall in 1932 during the Great Depression.

A 'help wanted' sign hangs on a window of a restaurant in Lower Manhattan, May 4, 2018 in New York City. U.S. unemployment fell to a near historic low of 3.9 percent and hiring remained strong in April. The Dow finished up over 300 points at the clos

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The government's report Thursday was its first of three estimates of growth last quarter; the figure will be revised twice in the coming weeks.

The outlook for the 2021 economy remains hazy. Economists warn that a sustained recovery won't likely take hold until vaccines are distributed and administered nationwide and government-enacted rescue aid spreads through the economy — a process likely to take months.