By Lucia Mutikani
WASHINGTON, 28 Jan (Reuters) – The US economy contracted by 2020 at its rate steepest since World War II, with COVID – 19 ravaging service firms like restaurants and airlines, leaving millions of people out of work and in poverty .
The Department of Commerce’s figures on Gross Domestic Product for the fourth quarter, released on Thursday, also showed that the rebound was losing steam at the end of the year, amid a resurgence of COVID infections – 19 and the depletion of nearly $ 3 trillion in aid funds distributed by the government.
The Federal Reserve maintained its interest rate on Wednesday reference to a day close to zero and pledged to continue injecting money into the economy through the purchase of bonds, noting that “the pace of recovery of economic activity and employment has moderated and n the last few months. “
President Joe Biden has presented a recovery plan worth $ 1.9 trillion and could use the GDP report to reach out to some lawmakers who had rejected the high amount after Washington contributed nearly 900. 000 million dollars in additional stimulus at the end of December.
The economy contracted 3.5% in 2020, its worst performance since 1946 after the 2.2% growth in 2019, and marks the first annual drop in GDP since the Great Recession of 2007 – 09. The economy went into recession last February.
In the fourth quarter, GDP increased at an annualized rate of 4.0%, at a time when the virus and the lack of another aid package reduced the consumer spending and partially overshadowed the robust housing and manufacturing market. GDP growth in the last quarter was in line with forecasts in a Reuters poll.
The big setback after a historic growth rate of 33 , 4% in the July-September period left GDP well below its level at the end of 2019.
With the virus still uncontrolled, economists expect growth to slow down. slow further in the first quarter of 2021, before picking up speed in the summer as more stimulus kicks in and more Americans get vaccinated.
The service sector has suffered the brunt of the coronavirus-induced recession, which has disproportionately affected lower-wage workers, who tend to be women and minorities.
Rising poverty was underscored by persistent weakness in the labor market.
In a separate report Thursday, the Labor Department said that 847. 000 more people presented new Applications for state unemployment benefits last week.
(Report by Lucia Mutikani. Edited in Spanish by Janisse Huambachano)