Updated Jan 28, 2021 - Economy

2020 was the economy's worst year since 1946

Source: FRED; Billions of chained 2012 dollars; Chart: Axios Visuals

One of the last major economic report cards of the Trump era lends perspective to the historic damage caused by the pandemic, which continued to weigh on growth in the final quarter of 2020.

By the numbers: The U.S. economy grew at a 4% annualized pace in the fourth quarter, a sharp slowdown in growth compared to the prior quarter. For the full year, the economy shrank by 3.5% — the first annual contraction since the financial crisis and the worst decline since 1946.

What happened: A resurgence in coronavirus cases and a delay in additional government aid contributed to the pullback in growth. In the third quarter, the U.S. economy grew at a 33.4% annualized pace.

  • In normal times, a 4% annualized growth rate would be strong. But in pandemic times, it shows the sharp bounce back expected once the economy reopened wasn't sustained.

What they're saying: The report "represents a major disappointment and hit to the nascent recovery in the domestic economy," Joseph Brusuelas, an economist at RSM, wrote in a note.

Zoom in: Economic growth in the final quarter of the year was driven by strong consumer spending, capital expenditures (i.e. businesses investing in equipment, buildings, etc.) and the hot housing sector.

  • It was dragged down by a slump in state, local and federal government spending and a surge in imports (which are a curb on GDP).

The bottom line: The U.S. economy remains in a deep hole and a full economic recovery is a ways off. The economy is still over $473 billion smaller than it was before the pandemic hit.

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