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Data: U.S. Department of Commerce; Chart: Axios Visuals

The coronavirus recession is technically over, but the GDP report makes clear the most important part of the U.S. economy — the services sector — is still mired in a severe downturn.

Why it matters: It makes up a whopping 70% of the U.S. economy. The services sector is also comprised of what has become undesirable in the wake of the pandemic, including eating in restaurants and traveling.

  • On the flip side, the level of spending on stuff (cars, clothing, footwear, etc.) hit the highest level on record.

By the numbers: Spending on services rose in the third quarter compared to the last. But it's still 7.2% below where it was in Q3 last year.

  • Meantime, spending on goods has made a full recovery — and then some. It's almost 7% higher than the same quarter one year ago.

The state of play: There has been "some substitution away from services toward goods," Nathan Sheets, chief economist at PGIM Fixed Income, tells Axios.

  • What that looks like: "Some families canceled summer travel and instead spent the money on goods, including home improvements or furnishings."

The bottom line: The U.S. economy has plenty of ground to make up to get back to pre-pandemic levels. But a continued drag on the services sector — which is at risk of getting worse with a resurgence of the pandemic — makes a full recovery that much harder.

Here's how KPMG chief economist Constance Hunter put it to the Washington Post:

  • “If we don’t get a handle on the pandemic, services consumption is not going to rebound. And if services consumption isn’t going to rebound, we’re not going to see employment rebound, and that’s going to have spillover effects over the whole recovery.”

Go deeper

Wall Street bets it all on a vaccine

Illustration: Eniola Odetunde/Axios

It's the time of year when Wall Street shops are rolling out predictions for where they see the stock market headed in the coming year. There's one common theme: Widespread distribution of a vaccine is the reason to be bullish.

Why it matters: Analysts say vaccines will help the economy heal, corporate profits rebound and stock market continue its upward trajectory.

6 hours ago - Health

Food banks feel the strain without holiday volunteers

People wait in line at Food Bank Community Kitchen on Nov. 25 in New York City. Photo: Michael Loccisano/Getty Images for Food Bank For New York City

America's food banks are sounding the alarm during this unprecedented holiday season.

The big picture: Soup kitchens and charities, usually brimming with holiday volunteers, are getting far less help.

9 hours ago - Health

AstraZeneca CEO: "We need to do an additional study" on COVID vaccine

Photo: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

AstraZeneca CEO Pascal Soriot said on Thursday the company is likely to start a new global trial to measure how effective its coronavirus vaccine is, Bloomberg reports.

Why it matters: Following Phase 3 trials, Oxford and AstraZeneca said their vaccine was 90% effective in people who got a half dose followed by a full dose, and 62% effective in people who got two full doses.