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U.S. Economy Shrank in 2020 Despite Growth in Fourth Quarter

2021-1-29 15:43:37 Viewers:

U.S. Economy Shrank in 2020 Despite Growth in Fourth Quarter

By Ben Walsh

Updated Jan. 28, 2021 10:06 am ET / Original Jan. 28, 2021 9:07 am ET


"Store Closing" signs are posted at a "Sur La Table" kitchenware store in Los Angeles.

VALERIE MACON/AFP via Getty Images

Here’s what you need to know to navigate the markets today.

The U.S. economy shrank 3.5% in 2020 as the Covid-19 pandemic and the lockdowns put in place to contain it shuttered businesses and disrupted daily life to an extent not seen in decades. The year’s slump was the worst since World War II, according to data released by the Bureau of Economic Analysis Thursday.

The economy did grow during the fourth quarter of the year, but the 4% expansion recorded from October to December was less than the 4.3% that economists surveyed by The Wall Street Journal had expected. Americans saved at a record rate in 2020, seeding optimism that U.S. households, spurred on by the slow rollout of vaccines and likely additional round of stimulus, will power economic growth in 2021. Economists are forecasting a 4.3% expansion over the full course of this year.

Pfizer found in a study, which has not yet been peer-reviewed, that it’s Covid-19 vaccine is effective against the new strains of the virus identified in the U.K. and South Africa. The pharmaceutical giant said that “findings do not indicate the need for a new vaccine to address the emerging variants,” but that it and its partner, BioNTech, are prepared to produce a booster shot to ward against any emerging variant that is vaccine-resistant. That process can be done relatively quickly, because the vaccine developed by Pfizer and BioNTech relies on messenger RNA and can be altered with relative ease compared to traditional vaccines.