The resurgence in the pandemic likely dealt a major blow to the U.S. economy in the last three months of the year, though it is not expected to have delivered a knockout punch.
Most economists expect fourth-quarter gross domestic product (GDP) data on Thursday will show a significant slowdown from July-September, when the economy staged a sharp recovery from the early pandemic days.
Key sectors such as leisure and hospitality have been hit hard by the pandemic’s resurgence, and had it not been for the $900 billion rescue package that Congress passed in the final weeks of December, the economy might have started 2021 with a double-dip recession.
But other companies, including in manufacturing and online retail, are doing better, and seeing business return to pre-pandemic levels.
Ben Herzon, a senior economist with IHS Markit, expects Thursday’s report from the Commerce Department will show GDP grew less than 1% in October, November and December.
That’s a significant slowdown from the previous three months, when the economy grew by 7.4% as businesses re-opened from pandemic lockdowns in March and April.
(The Commerce Department typically reports quarterly GDP changes at annualized rates, but that exaggerates swings both up and down. Measured by that rate, third-quarter GDP grew 33.4% after a drastic 31.4% contraction in the second quarter.)
Hurt most in the last three months of the year were restaurants and in-person entertainment busineses like movie theaters, as a winter wave of coronavirus infections and deaths made consumers nervous about going out. The leisure and hospitality segment of the economy lost nearly 500,000 jobs in December.
Other segments of the economy have fared better. Manufacturing and homebuilding continue to bounce back from their pandemic slump, and consumption of goods is higher now than it was before the coronavirus struck.
“There are some strengths,” Herzon said. “It’s just that services, which is a very large part of the economy, is really struggling to get back to where it was.”
While the U.S. has made up much of the ground it lost early last year, the economy likely ended 2020 about 3% smaller than when it began.
