The US saw its sharpest contraction in growth since 1946 as the COVID-19 pandemic hammered the economy last year, but while the country might be set for a recovery, it has not yet arrived.
The world’s largest economy contracted by 3.5 percent last year, the US Department of Commerce reported on Thursday, after COVID-19 rearranged daily life and forced many businesses to shut down or change their operations while laying off workers in droves.
Those mass layoffs, which began in March as the pandemic intensified, continue to take a toll, with the US Department of Labor reporting nearly 1.3 million new claims for unemployment benefits filed last week.
Photo: Bloomberg
The data underscore the job awaiting US President Joe Biden, who took office promising to get the country back on track with a US$1.9 trillion spending proposal that is an initial salvo against the twin economic and health crises.
“Today’s data suggest a significant slowing of our economic recovery,” US National Economic Council Director Brian Deese said. “Without swift action, we risk a continued economic crisis that will make it harder for Americans to return to work and get on back their feet. The cost of inaction is too high.”
However, by this point, analysts agree that there is only so much that the government can do to support the economy, which will not be back to normal until COVID-19 is done away with or has at least been brought to manageable levels.
“Additional fiscal stimulus and broader vaccine diffusion should support an improved labor market in the spring, but claims are expected to remain high in the near term as the pandemic continues to restrict activity, with new strains of the virus a concern,” Nancy Vanden Houten of Oxford Economics said.
The pandemic caused an unheard-of whipsaw in the growth, with the economy contracting a record 31.4 percent annualized in the second quarter of last year when pandemic restrictions were at their most severe, then shooting back up 33.4 percent the next quarter, as businesses reopened.
In the fourth quarter, the US’ GDP grew by an annual rate of 4.0 percent, the US Commerce Department’s first estimate for the final three months of last year showed.
That was not enough to stop last year from seeing an overall contraction, which the US government said was caused by a drop in spending, as well as in “exports, private inventory investment, nonresidential fixed investment, and state and local government.”
Net exports last year fell 13 percent, while personal consumption dropped 3.9 percent.
The declines were partially offset by the strong housing market and federal government spending, such as the trillions of US dollars in stimulus money that the US Congress passed last year.
“Against the risk of excessive winter pessimism, we believe in spring optimism,” Gregory Daco of Oxford Economics said.
Even if Biden’s stimulus bill is eventually watered down by cost-conscious lawmakers, that — combined with the effect of COVID-19 vaccine drives and a recovery in the employment market — could cause the economy to expand by 5.5 percent this year, he said.
CHIP RACE: Three years of overbroad export controls drove foreign competitors to pursue their own AI chips, and ‘cost US taxpayers billions of dollars,’ Nvidia said China has figured out the US strategy for allowing it to buy Nvidia Corp’s H200s and is rejecting the artificial intelligence (AI) chip in favor of domestically developed semiconductors, White House AI adviser David Sacks said, citing news reports. US President Donald Trump on Monday said that he would allow shipments of Nvidia’s H200 chips to China, part of an administration effort backed by Sacks to challenge Chinese tech champions such as Huawei Technologies Co (華為) by bringing US competition to their home market. On Friday, Sacks signaled that he was uncertain about whether that approach would work. “They’re rejecting our chips,” Sacks
Taiwan’s exports soared 56 percent year-on-year to an all-time high of US$64.05 billion last month, propelled by surging global demand for artificial intelligence (AI), high-performance computing and cloud service infrastructure, the Ministry of Finance said yesterday. Department of Statistics Director-General Beatrice Tsai (蔡美娜) called the figure an unexpected upside surprise, citing a wave of technology orders from overseas customers alongside the usual year-end shopping season for technology products. Growth is likely to remain strong this month, she said, projecting a 40 percent to 45 percent expansion on an annual basis. The outperformance could prompt the Directorate-General of Budget, Accounting and
NATIONAL SECURITY: Intel’s testing of ACM tools despite US government control ‘highlights egregious gaps in US technology protection policies,’ a former official said Chipmaker Intel Corp has tested chipmaking tools this year from a toolmaker with deep roots in China and two overseas units that were targeted by US sanctions, according to two sources with direct knowledge of the matter. Intel, which fended off calls for its CEO’s resignation from US President Donald Trump in August over his alleged ties to China, got the tools from ACM Research Inc, a Fremont, California-based producer of chipmaking equipment. Two of ACM’s units, based in Shanghai and South Korea, were among a number of firms barred last year from receiving US technology over claims they have
BARRIERS: Gudeng’s chairman said it was unlikely that the US could replicate Taiwan’s science parks in Arizona, given its strict immigration policies and cultural differences Gudeng Precision Industrial Co (家登), which supplies wafer pods to the world’s major semiconductor firms, yesterday said it is in no rush to set up production in the US due to high costs. The company supplies its customers through a warehouse in Arizona jointly operated by TSS Holdings Ltd (德鑫控股), a joint holding of Gudeng and 17 Taiwanese firms in the semiconductor supply chain, including specialty plastic compounds producer Nytex Composites Co (耐特) and automated material handling system supplier Symtek Automation Asia Co (迅得). While the company has long been exploring the feasibility of setting up production in the US to address
RSS