What happened in the economy in 2020

Yahoo Finance’s Brian Sozzi, Julie Hyman, Myles Udland, and Emily McCormick recap what happened in the economy in 2020.

Video Transcript

MYLES UDLAND: Friday, 2021 spending spree. Consumers getting more confident, maybe they'll shell out some more of those savings that they've piled up this year. And another shot at $2,000 checks. The House passed a bill, will the Senate get that done? We will see as we get through today's session. But let's talk first about the story for the economy in 2020, how things unfolded. And really, I guess how we're going to try and think about this year as we finally wrap it up. Yahoo Finance's Emily McCormick joins us now for that story. And Emily, I guess I would wonder how many parts do we have to break this story down in to talk about one coherent vision of 2020?

EMILY MCCORMICK: Yeah, absolutely, Myles. And I thought it was really worth taking stock of what happened across the economy as this historic year comes to a close. Really as we've talked more and more about, it is about the story of the K-shaped recovery, about certain industries, certain cohorts, and populations really being hit harder than others when it comes to this pandemic. And, of course, that coronavirus pandemic really defined the course of the economy this year. We had at our worst point GDP sinking 31.4% on an annualized basis in the second quarter. It was more than three times the pre-pandemic record contraction of 10%.

But that record contraction and these widespread shutdowns were met with equally historic rounds of monetary and fiscal stimulus from central banks, as well as congressional lawmakers. We saw that the US economy grew at a record 33.4% annualized rate in the third quarter. Of course, output levels are still below pre-pandemic levels. But at the same time, still making up some lost ground here.

Now, that K-shaped recovery has really been most evident in the labor market. We saw that the service sector has by far been the most negatively impacted. We saw that leisure and hospitality industries lost a staggering 8.3 million jobs between March and April alone. And those have not yet been fully recovered. Now that said, things are also and have been difficult across the economy as well. We saw that us employers shed a record 20.8 million jobs in April alone and the National unemployment rate also surged with pandemic era high of 14.7%.

Now as of November, the latest data that we have, the economy is still 9.8 million jobs short of its pre-pandemic levels. And the unemployment rate at 6.7% is still double where it was before the pandemic. Now, I do want to note that despite these historic levels of unemployment, we have still seen consumer spending hold up relatively strongly across the course of 2020. Really, it has been defined by this wallet shift towards goods as opposed to services and towards online retailers as opposed to brick and mortar, of course, because of these restrictions.

And then finally, one other strong pocket of the economy that we've seen has been in the housing market. Of course, low interest rates demand for new work from home environments as well as tight inventory have driven home prices up, driven new and existing home sales quite a bit higher. So that's also been another pocket of strength here. Now, final thing I'll note is where we're actually headed going into 2021. Of course, we now have that $900 billion fiscal stimulus package from Congress coming about. And we had Goldman Sachs economist yesterday actually upgrade their GDP forecasts for 2021 to 5.8% growth annualized from the 5.3% they saw previously, mostly on account of that new fiscal stimulus. So again, still quite a bit of lost ground to make up here, Myles. But certainly off the lows that we saw earlier on during the spring.

MYLES UDLAND: Yeah, we got that K Schiller out number this morning and certainly the housing market and that stimulus are what seemed to have most folks across Wall Street bulled up, right? Emily McCormick with the latest on that.