Stuck in the grip of a viral pandemic, in the last three months of 2020, the U.S. economy grew at a 4 percent average pace and shrank last year for the greatest amount in 74 years.

The economy contracted 3.5 percent for 2020 as a whole, a year when the coronavirus inflicted the worst global freeze since the end of World War II, which clouded the forecast for the coming year. Economic damage accompanied the outbreak of the pandemic 10 months ago and the profound slump that it caused, leaving tens of millions of Americans unemployed.

The government’s Thursday report reported that the gross domestic product of the country, its overall production of goods and services, slowed dramatically in the quarter of October-December from a record 33.4 percent growth in the quarter of July-September. A record-shattering 31.4 percent annual dive in the April-June quarter, when the economy sank into a free-fall, accompanied the gain.

The 2021 forecast is hazy. Economists caution that before vaccines are distributed and delivered nationally and government-enacted relief assistance spreads through the country, a process expected to take months, a sustainable recovery would not necessarily take place. Millions of Americans, meanwhile, continue to suffer.

For example, the government announced on Thursday that although unemployment insurance claims declined last week, they stood at a record high 847,000, proof that businesses continue to slash jobs as the pandemic continues to rage. Except after the Great Recession, weekly applicants for jobless assistance had only topped 700,000 until the epidemic exploded in the United States in March.

The stock market continued to grow sharply even though the economy shrank last year, with the S&P 500 index rising 16 percent. A time-tested adage illustrated the difference between the two: the stock market is a forward-looking proxy, with investors based not on the present state of the economy but on expectations for future business earnings and economic health. So, even though the economy collapsed last year, investors looked ahead to expectations for vaccinations and government assistance and high business earnings, especially among tech firms, which led to gains last year.

The pandemic’s blow to the economy early last spring ended almost 11 years of the longest U.S. economic boom on record. In last year’s January-March quarter, the disruption from the virus caused GDP to contract at a 5 percent annual rate. Thousands of firms have since closed down, almost 10 million workers are out of jobs, and more than 400,000 Americans have died of the epidemic.

Thursday’s government survey was the first of last quarter’s three growth estimates; the number will be updated again in the coming weeks. Consumer buying, which accounts for around 70% of the economy, slowed sharply last quarter to a 2.5% annual increase from a 41% increase in the July-September quarter, the survey showed.

Instead, the economy of the last quarter was powered in part by corporate spending and housing, which over the past year has been a star performer, representing record-low mortgage rates and a need for more household rooms. Housing rose at a sizzling 33.5 percent annual pace, at a 13.8 percent rate for company activity. Government spending, however, shrunk last quarter at a 1.2 percent pace. In addition to declining tax revenue, state and municipal governments have begun resorting to layoffs.

The predicted reduction in GDP for 2020 was the first such decrease since the 2.5 percent decline in 2009, during the recession following the financial crisis of 2008. Since the economy shrank 11.6 percent in 1946, when the economy was demobilised during World War II, it was the deepest annual setback.

Former President Donald Trump finished his presidency with GDP averaging average gains of 1 percent over his four years, the GDP study revealed. That was smaller than during the Obama administration’s 1.6 percent average GDP gains, a time that also featured a recession.

When vaccines is commonly available and delivered in the coming months, development is expected to revive. But even then, when customers and companies hunker down and hold back on spending, many Americans will suffer even though the economy is expected to keep rising. Gregory Daco, Oxford Economics chief economist, said he expects inflation to weaken to an annual rate of about 2 percent in the current period.

But for the remainder of this year, Daco foresees a brightening future. His opinion implies the universal use of vaccines, expanded government funding from the ratification by Congress of at least part of President Joe Biden’s $1.9 trillion stimulus programme, and pent-up spending since the pandemic from a savings accumulation among higher-income households. Also offering some funding is a $900 billion rescue assistance plan that the government passed late last year.

“The rollout of the vaccine is essential,” Daco said. “We will not get any improvement in the economic situation without an improvement in the health situation.”

Daco said he believes an economic recovery will achieve 5 percent annual growth this year. The International Monetary Fund estimated earlier this week that the U.S. economy would expand 5.1 percent this year and 2.5 percent in 2022.

The Federal Reserve took stock of the economic threats on Wednesday. It kept its benchmark interest rate near zero at a historic low and emphasised that once a rebound is well underway, it will continue following its low-rate policies. The Fed agreed that the economy has deteriorated in recent months, with recruitment deteriorating, particularly in industries affected by the raging pandemic, particularly restaurants, bars, hotels and those engaged in public face-to-face contact.

Hiring in the U.S. has slowed for six consecutive months, and for the first time since April, businesses shed employment in December. As the pandemic and cooler conditions have prevented Americans from flying, shopping, eating out or attending entertainment venues, the work market has sputtered. For three consecutive months, retail prices have decreased.

Moody’s Analytics chief economist Mark Zandi estimates that about 5 million missing U.S. workers will never recover, causing the unemployed to find employment in other markets in such businesses as restaurants and bars.

And several analysts warn that the economy risks succumbing to another recession without further financial assistance from the government. They remember that much of the assistance from the $900 billion programme that was introduced late last year for individuals is due to expire in mid-March.