Just a month ago the U.S. economic contraction measured by gross domestic product for the fourth quarter of 2008 had been estimated at 3.8 percent. Then the Commerce Department revised the GDP contraction to an astonishing 6.2 percent Friday, Feb. 27 on the ground of sharp declines in consumer spending, investment and exports. Both the new and the old fourth-quarter figures marked the weakest quarterly showing since an annualized drop of 6.4 percent in the first quarter of 1982, when the country was suffering through an intense recession.
For all of 2008, the economy grew just 1.1 percent. That was down from a 2 percent gain in 2007 and marked the slowest growth since the last recession in 2001. GDP, the value of all goods and services produced in the United States, is the best barometer of the country's economic health.
The faster downhill slide came as the worst financial crisis since the 1930s intensified in the final quarter of 2008 following the government rescue of several large financial institutions and the collapse of Lehman Bros. The ensuing credit squeeze has driven consumer and business confidence to generational lows, and cost nearly 2 million Americans their jobs. The nation's jobless rate is now at 7.6 percent, the highest in more than 16 years.
Now in the second year of recession, most economists don't expect GDP to grow until the second half of the year, when the leading edge of the $787 billion fiscal-stimulus plan begins to have an impact.
The recession is expected to stretch at least through the first six months of 2009, as shoppers slash spending in the shadow of hard times at home and aboard. Companies, in turn, are being forced to cut jobs and production while resorting to other cost-saving measures to survive.
Federal Reserve Chairman Ben Bernanke said earlier in the week that he was confident the economy would rebound modestly later this year and into 2010, but only if the government's efforts to stabilize the banking system prove successful.
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