Recession worse than thought
Data show recovery slower than government reported
Revised data from the Commerce Department showed that the 2007-2009 recession was even deeper and the recent recovery much slower than economists had thought.
The data, released Friday, show that the U.S. gross domestic product shrank 5.1 percent from the fourth quarter of 2007 to the second quarter of 2009, rather than 4.1 percent the Commerce Department had previously reported. The fourth quarter of 2008 now shows an 8.9 percent fall in GDP – the steepest single-quarter drop since 1958, Bloomberg reports.
More recently, GDP grew only 0.3 percent in the first quarter of this year and 1.3 percent in the second quarter – much lower than economists had projected.
“The word for this report is ‘shocking,’” John Ryding, chief economist at RDQ Economics, told the New York Times. “With slow growth, higher inflation and almost no consumer spending growth, it is very tough to find good news.”
And with the debt ceiling battle continuing in Washington, the economic forecast could get even worse. As Congress debates how much to cut government spending and whether to raise taxes, economists worry the cuts could throw the country back into a recession.
“Even if everything gets done, there is still a big hit coming from the uncertainty,” Paul Dales, a senior United States economist at Capital Economics, told the New York Times. “Companies have probably put projects on hold and postponed hiring.”
Among the biggest concerns is consumer spending, which has been significantly weak in recent quarters. Another problem is the housing industry, which has also shown few signs of recovery.
The revised data showing the even greater depth of the recession better explains why the unemployment rate doubled from 5 percent from the beginning of the downturn in 2007 to a 26-year high of 10.1 percent in October 2009, Bloomberg reports.
Today, unemployment hovers at 9.2 percent. As of June, 14 million Americans were actively looking for work.