U.S. recession is the worst in 25 years

GDP saw its steepest drop since a 6.4 percent decline in 1982

WASHINGTON — It's official: This recession is the worst the United States has experienced in 25 years, the government said Friday. And it appears likely to get worse before it gets better.

At the White House, where the new administration is working on a broad strategy to combat the crisis, President Barack Obama described the downturn as "a continuing disaster for America's working families."

In the coming weeks, the White House will announce new regulatory measures aimed at preventing future financial crises. As early as next week, the White House will announce measures that would bar Wall Street financial firms receiving bailout money from paying large bonuses to executives. The president this week termed such largesse "shameful."

The first days of Obama's presidency have been dominated by the economy, and the latest news from the Commerce Department provided fresh evidence of trouble.

The government reported that gross domestic product — the value of all goods and services produced in the economy — declined at a precipitous 3.8 percent annual rate in the fourth quarter of last year.

That was the steepest drop since a 6.4 percent decline in 1982, easily surpassing the downturns seen during the 1990-91 and 2001 recessions.

It also provided the second-consecutive quarterly drop in GDP, following the .5 percent dip in the third quarter of 2008.

Two consecutive drops in GDP generally is considered proof of recession. The National Bureau of Economic Research, however, already has declared officially that the recession began at the end of 2007 based on job losses and other factors.

Before Friday's announcement, many had predicted that fourth-quarter GDP would be down by 5 percent or more. It wasn't, but only because of an unexpected growth in inventories. That means companies likely will cut back even further on output and jobs in the months to come to clear their inventories.

"Unfortunately, this is a head fake," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "This is still an economy that is deteriorating rapidly. That has not changed."

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