‘Great Recession’ even deeper than thought

Greg Robb

WASHINGTON (MarketWatch) — The U.S. recession was even deeper than previously thought, a new government report showed on Friday.

As part of an annual revision of data on U.S. gross domestic product, the Commerce Department said that the economy contracted by 5.1% between the fourth quarter of 2007 and the second quarter of 2009, more than the 4.1% previously estimated.

It ranks as the most severe recession in the post-World War II era.

As a result of the revision, GDP is now still below the pre-recession peak, economists said.

Nigel Gault, chief economist at IHS Global Insight, said the revised data helps explain the weak labor market.

Before the revision, it was hard to square an unemployment rate above 9% with the economy’s growth rate.

The data about the depth of the recession were included in the government’s preliminary estimate of GDP growth for the three months through June.

The government reported that growth accelerated to a 1.3% rate in the second quarter, from a sharply -downwardly-revised 0.4% increase in the first quarter.

Weaker consumer spending and business investment were the main drivers of the downward revisions, according to government analysts.

The revisions incorporate updated data including retail sales from the Census Bureau.

Under the revised data, the U.S. economy declined 0.3% in 2008, weaker than the prior estimate of a flat reading.

The contraction in GDP for 2009 was revised to 3.5%, much weaker than the previous estimate of a 2.6% decline.

The economy grew a little faster in 2010 than previously estimated, rising 3% compared with the prior estimate of 2.9%.

The data show that President Barack Obama won the 2008 election as the economy was in a freefall.

The economy declined at an 8.9% annual rate in the three months around the election. This was following by a drop of 6.7% in the first quarter of 2009.

Greg Robb is a senior reporter for MarketWatch in Washington.