Recession Was Deeper Than Previously Thought

Economy Growth - Wake-up Call: American Workers AP / CBS

Updated at 6:33 p.m. ET

U.S. gross domestic product increased at an annual rate of 2.4 percent in the second quarter of this year. That lackluster performance was less than the 2.5 percent .

The report Friday is confirming investors' belief that the economic recovery is weakening as unemployment remains high and government stimulus programs end.

But also found in the latest government figures is that the recession was deeper than previously thought.

The Commerce Department's Bureau of Economic Analysis, in revisions issued Friday, estimates the economy shrank 2.6 percent last year - the steepest drop since 1946.

That's worse than the 2.4 percent decline originally estimated.

The economy will need to pick up to speed to create jobs, CBS News Correspondent Anthony Mason reports. At the 2.5 percent growth rate most economists are forecasting for the rest of the year, unemployment will remain right where it is.

The economy's plunge underscores why the unemployment rate surged to 10.1 percent in October, a 26-year high.

The revisions in gross domestic product, or GDP, now show zero growth in 2008. That compares with a 0.4 percent gain previously estimated. The economy also grew less in 2007 (1.9 percent) than earlier thought (2.1 percent).

For all three years, consumers spent less and home builders cut more deeply than had been thought. Those factors help explain the downward revisions on the economy.

The revisions also show that struggling state and local governments cut spending more last year than previously thought, and they spent less in 2007 and 2008.

GDP: 2nd Qtr 2010, Revised 2007-1st Qtr 2010

The economy slid into its worst recession since the Great Depression in late 2007. Many economists think the recession ended last summer, although a panel of academics that dates the start and end of recessions hasn't declared when this one ended. The panel usually does so well after the fact.

From the start of the recession in December 2007 until the April-to-June quarter of 2009, the economy sank 4.1 percent. That was deeper than the 3.7 percent decline previously estimated for the recession.

GDP is the broadest gauge of the economy's health. It measures the value of all goods and services - from machinery to manicures - produced in the United States.

The Commerce Department's latest revisions reach back to 2007. They're based on more complete data and on methodology thought to be more accurate.
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