Economy: Slower Than First Thought

The recession, now in its second year, is inflicting more damage to the economy daily as layoffs mount and companies cut production.

The economy contracted at a staggering 6.2% in the final three months of 2008, the worst showing in a quarter-century, and the Fed has said it will probably shrink during the first six months of this year. Recent economic barometers “show little sign of improvement,” according to Federal Reserve Chairman Ben Bernanke.

The nation’s unemployment rate in January jumped to 7.6%, the highest in more than 16 years. And the number of newly laid-off people signing up for unemployment benefits has risen since mid-January, “suggesting that labor market conditions may have worsened further in recent weeks,” Bernanke said.

With jobs vanishing, nest eggs cracking and home values tanking, consumers have reined in their spending. That has forced companies to lay off workers, trim production and cut back in other ways. It’s a vicious circle of negative forces that feed on each other, deepening the recession.

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