WASHINGTON - Brace yourself: The recession is projected to worsen this year as consumers at home and abroad retrench in the face of persistent economic troubles.
One key example: The U.S. unemployment rate - now at 7.6 percent, the highest in more than 16 years - is expected hit a peak of 9 percent this year. It hasn't been that high since September 1983, when the jobless rate was 9.2 percent.
The gloomy economic outlook came from leading forecasters in the latest survey by the National Association for Business Economics, which was released yesterday. The new estimates are roughly in line with other recent projections, including those released last week by the Federal Reserve.
"The steady drumbeat of weak economic and financial market data have made business economists decidedly more pessimistic on the economic outlook for the next several quarters," said NABE president Chris Varvares, head of Macroeconomic Advisers.
All told, Varvares and his fellow forecasters now expect the economy, measured by the gross domestic product, to shrink by 1.9 percent this year, a much deeper contraction than the 0.2 percent dip projected in the fall.
If the new forecast is correct, it would mark the first time since 1991 that the economy actually contracted over a full year and would be the worst showing since 1982, when the country had suffered through a severe recession.
Vanishing jobs, shrinking nest eggs, rising foreclosures and tanking home values have forced American consumers to cut back, which in turn has caused businesses to lay off workers and slash costs in other ways, feeding a vicious downward cycle for the economy.
"As the news on the economy has darkened, so too, have the forecasts," said Ken Mayland, president of ClearView Economics. "We are suffering a period of maximum stress on the economy."
In terms of lost economic activity in 2009, the biggest hit will come in the first six months, forecasters said.
NABE forecasters now expect the economy to slide backward at a staggering pace of 5 percent in the current January-March quarter. That's a sharp downgrade from the 1.3 percent annualized drop projected in the prior survey.
"Further pronounced weakness in housing and deteriorating labor markets underscore the risks for 2009," Varvares said.
Many economists believe that the current quarter will be the worst of the recession in terms of the bite to gross domestic product, which is the value of all goods and services produced within the U.S. and is the broadest barometer of the country's economic health.