Recession Is Officially Here —And May Last for Awhile

The US economy slipped into recession in December 2007, the official arbiter announced Monday, and experts think the downturn is far from over.

The the National Bureau of Economic Research—a private, nonprofit research organization—said its group of academic economists who determine business cycles decided that the US recession began last December.

The news pushed US stocks lower and renewed calls for another economic stimulus program.

The current recession, which many economists expect to persist through the middle of next year, is already the third-longest since the Great Depression, behind only the 16-month slumps of the mid-1970s and early 1980s.

"I think that we've got a ways to go, that this is going to be probably a deep and long recession," Jeffrey Frankel, a Harvard University economist who sits on the NBER's committee, told CNBC. "It could be the worst post-War recession. We don't know yet."  See video below.

By one benchmark, a recession occurs whenever the gross domestic product, the total output of goods and services, declines for two consecutive quarters. The GDP turned negative in the July-September quarter of this year, and many economists believe it is falling in the current quarter at an even sharper rate.

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But the NBER's dating committee uses broader and more precise measures, including employment data. In a news release, the group said its cycle dating committee held a telephone conference call on Friday and concluded that the 73-month economic expansion had ended. The previous expansion of the 1990s lasted 120 months.

Many Wall Street financial institutions already had declared that the US recession began in December 2007, when there was a sharp increase in the US unemployment rate.

The last two recessions have been so short—about eight months—that the NBER's official prenouncement came after the downturn had actually ended.

In November 2001, for instance, the group said the recession had begun in March of that year. History would later show the recession ended in November of 2001.

What's been confusing for economists this time around is that a contraction in gross domestic product—what laymen consider a key recession indicator—did not happen until the third quarter of this year.

Video: Jeffrey Frankel, an economist who sits on the NBER's committee, talks about the group's findings.

Other key barometers, such as payrolls and the jobless rate, have clearly been in a recessionary trend for most, if not all, of the year, economists say.

Payrolls have fallen every month since January and the jobless rate is about two percentage points higher than a year ago.

Another key area, consumer spending, took longer to join the trend, but that's largely because of the government's massive fiscal stimulus plan, which sent out tax rebates to millions of Americans.

That boosted income and spending through the second quarter, but the effect quickly faded in the early summer when the government stopped mailing out checks. Consumer spending indeed shrank in the third quarter for the first time in almost two decades.

A senior adviser to U.S. President-elect Barack Obama said news that the United States has been in a recession for a year underscored the need for an economic stimulus package.

Lawrence Summers, tapped by Obama to become director of the White House National Economic Council, said the slump may be worsening.

"While the economy has already lost 1.2 million jobs this year, recent economic evidence suggests that the pace of this downturn is accelerating. That is why President-elect Obama has set as his top priority passing an economic recovery plan," Summers said in a statement.

House Speaker Nancy Pelosi met leading governors Monday to discuss the size and shape of an economic stimulus package that one Democratic aide said was likely to cost around $500 billion.

The aide, who asked not to be identified, said the legislation would include a middle-class tax cut, billions of dollars for road, bridge and mass transit construction, expanded aid to states and investments in renewable energy.

Speaking to reporters earlier, Pelosi said she hoped the job-creating legislation, which she did not detail, would be ready for President-elect Barack Obama to sign when he takes office on Jan. 20.

—AP and Reuters contributed to this report.

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