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Job seekers queue up to attend a job fair Tuesday, Jan. 27, 2009, in Chicago. The number of people receiving unemployment benefits has reached an all-time record, the government said Thursday, and more layoffs are spreading throughout the economy. (AP Photo/M. Spencer Green)

Job seekers queue up to attend a job fair Tuesday, Jan. 27, 2009, in Chicago. The number of people receiving unemployment benefits has reached an all-time record, the government said Thursday, and more layoffs are spreading throughout the economy. (AP Photo/M. Spencer Green)

Economy Shrinks In 4Q At 3.8 Percent Pace

JEANNINE AVERSA | January 30, 2009 10:33 AM EST | AP

WASHINGTON — The economy shrank at a 3.8 percent pace at the end of 2008, the worst showing in a quarter-century, as the deepening recession forced consumers and businesses to throttle back spending.

Although the initial result was better than economists expected, the figure is likely to be revised even lower in the months ahead and some believe the economy is contracting in the current quarter at a pace of around 5 percent. The current January-March period, they said, will probably turn out to be the worst quarter for the recession.

American consumers and businesses cut back everywhere in the final three months of 2008. Shoppers chopped spending on cars, furniture, appliances, clothes and other items. Businesses dropped the ax on equipment and software, home building and commercial construction. And overseas sales of U.S.-made goods and services tanked as foreign buyers grappled with their own economic woes.

“The downturn is intensifying. The fourth quarter is worse than it looks,” said Mark Zandi, chief economist at Moody’s Economy.com.

The new figure, released Friday by the Commerce Department, showed the economy sinking at a much faster clip in the October-December period than the 0.5 percent decline logged in prior quarter.

The report tallies gross domestic product, the value of all goods and services produced within the United States. It is considered the broadest barometer of the country’s economic health.

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