In his sober column today decrying President Bush's lame-duck abdication of leadership, Nobel prize winning economist Paul Krugman fretted, "The prospects for the economy look much grimmer now than they did as little as a week or two ago." Make that 24 hours. Just one day after I compiled the dismal numbers for the mushrooming Bush recession, startling new forecasts for gross domestic product (GDP) show the economic crisis will be even longer and deeper than initially feared.
U.S. GDP shrank by 0.3% in the third quarter (July through September), a decline which followed the downward revision of the Q2 number from 3.3% to 2.8%. But while "recession" is traditionally defined as two consecutive quarters of GDP contraction, the quarterly Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia concluded that the United States entered a recession in April. And with most states and metropolitan areas already experiencing economic contraction, the pain is already widespread.
Now, two new forecasts leave no doubt that the fourth quarter of 2008 will make it official. Economists polled by Reuters "downgraded their growth estimates dramatically from just one month ago." What was a bleak landscape has grown bleaker still:

They predicted the U.S. economy, measured by gross domestic product, would shrink 3.0 percent in the fourth quarter this year, versus the 1.3 percent fall they had forecast for the period in October. A 3.0 percent decline would be the worst since the fourth quarter of 1990.
The poll predicted the economy would shrink by another 1.5 percent in the first quarter of 2009 and would neither grow nor shrink in the second quarter.
Economists now predict the economy will grow just 0.4 percent in all of 2009 after advancing 1.2 percent and 2.0 percent in the third and fourth quarters respectively.

On Friday, analysts at Goldman Sachs echoed that grim assessment and warned that unemployment could spike above the 8% level many economists see as likely by mid-2009:

Goldman Sachs Group Inc. increased its recession estimates, saying gross domestic product is declining at a 5 percent annual rate in the current quarter and will drop 3 percent and 1 percent in the next two quarters.
Unemployment will reach 9 percent by the fourth quarter of 2009, Goldman economists led by Jan Hatzius wrote in a research note today.

For its part, the Federal Reserve is reflecting the same pessimism. In June, the Fed project 2008 GDP growth ranging between 1.0% and 1.6%, while 2009 was forecast ot experience 2.0% growth. Now, the U.S. central bank has sharply lowered its assessment, putting 2008 GDP growth between zero and 0.3%. Its conservative prediction for next year now forecasts a GDP decline of 0.2%.
Scott Anderson, chief economist at Wells Fargo & Co, summed up the emerging consensus over the rapid deterioration of the U.S. economy:

"The economic outlook has taken on a far darker tone over the past few weeks. We have substantially downgraded our outlook for GDP and the labor market to reflect a far steeper recession over the next two quarters."

He'll get no argument from Paul Krugman. Pondering the crisis on Wall Street and an American auto industry teetering on the brink coupled with a complete leadership vacuum from the Bush White House, Krugman concluded, "it's scary to think how much more can go wrong before Inauguration Day."