The latest GDP report from the U.S. Commerce Department shows that the economy shrank at an annualized rate of 1% from April to June of this year. That means the economy shrank in the last four quarters, and five of the last six quarters.

Great Depression

Depression

Traditionally, economists define a depression as four quarters of decline in gross domestic product. These days, there is no generally agreed upon definition of a depression, other than that it is a really long recession. The National Bureau of Economic Research declared this recession began in late 2007. By this winter, we’ll have had at least a two-year recession already.

Even if things stop declining in the next few months, it’s unlikely the NBER will declare the recession over until we see some extended period of growth, which even optimistic economists say will not happen for a long time, as reported here.

The Obama administration will be very wary of using the term Depression. The failure of the economy to improve thus far despite a record stimulus package has hurt him politically. However, he’s managed to skirt most of the blame for the bad economic news, by pointing to his predecessor George W. Bush.

Obama may be in big trouble however in the coming months. As pointed out in the Wall Street Journal, there are some fundamental weaknesseses that will haunt this economy for years. Jobs won’t come back until at least late 2010, even by the most optimistic forecasts. Unemployment will hit 10% very soon. Consumer spending will continue to remain flat, meaning the economy may not shrink, but it will not grow at a rapid pace for quite a while.

In other words, while we may be officially out of a recession/depression by the end of 2009, the average American will not feel any of the benefits until much later.

The last President during a jobless recovery was a guy by the name of George H.W. Bush. We all know what happened to his Presidency. No second term.