Economy shrinks 6.3% in 4th quarter

The Labor Department said Americans collecting jobless benefits in March hit a record 5.56 million. David Dallecarbonare of Franklin, Ind., was laid off in January. (Matt Detrich/The Indianapolis Star via Associated Press)

WASHINGTON - The US economy shrank at a 6.3 percent annual pace in the fourth quarter, the worst performance since 1982, in what may be the depths of the recession.

The contraction in gross domestic product was larger than the previously estimated 6.2 percent drop, the Commerce Department said yesterday. A report from the Labor Department showed the number of people collecting jobless benefits this month climbed to a record 5.56 million.

"We're at a turning point," Michael Darda, chief economist at MKM Partners LP in Greenwich, Conn., said. "There are some glimmers of hope. By the fourth quarter, maybe even the third quarter, we'll be pleasantly surprised by the economic data."

Recent reports show retail sales, residential construction, and home sales have improved, indicating last quarter's slump may give way to smaller declines in growth. A let-up in the recession would set the stage for President Obama's stimulus plan and Federal Reserve measures to take hold in the second half of the year.

The GDP report also showed corporate profits dropped 16.5 percent in the fourth quarter from the previous three months, the biggest decline since 1953. For all of last year, profits were down 10.1 percent, the biggest annual drop since 1970.