WASHINGTON – Now that the U.S. economy officially has been in recession for a year, it’s certain that this downturn will be deeper and more punishing than the past two, in 1990-91 and 2001. That makes it harder to gauge where the end may be and what’s necessary to restore the world’s largest economy to health.

Falling home prices, a deep freeze on lending and turmoil in financial markets all helped create the current recession, which started in December 2007. Friday’s grim jobs report, with employers shedding another 533,000 positions in November, was an exclamation point for a worsening recession.

The credit crunch, falling home values and shaken consumer confidence all hurt consumer spending, which drives two-thirds of all economic activity. There’s no quick or easy way to turn them around, especially at the same time.

Since the end of World War II, there have been 10 recessions before this one. The bust of 1973-75 followed oil price shocks and failed attempts at government price controls. The skid of 1981-82 was triggered by high interest rates needed to quash runaway inflation and a banking crisis rooted in a real estate crash. Those were the two worst recessions in the postwar era, and each lasted 16 months.

Another real estate and banking crisis led to the recession of 1990-91. Later that decade, overvalued technology stocks collapsed and sparked the 2001 downturn, which lasted eight months.

Today’s recession was brought about by a rapid growth in home prices and home construction that was unsustainable. Under normal circumstances a price correction would occur and the economy would quickly return to growth. That’s why the average length of recessions since 1945 has been 10 months.

These aren’t normal times, however. The U.S. economy is entering its 13th month of recession, and no one sees an early end.

“It’s going to be a longer recession than any in the postwar period, because I don’t think we will get out of it before the middle of 2009,” said Lyle Gramley, a Federal Reserve governor from 1980 to 1985. “The primary reason we’re going through this is we have a credit crunch that is literally strangling the economy.”

His view is widely shared.

“We continue to believe that this will be the longest and, possibly, the deepest recession of the post-war era. If the recession runs through May 2009, this will qualify as the longest recession since the 1930s,” John Ryding and Conrad DeQuadros, partners in the New York research firm RDQ Economics, said in analysis for investors.

Unemployment hit its highest postwar peak – 10.8 percent – in 1982. Today, it’s 6.7 percent and rising fast.

If there’s agreement that this recession will be long and deep, there’s also consensus that a stimulus plan will be needed to jolt the economy back to life.

“Only a concerted, comprehensive and consistent policy response will bring this downturn to an end by this time next year. This response should include a zero effective funds rate and quantitative easing by the Federal Reserve, a large foreclosure mitigation plan, and a big economic recovery package,” said Mark Zandi, chief economist of Moody’s Economy.com, a forecaster in West Chester, Pa.

President-elect Barack Obama has signaled that he’ll push a massive economic stimulus plan that’s expected to include a middle-class tax rebate, big spending on public works projects to create jobs and aid to states.

“My guess is the fiscal-stimulus package is going to be very large, a package spread over two years that will total at least $700 billion over those two years, front loaded to get big” results fast, said Gramley, now an adviser at the Stanford Washington Research group in Washington.


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