The economy is in such wretched shape – finishing 2008 with its worst performance in a quarter century – that some forecasters have begun writing off 2009 as well.

A pileup of bad news accumulating since New Year's hit critical mass Friday, as the government said the nation's gross domestic product fell at an annual rate of 3.8 percent in the fourth quarter. Some analysts are rethinking predictions that the recovery would start in late 2009; now they're talking 2010.

"A lot of people revised down their (predictions) in the last week or two," said Jeff Michael, director of business forecasting at the University of the Pacific. "The pace of decline now is extremely rapid, and probably more rapid than many forecasters anticipated."

January already saw a spike in unemployment rates and a rash of layoff notices totaling an estimated 125,000. Now comes news that GDP, the broadest measure of economic output, suffered its steepest decline since 1982.

The 3.8 percent drop wasn't as bad as some experts had predicted. But the decline would have been 5.1 percent, if not for the stacks of goods that were produced in the quarter but sat unsold. That production was counted as "growth."

The numbers suggest the recovery is further off than previously believed, said economist Sung Won Sohn of California State University, Channel Islands.

"There's a good possibility that this could stretch well beyond 2009," he said. "The worst is yet to come." The recession started nationally in December 2007 and probably a few months sooner in California.

Predicting the start of the recovery isn't just an academic exercise. It affects factory owners, retailers and others who are deciding whether to hire or fire, expand inventory or hoard cash.

Some will even take a fresh look at whether their business can survive. That includes Carolyn Paul, co-owner of 100-year-old Hobrecht Lighting Design & Decor on Auburn Boulevard in Sacramento.

Hobrecht's sales are down 50 percent, and Paul has already cut expenses to the bone. She's trimmed payroll. She no longer spends $600 a month on bottled water to be handed out to customers. She generally buys merchandise only to fill customer orders, and won't stockpile inventory.

She isn't sure what else she can do.

"I'm not going to go without a good fight," said Paul, whose son and granddaughter work in the business. But she added, "Can I go on? I don't know."

At El Dorado Savings Bank in Placerville, a recovery possibly deferred to 2010 means keeping a conservative bent on new loans.

"What is happening today that makes you feel that things are going to be much better six months from now?" said Chief Executive Tom Meuser. "We kind of have to build in a worst-case scenario. Let's not anticipate that this is going to turn around in the second half of 2009."

No matter when the recovery begins, it will probably be slow and bumpy. "It's going to take us quite a while to claw back to where we were in '08," said UOP's Michael.

Grim forecasts breed more business conservatism, said Dennis Tootelian, director of the Center for Small Business at California State University, Sacramento. Business owners will lay off workers, postpone equipment purchases – even cancel their janitorial service. That'll take more dollars out of circulation, which prolongs the pain.

"It's just a vicious cycle," Tootelian said.

The GDP numbers were bad all around. Business spending on machinery and other capital goods fell 19.1 percent. Imports fell 15.7 percent as consumers snapped their wallets shut. Perhaps more troubling was a 19.7 percent drop in exports, which had held strong until recently.

While previous recessions were more concentrated on a particular sector, like the dot-com bust of 2001, this one is broader and perhaps scarier.

"It's touching every state, it's touching every community," said Suzanne O'Keefe, an economist at CSU Sacramento.

Two weeks ago, O'Keefe said job growth could resume in Sacramento by September. Now she says it probably won't happen until 2010. The region has lost 22,400 jobs in the past year, pushing unemployment to 8.7 percent.

Responding to the GDP numbers, President Barack Obama renewed his call for Congress to approve a massive stimulus plan. The plan was approved by the House on Wednesday.

"What we can't do is drag our feet or delay much longer," Obama said.

Experts said a successful stimulus is crucial to starting the recovery quickly. Consumer confidence is at all-time lows and won't improve if Americans believe the stimulus isn't delivering results.

"If consumers are still afraid when we get into the middle of the year, we're not going to start the recovery (in 2009)," said University of California, Los Angeles, economist Jerry Nickelsburg.

Jim Radler, a land broker for Park Place Partners real estate in Roseville, is one of those nervous consumers. Even as his firm quietly prepares for a recovery – it just hired a marketing assistant and a broker – Radler is cutting back on his personal spending.

"I'm totally of the opinion that '09 is a totally throw-away year," he said.

Some experts warn against too much negativity. Sanjay Varshney, dean of CSU Sacramento's College of Business Administration, said some economists are overreacting to the bad news to compensate for their tardiness in recognizing the severity of the downturn. He still believes the recovery can begin in late 2009.

But people might not realize things are getting better until well after the recovery actually has begun. Unemployment – the most closely watched indicator – usually keeps rising even after business conditions start improving, because employers are slow to rehire and often continue cutting back.

NEC Electronics just said it will close one of its two manufacturing lines at its Roseville computer-chip plant – in March 2010. That will erase an unknown number of jobs.

"Eventually economic cycles do reverse themselves," Varshney said. "But it takes almost a year for people to recognize it."

Call The Bee's Dale Kasler at (916)321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs. The Associated Press and New York Times contributed to this report.