The evidence grew clearer Tuesday that the U.S. is stuck in a recession.

Figures released by the Commerce Department revealed that Americans during the third quarter cut back on spending more than at any time since 1980.

The slowdown caused gross domestic product for the period to shrink at an 0.5% annual rate, the biggest falloff since the economy contracted at a 1.4% pace late in 2001 during the last U.S. recession.

GDP measures the value of all goods and services produced in the U.S. and is considered the best barometer of the country’s economic fitness.

The new reading on GDP underscores just how quickly the economy deteriorated as housing, credit and financial crises intensified. The economy logged growth of 2.8% in the second quarter.

Consumers are spending less amid job losses, tanking investment portfolios and sinking home values.

The nation’s unemployment rate is at 6.5%, a 14-year high, and with layoffs rampant across all sectors it will undoubtedly climb higher. Employers have cut payrolls every month so far this year and more losses are expected in the months ahead. The total of number of unemployed in October was just over 10 million, the most in 25 years.

Given all the stresses, consumers are expected to scale back even further through the end of the year, making it all but certain the economy will continue to shrink through the fourth quarter and into 2009, fulfilling the classic definition of a recession -- two straight quarters of contracting GDP.

American consumers slashed spending in the third quarter at a 3.7% pace. That was deeper than the 3.1% cut initially reported and marked the biggest reduction since the second quarter of 1980, when the country was also recession.

To help revive the economy, the Federal Reserve is expected to lower interest rates when it meets next on Dec. 16. Last month, the Fed dropped its key rate to 1%, a level seen only once before in the last half-century.

To revive the economy, President-elect Barack Obama, who takes over on Jan. 20, says a top priority will be working with Congress to enact a massive stimulus package that he says will generate millions of new jobs.