Dec. 11 (Bloomberg) -- The U.S. economy is in the midst of a deep and sustained recession that probably won’t end without unemployment reaching as high as 10 percent, Harvard University professor Kenneth Rogoff said.

“We’re just going into the teeth of this recession. It’s a very deep recession, a worldwide recession,” Rogoff said in an interview on “Night Talk” with Mike Schneider to be broadcast today on Bloomberg Television. “Not the Great Depression, that’s hyperbole, but possibly the worst since World War II.”

He predicted the U.S. unemployment rate, which reached 6.7 percent in November, will rise to 9 percent to 10 percent.

Rogoff criticized Treasury Secretary Henry Paulson’s $700 billion financial rescue plan, saying it wasn’t “radical enough” to solve the credit crisis. Paulson has come under fire in Congress for abandoning the original intent of using the Troubled Asset Relief Program to buy toxic mortgage-related securities and help homeowners in favor of direct capital injections into banks.

“The policy’s been very erratic and insufficient,” Rogoff said. “They really didn’t come on a scale consistent with the problem.”

A yearlong recession is deepening as employers cut payrolls and companies and consumers reduce spending amid frozen credit markets. The number of Americans filing first-time claims for unemployment benefits last week soared to a 26-year high, a report today showed.

Biggest Decline

Household spending will drop 1 percent in 2009, the biggest decline since 1942, according to economists surveyed by Bloomberg News. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey taken Dec. 4 through Dec. 9 showed.

The decline in spending has brought the U.S. auto industry to the brink of collapse, and rescuing the companies makes sense only from a political point of view, Rogoff said. A $14 billion plan to bail out General Motors Corp. and Chrysler LLC hasn’t gained enough support to pass in the Senate.

“From a technocratic point of view, obviously” it doesn’t make sense to save the car companies, Rogoff said.

“A lot of them may not be in business in 10 years, anyway. On the other hand, we’re going around handing out checks left and right” to financial companies, he said. “It’s just very hard to tell unions to go jump in the lake.”

President-elect Barack Obama pledged on Dec. 6 to revive the economy and create jobs by making the “single largest new investment” in roads, bridges and public buildings since the Eisenhower administration.

While he didn’t say how much such a package would cost, a group of more than 150 economists including Rogoff last week urged Obama to support a $900 billion stimulus plan.

To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net; Mike Schneider in New York at mschneider12@bloomberg.net

Last Updated: December 11, 2008 15:53 EST