Oct. 13 (Bloomberg) -- Microsoft Corp. co-founder Bill Gates said the U.S. economy is headed for a ``fairly significant recession,'' and that the unemployment rate may peak at more than 9 percent.

Higher personal and governmental debt are contributing to the U.S. economic slowdown, Gates said today in comments at Harvard Business School in Boston. The U.S. unemployment rate climbed to 6.1 percent in August and stayed at that level in September.

Alumni gathering at the business school's centennial celebration responded to questions about the worst U.S. financial crisis since the Great Depression. The perception of a strong economy led many investors to have unrealistic expectations of high, stable market returns while there were few defaults and other signs of trouble, Gates said.

``That encourages people to get leveraged and take risks,'' Gates said. ``The danger of leverage is pretty incredible.''

Gates, 52, left Harvard in the 1970s without earning a degree so he could work on forming Microsoft Corp., the world's biggest software maker. He received an honorary diploma last year. The Redmond, Washington, company's shares gained as much as 13 percent today as the Standard & Poor's 500 Index rebounded from its worst week since 1933.

Immelt and Economy

Jeffrey Immelt, 52, General Electric Co.'s chief executive officer and a 1982 graduate of the business school, said the U.S. economy is likely to experience two quarters of ``negative growth'' once the financial systems and liquidity stabilize globally. He described the past month's events as ``unspeakable, undreamed-of and really, really tough.''

The International Monetary Fund said last week in its World Economic Outlook that global growth will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007. That would mean a world recession under the fund's informal definition -- growth of 3 percent or less.

The U.S., where the 2 1/2 year-old nosedive in the housing market is damaging the rest of the economy, is the epicenter of that slump. Gross domestic product contracted in the third quarter and is set to shrink further in the fourth, according to a survey of 52 economists by Bloomberg News this month.

Freeing Credit

Global economic leaders have redoubled efforts to loosen credit markets and avert the worst worldwide recession in 30 years. The Federal Reserve led an unprecedented push by central banks to flood the financial system with liquidity. Immelt said he was ``optimistic'' after measures by governments in the U.S. and elsewhere.

GE, of Fairfield, Connecticut, is the world's biggest maker of power-plant turbines, jet engines, medical imaging equipment and locomotives. About half its profit last year came from finance-related businesses.

``If we can get liquidity back in the system and we can make sure the productive capacity continues, it doesn't have to be a long recession,'' Immelt said. ``There are engines of the world that still work.''

To contact the reporters on this story: John Lauerman in Boston at jlauerman@bloomberg.net; Rachel Layne in Boston at rlayne@bloomberg.net

Last Updated: October 13, 2008 13:58 EDT