The Fall And Rise Of The U.S. Economy, From The Wall Street Crash Until Now

The Fall And Rise Of The U.S. Economy, From The Wall Street Crash Until Now

In his inaugural speech, president Trump painted a gloomy picture of an America that was broken, and is in dire need of fixing. In fact, as this graph shows, the U.S. economy he inherits has been improving steadily over the past six years, with unemployment showing in an equally steady decline.

Like an economic stroboscope, the graph pulsates and changes color to indicate the state of the nation. Larger circles indicate higher levels of unemployment, and vice versa. Green means GDP growth, more so if darker green. Red indicates crisis moments, when the Gross Domestic Product contracts – by more, as the shade of red darkens.

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The graph starts in 1929, an ominous year for the economy of the U.S., and indeed the world. The Wall Street Crash sets off the Great Depression, which causes hardship on a scale not seen for generations – before or since.

Unemployment almost triples, from 3.14% in 1929 to 8.67% in 1930, almost doubles again by the next year to 15.82%, and adds another 8% by 1932. The rate peaks in 1933, when almost a quarter of the workforce – 24.75% – is out of a job. By that time, the benefits of president F.D. Roosevelt’s New Deal start to kick in.

But the massive programme for Relief, Recovery and Reform (which also included the beginning of Social Security) did not translate into a smooth or swift recovery. Unemployment stubbornly stayed in the double digits throughout the rest of the decade, and even ticked up four and a half percentage points again, to 18.91% in 1938. Only by 1941 did the unemployment rate dip below 10% again, and the mobilisation effort that followed U.S. entry into war the next year led to the historically low unemployment rate of 1.2% in 1944. Never since has the U.S. unemployment rate ever been as low as that – nor ever as high again as 11 years previously.

Post-war America, in the public imagination, turned from military victory to the commercial conquest of the world, bringing stability and growth in the domestic economy. Point in case: the Employment Act of 1946, which extended the federal government’s powers to fight inflation and unemployment – although the bill stopped short of advocating full employment, as so nearly achieved a few years earlier. But in reality, as this graph shows, peace did not bring immediate prosperity. Between 1945 and 1949, GDP contracted and unemployment crept up again, to 5.9%. But from 1950 onwards, growth returns, and unemployment goes down again.

By 1954, the Dow Jones had returned to pre-Crash levels, officially ending the Recession. Apart from two ‘red’ years this decade – 1954 and 1958 – the economy keeps growing and growing, all the way to the early 1970s. Unemployment gradually drops to a low of 3.6% in 1968; but starts to creep up again even before the Oil Crisis, which turns the start of the next decade red, and leads to ‘stagflation’ – low growth plus high inflation.

President Reagan oversees an even bigger contraction of GDP in the early 1980s, but the rest of the decade sees a recovery to growth and lower unemployment – only perforated by the Savings and Loan Crisis of 1989, a financial meltdown that was felt well into the 1990s. However, the Clinton years witness another long stretch of economic growth, the establishment of NAFTA and the balancing of the federal budget.

The presidency of George W. Bush was hit by the stock market crash of 2000, and by 9/11 a year later. The ensuing war on two fronts – in Afghanistan and Iraq – doesn’t seem to have a negative impact on the home front, where growth stays strong and unemployment stays low. But the fact that the European Union overtakes the U.S. as the world’s largest economy in 2007 could be seen as a sign of underlying weakness – but that warning is soon rendered obsolete by the financial crisis that erupts the next year. Dubbed the Great Recession, it sees a serious contraction of the economy and a spike in unemployment spike at 10%. Measures taken by president Obama avert an even worse crisis, and the economy starts to grow again, although the so-called ‘jobless recovery’ leaves many ordinary Americans wondering when or even whether they will reap the benefits of the improving economy.

Unemployment has now fallen to what has come to be considered a natural low, of 5%. Could it ever return to the catastrophic levels of the early 1930s – or the near-full employment of the mid-1940s? As the Trump era begins, it remains to be seen whether the new president’s policy changes will extend the virtuous cycle of rising growth and falling unemployment – or punctuate it with a red mark for recession, followed by rising jobless rates.

Article by HowMuch

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