Recession of 1937

Recession of 1937

The Recession of 1937 was a sharp economic downturn in the United States in 1937-38. It was part of the Great Depression in the United States, and had serious political results, and helped strengthen the new Conservative Coalition led by Senators Robert A. Taft and Richard B. Russell. Economic historians have not agreed on the causes [] , but many of the causes show that because the New Deal involved spending money from the Federal budget, President Roosevelt had to end New Deal spending, and thus programs, as a result.


By 1936, all the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high. In 1937, the American economy took an unexpected downturn, lasting through most of 1938. Production declined sharply, as did profits and employment. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. In two months, unemployment rose from 5 million to over 9 million, reaching almost 12 million in early 1938. Manufacturing output fell off by 40% from the 1937 peak; it was back to 1934 levels. Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. In most sectors hourly earnings continued to rise throughout the recession, which partly compensated for the reduction in the number of hours worked. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production.


The Roosevelt Administration reacted by launching a rhetorical campaign against monopoly power, which was cast as the cause of the depression, and appointing Thurman Arnold to act; Arnold was not effective, and the attack ended once World War II began and corporate energies had to be directed to winning the war.

The recession was short, and by 1939 the effects had disappeared.

The Administration's main response to the 1937 recession was a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power. Business-oriented observers explained the recession and recovery in very different terms from the Keynesians. They argued the New Deal had been hostile to business expansion in 1935–37 and had encouraged massive strikes.


It began to get better in mid-1938, and every month it was better. However, employment did not regain the 1937 level until the war boom began in late 1940. Productivity steadily increased, and output in 1940 as well above the levels of both 1929 and 1937. Personal income in 1939 was almost at 1919 levels in aggregate, but not per capita. The farm population had fallen 5%, but farm output was up 19%, so the remaining farmers were better off than the average farmer in 1939.

Employment in private sector factories recovered to the level of the late 1920s by 1937 but did not grow much bigger until the war came and manufacturing employment leaped from 11 million in 1940 to 18 million in 1943.

ee also

*Great Depression


* Brinkley, Alan. "The End Of Reform: New Deal Liberalism in Recession and War". (1995) the political story
* Coleman, John J. "State Formation and the Decline of Political Parties: American Parties in the Fiscal State" "Studies in American Political Development" 1994 8(2): 195-230. ISSN 0898-588X
* Walter Galenson; "The CIO Challenge to the AFL: A History of the American Labor Movement, 1935-1941" Harvard University Press, 1960
* D. A. Hayes, "Business Confidence and Business Activity: A Case Study of the Recession of 1937," "Michigan Business Studies" v 10 #5 (1951)
* Patrick D. Reagan; "Designing a New America: The Origins of New Deal Planning, 1890-1943" University of Massachusetts Press, 2000
* Kenneth D. Roose. "The Recession of 1937-38" "Journal of Political Economy", Vol. 56, No. 3 (Jun., 1948) , pp. 239-248
* Kenneth D. Roose. "The economics of recession and revival; an interpretation of 1937-38." (1954)
* Richard Ruggles; "An Introduction to National Income and Income Analysis" 1949.
* Sumner H. Slichter, "The Downturn of 1937" "Review of Economic Statistics" 20 (1938) 97-110

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