Value of $100 in 1916, adjusted to 1938

What happened to prices between 1916 and 1938

Between 1916 and 1938, the Consumer Price Index went from 10.9 to 14.1. Cumulatively, prices increased 29.4%, which works out to an average of 1.18% per year. Put differently, a dollar in 1916 bought what $0.77 buys in 1938.

1916 was when World War I first showed up clearly in American price tags. Consumer prices rose 7.9% for the year, easily the sharpest increase since the Bureau of Labor Statistics’ CPI history begins in 1913, as factories ran flat out to fill steel, munitions, and food orders from Britain and France. Railroad workers felt the squeeze from rising living costs enough to threaten a nationwide strike; Congress headed it off in September with the Adamson Act, which set an eight-hour standard workday for interstate rail employees, the first federal law of its kind covering private-sector hours. Washington was also preparing more directly for war: the National Defense Act, signed in June, expanded the Army and National Guard and funded new government-owned munitions plants, adding another source of demand to an economy already running hot. Woodrow Wilson won re-election in November largely on having kept the country out of the fighting so far, a promise that would not survive the following spring. A first-class stamp still cost 2 cents, one of the few prices that had not yet moved.

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The destination year: 1938

Consumer prices fell 2.1% in 1938, reversing most of 1937’s gain and interrupting four straight years of recovery from the Depression’s trough. The National Bureau of Economic Research dates the bottom of the downturn, which had begun that May, to June 1938, a sharp 13-month contraction that briefly pushed unemployment back up near 19%. Even in a year the economy was shrinking again, Congress passed one of the New Deal’s most lasting reforms. The Fair Labor Standards Act, signed June 25 and effective that October, established the first federal minimum wage, 25 cents an hour, capped the standard workweek at 44 hours with time-and-a-half overtime beyond it, and restricted the employment of children in most industries. The wage floor and hours limits applied only to workers engaged in interstate commerce at first, but they set a precedent that would expand in the decades that followed. Consumer prices stood 42.4% above their 1913 level and 17.5% below their 1929 peak, evidence of how far the recovery still had to go even eight years after the Depression began. First-class postage held at 3 cents.

More about inflation in 1938 →