Between 1916 and 1981, the Consumer Price Index went from 10.9 to 90.9.
Cumulatively, prices increased 733.9%, which works out to an average of
3.32% per year. Put differently, a dollar in 1916 bought what
$0.12 buys in 1981.
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.
The headline number is an average. Individual categories moved very differently over this
period. Here is what $100 of 1916 spending costs in 1981, by category:
Category
Avg. yearly inflation
$100 in 1916 →
All items (CPI-U)
3.32%
$834
Food
3.31%
$828
Apparel
2.71%
$567
Not shown because the BLS began these indexes after 1916: core (all items less food & energy) (1957–), energy (1957–), housing (1967–), medical care (1935–), transportation (1935–), recreation (1993–), education & communication (1993–).
Long periods are sampled every 5 years; the calculator above covers any pair of years.
The destination year: 1981
1981 was the year the inflation fever finally broke, at an extraordinary price.
Consumer prices rose 10.3%, the second year of back-to-back double-digit
inflation and the last time the U.S. would see one. To end it, Paul Volcker’s
Federal Reserve drove its policy rate above 19% and let borrowing costs go
where they may: a 30-year mortgage cost more than 18% by autumn, car loans and
business credit froze, and homebuilders mailed the Fed two-by-fours in protest.
The squeeze tipped the economy into recession in July, the deep 1981–82
downturn that would push unemployment past 10%. But it worked. Inflation fell
by nearly half within a year and to under 4% by 1983, the disinflation that
defined the following two decades. Even the price of mailing a letter told the
year’s story: postage went up twice in eight months.
MLA: “Inflation from 1916 to 1981: $100 is worth $834 today.” InflationCalculator.com, U.S. Bureau of Labor Statistics CPI-U data, https://inflationcalculator.com/inflation/1916-to-1981/
APA: InflationCalculator.com. Inflation from 1916 to 1981. Based on U.S. Bureau of Labor Statistics CPI-U data. Retrieved from https://inflationcalculator.com/inflation/1916-to-1981/