Value of $100 in 1917, adjusted to 1962

What happened to prices between 1917 and 1962

Between 1917 and 1962, the Consumer Price Index went from 12.8 to 30.2. Cumulatively, prices increased 135.9%, which works out to an average of 1.93% per year. Put differently, a dollar in 1917 bought what $0.42 buys in 1962.

1917 is when World War I inflation stopped being a background trend and became the dominant fact of American economic life. Consumer prices rose 17.4% for the year, more than double the previous year’s already sharp increase, as the country’s April 6 entry into the war layered federal war spending on top of an economy already strained by military demand and worker shortages. Congress paid for the war with the War Revenue Act that October, which sharply raised income taxes, created a new tax on wartime business profits, and, in a small but very visible change for ordinary households, raised the cost of a first-class stamp from 2 cents to 3 cents that November, the rate’s first move since 1885. Herbert Hoover took over the new Food Administration in August and asked Americans to conserve food voluntarily rather than face formal rationing, a campaign that became famous enough that “Hooverize” entered the language as a verb for cutting back. None of it slowed prices much: the 17.4% increase would be topped again the very next year, in 1918.

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The destination year: 1962

Consumer prices rose 1.0% in 1962, matching 1961’s pace as inflation stayed remarkably low and unemployment slowly declined from its recession-era highs. That January, Kennedy’s Council of Economic Advisers introduced “wage-price guideposts,” non-binding targets meant to keep pay and price increases in line with productivity growth without formal controls. The space race delivered a milestone that February, when John Glenn’s Friendship 7 capsule circled Earth three times, making him the first American to orbit the planet. Markets got a scare that spring: a dispute over U.S. Steel’s April price increase, which Kennedy publicly pressured the company into rolling back, rattled investors, and the Dow Jones Industrial Average fell about 5.7% on May 28, its steepest one-day drop since the 1929 crash. The year’s gravest moment came that October, when American reconnaissance photographed Soviet nuclear missiles in Cuba, setting off a 13-day standoff that brought the two superpowers closer to nuclear war than at any other point in the Cold War before the Soviet Union agreed to remove the missiles in exchange for a U.S. pledge not to invade the island. Consumer prices finished 1962 205.1% above their 1913 level. First-class postage held at 4 cents, and the minimum wage stayed at $1.15 an hour.

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