Value of $100 in 1921, adjusted to 1935

What happened to prices between 1921 and 1935

Between 1921 and 1935, the Consumer Price Index went from 17.9 to 13.7. Cumulatively, prices declined 23.5%, which works out to an average of -1.89% per year. Put differently, a dollar in 1921 bought what $1.31 buys in 1935.

Consumer prices fell 10.5% in 1921, the mirror image of the wartime inflation that had more than doubled the cost of living between 1913 and 1920. The Depression of 1920-21, one of the sharpest contractions in U.S. history, bottomed out that July according to the National Bureau of Economic Research, even though it had lasted barely eighteen months. Unemployment climbed toward one worker in ten as businesses cut production and prices to work through wartime inventories, but the same collapse in prices also meant the recovery, once it started, had room to run without reigniting inflation. Warren Harding took office March 4, promising a return to “normalcy” after a decade of war, pandemic, labor unrest, and rapid price swings; his administration moved quickly to cut top income tax rates and federal spending. Congress also acted on immigration that year: the Emergency Quota Act, signed May 19, capped annual arrivals from each country at 3% of that nationality’s population in the 1910 census, the first time the United States had set a numerical ceiling on immigration. The law favored northern and western Europe and cut total immigration by more than half compared with prewar levels; Congress tightened the formula again in 1924. First-class postage held at 2 cents, unchanged since mid-1919.

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The destination year: 1935

Consumer prices rose 2.2% in 1935, a second straight annual increase after 1934’s turnaround, though the CPI still sat well below its 1929 peak and the recovery remained uneven and incomplete. The year’s biggest legislative achievements aimed at making that unevenness less punishing. Roosevelt signed the Social Security Act on August 14, creating federal old-age pensions and unemployment insurance funded by a new payroll tax, the first federal safety net of its kind in U.S. history. That spring, the Works Progress Administration had already begun putting millions of unemployed Americans to work on public construction, arts, and infrastructure projects, becoming the largest jobs program of the New Deal. Congress added labor protections to the mix that July with the National Labor Relations Act, guaranteeing most private-sector workers the right to organize and bargain collectively. The human cost of the Dust Bowl was still mounting on the Plains: the storm known as Black Sunday hit on April 14, one of the worst of the decade, and continued drought kept driving farm families off land that could no longer support them. Consumer prices ended the year 38.4% above their 1913 level. First-class postage held at 3 cents.

More about inflation in 1935 →