Value of $100 in 1921, adjusted to 1949

What happened to prices between 1921 and 1949

Between 1921 and 1949, the Consumer Price Index went from 17.9 to 23.8. Cumulatively, prices increased 33.0%, which works out to an average of 1.02% per year. Put differently, a dollar in 1921 bought what $0.75 buys in 1949.

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: 1949

Consumer prices fell 1.2% in 1949, down from 1948’s 8.1% gain and the first annual decline since 1939, the first real break in a decade otherwise defined by wartime and postwar inflation. A mild recession drove the drop: the National Bureau of Economic Research dates a downturn from November 1948 to October 1949, as businesses worked off inventories built up during the postwar buying boom and price pressure finally eased. The Cold War hardened around the same time. On April 4, the United States, Canada, and ten Western European nations signed the North Atlantic Treaty, committing to treat an attack on one member as an attack on all and formalizing the Western alliance against Soviet expansion. That August 29, the Soviet Union tested its first atomic bomb, ending the American nuclear monopoly just four years after Hiroshima and Nagasaki and setting off an arms race that would run for decades. Congress closed out the decade’s wage policy that October, passing the Fair Labor Standards Amendments of 1949 to raise the federal minimum wage to 75 cents an hour effective the following January, nearly double the 40 cents that had held since 1945. The decade closed with consumer prices 140.4% above their 1913 level, up 70% since 1940 alone even after 1949’s decline. First-class postage held at 3 cents.

More about inflation in 1949 →