Value of $100 in 1929, adjusted to 1938

What happened to prices between 1929 and 1938

Between 1929 and 1938, the Consumer Price Index went from 17.1 to 14.1. Cumulatively, prices declined 17.5%, which works out to an average of -2.12% per year. Put differently, a dollar in 1929 bought what $1.21 buys in 1938.

Consumer prices were unchanged in 1929, the CPI’s annual average flat for the second time in six years and a fitting close to a decade that began with wartime inflation and ended in rough price stability. By year’s end the index stood 14.5% below its 1920 peak and roughly 73% above its 1913 starting point, a reminder that even a “stable” decade left prices well above where they had started. The stability in the cost of living masked what was building in financial markets. The National Bureau of Economic Research dates the start of the Great Depression to that August, the month the business cycle peaked, months before most Americans noticed anything was wrong. The break came that October: panic selling hit Wall Street on Black Thursday, October 24, and returned even worse on Black Tuesday, October 29, when the Dow Jones Industrial Average fell about 12% in a single session. Billions of dollars in paper wealth disappeared within days, and the crash marked the start of a downturn that would pull consumer prices into their steepest sustained decline of the 20th century over the next four years. First-class postage was still 2 cents, a price that would hold until 1932.

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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 →