Value of $100 in 1929, adjusted to 1946

What happened to prices between 1929 and 1946

Between 1929 and 1946, the Consumer Price Index went from 17.1 to 19.5. Cumulatively, prices increased 14.0%, which works out to an average of 0.78% per year. Put differently, a dollar in 1929 bought what $0.88 buys in 1946.

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: 1946

Consumer prices rose 8.3% in 1946, up sharply from 1945’s 2.3% and the sharpest increase since 1942, as wartime price controls finally came apart. Congress let the Office of Price Administration’s authority lapse at the end of June, reinstated a weaker version soon after, then wound the whole system down through the rest of the year, releasing years of pent-up demand into the price level almost at once. Meat was the clearest casualty of the fight over decontrol: farmers withheld livestock rather than sell at capped prices, producing severe shortages that spring and summer until ceilings on meat were lifted that October, after which supplies reappeared almost overnight. Labor cashed in its own wartime restraint the same year. An estimated 4.6 million workers walked out at some point in 1946, hitting steel, coal, automakers, and the railroads in the largest strike wave in U.S. history, as unions pushed for wage gains to offset cost-of-living increases controls could no longer contain. Amid the turmoil, Congress made a less visible but lasting change to economic policy: the Employment Act of 1946, signed that February, committed the federal government to promoting maximum employment and created the Council of Economic Advisers. Consumer prices stood 97.0% above their 1913 level, nearly double where the index had started 33 years earlier. First-class postage held at 3 cents, and the minimum wage stayed at 40 cents an hour.

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