Value of $100 in 1932, adjusted to 1938

What happened to prices between 1932 and 1938

Between 1932 and 1938, the Consumer Price Index went from 13.7 to 14.1. Cumulatively, prices increased 2.9%, which works out to an average of 0.48% per year. Put differently, a dollar in 1932 bought what $0.97 buys in 1938.

Consumer prices fell 9.9% in 1932, the steepest single-year drop in the CPI’s history to that point and the third straight year of decline following 1930 and 1931. Wages, farm incomes, and industrial output all kept falling, and Congress tried to arrest the credit collapse by creating the Reconstruction Finance Corporation that January, capitalized at $500 million with authority to borrow up to $1.5 billion to lend directly to banks, railroads, and other struggling businesses. Relief did not reach ordinary households as quickly. That summer, tens of thousands of World War I veterans and their families camped in Washington demanding early payment of a service bonus not due until 1945; in July, U.S. Army troops under General Douglas MacArthur forcibly dispersed the encampment, an episode that badly damaged the Hoover administration’s standing months before an election it was already losing. Voters delivered their verdict on November 8, electing Franklin D. Roosevelt in a landslide over the incumbent Hoover on a promise of relief and a “new deal for the American people.” Roosevelt would not take office until the following March, leaving a long and difficult transition during the depths of the crisis. First-class postage rose from 2 cents to 3 cents on July 6, the first change to the rate since 1919.

More about inflation in 1932 →

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 →