Value of $100 in 1937, adjusted to 1940

What happened to prices between 1937 and 1940

Between 1937 and 1940, the Consumer Price Index went from 14.4 to 14. Cumulatively, prices declined 2.8%, which works out to an average of -0.93% per year. Put differently, a dollar in 1937 bought what $1.03 buys in 1940.

Consumer prices rose 3.6% in 1937, the fastest pace since before the Depression and the fourth straight year of gains, leaving prices 10.8% above their 1933 trough though still 15.8% below the 1929 peak. The recovery did not last the year. The National Bureau of Economic Research dates a new business cycle peak to that May, the start of what became known as the Recession of 1937-38. Policy tightened on two fronts at once: the Federal Reserve had doubled bank reserve requirements over the preceding year to head off inflation it worried was building, and the federal government pulled back its own spending even as new Social Security payroll taxes began draining money from paychecks months before the first benefit checks went out. Together they choked off a recovery that had not yet reached its pre-Depression footing. Not every milestone that year was economic. The Golden Gate Bridge opened to traffic on May 27 after four years of construction, at the time the longest suspension bridge span in the world, a rare bright spot in a year that would end with the economy sliding backward again. First-class postage held at 3 cents.

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The destination year: 1940

Consumer prices rose 0.7% in 1940, snapping 1939’s decline and marking the first increase since 1937. The gain was modest, and the CPI still stood 18.1% below its 1929 peak, a reminder of how far the recovery from the Depression’s trough had left to go even as defense orders from Britain and France began reaching American factories. War was already reshaping domestic policy well before it touched American soil. Congress passed the Selective Training and Service Act that September, the country’s first peacetime draft, requiring men aged 21 to 35 to register and authorizing the induction of up to 900,000 men a year, more than a year before Pearl Harbor. That November, Franklin Roosevelt won an unprecedented third term, defeating Republican Wendell Willkie after campaigning on keeping the United States out of the war then consuming Europe and Asia. The promise would not hold much longer: within two years, wartime demand would push consumer prices up faster than at any point since the aftermath of World War I. First-class postage held at 3 cents, and the federal minimum wage stayed at 30 cents an hour, the level set the previous October under the Fair Labor Standards Act.

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