1989 closed out a decade that began in economic crisis and ended in a long, calmer expansion. Inflation for the year came in at 4.8%, higher than the mid-decade lull but still roughly a third of the 13.5% peak that had opened the decade in 1980. The federal minimum wage, unchanged at $3.35 an hour since January 1981, had gone longer without an increase than at any point since Congress created it, and had lost close to a third of its purchasing power to inflation in the meantime; lawmakers would finally raise it to $3.80 the following April. The decade’s other unfinished business came due in August, when Congress passed FIRREA, the law that created the Resolution Trust Corporation to seize and sell off the hundreds of savings and loan institutions that a decade of deregulation and risky lending had left insolvent, a bailout that eventually cost taxpayers over $100 billion. On Wall Street, the recovery was already complete: the Dow Jones Industrial Average closed 1989 at a record high, just over two years after Black Monday’s 22.6% single-day crash, capping the bull market that had begun at the Dow’s 776 low in August 1982. Between the S&L bailout, a wage floor eroded by years without a raise, and a stock market at new highs, 1989 captured how unevenly the decade’s disinflation had been felt.
Year in review
Inflation in 1989
The U.S. inflation rate in 1989 was 4.8% (CPI: 124). Convert 1989 dollars to today →
4.8% 1989 inflation rate
5.6% 1980s average
5.4% peak month (May)
4.3% lowest month (Sep)
What things cost in 1989
| Median household income | $28,906 |
|---|---|
| Gas (per gallon) | $1.00 |
| Median home price | $120,000 |
| First-class stamp | $0.25 |
| Federal minimum wage | $3.35 |
What $100 from 1989 was worth later
| In 1990 | $105 |
|---|---|
| In 2000 | $139 |
| In 2010 | $176 |
| In 2020 | $209 |
| In 2026 | $267 |
Inflation in 1989, month by month
| Month | CPI-U | 12-month rate |
|---|---|---|
| January | 121.1 | 4.7% |
| February | 121.6 | 4.8% |
| March | 122.3 | 5.0% |
| April | 123.1 | 5.1% |
| May | 123.8 | 5.4% |
| June | 124.1 | 5.2% |
| July | 124.4 | 5.0% |
| August | 124.6 | 4.7% |
| September | 125 | 4.3% |
| October | 125.6 | 4.5% |
| November | 125.9 | 4.7% |
| December | 126.1 | 4.6% |
Economic events of 1989
- The minimum wage has not risen in eight years, the longest stretch on record Congress last raised the federal minimum wage, to $3.35 an hour, in January 1981. By 1989 it had lost close to a third of its purchasing power to inflation; lawmakers would finally raise it to $3.80 in April 1990.
- The savings and loan crisis forces a federal bailout Deregulation and risky lending had left hundreds of savings and loan institutions insolvent through the decade. In August, Congress passed FIRREA, creating the Resolution Trust Corporation to seize and sell off failed thrifts, an intervention that would eventually cost taxpayers over $100 billion.
- The Dow Jones fully recovers from the 1987 crash, closing 1989 at a record high It took just over two years for stocks to erase the damage of Black Monday, a faster recovery than many expected in October 1987. The rebound capped the bull market that had begun at the Dow's 776 low in August 1982.
- Inflation closes the decade at 4.8%, roughly a third of 1980's peak The 1980s ended with prices having risen far more calmly than they began: after peaking at 13.5% in 1980, annual inflation spent the second half of the decade oscillating in a 2-5% range that would largely hold through the 1990s.
Sources: U.S. Census Bureau, Current Population Survey (income); U.S. Census Bureau, New Residential Sales (home price); U.S. Energy Information Administration (gasoline); U.S. Department of Labor (minimum wage); USPS historical rates.
Inflation figures: U.S. Bureau of Labor Statistics, CPI-U annual averages. See the methodology.