Meanwhile, inflation had grown to a staggering 13.5 percent and the Fed had no choice but to raise interest rates, which put the brakes on the booming late 1970s economy. This led to high prices and long lines at the gas pump in the United States. Oil prices skyrocketed again in 1979 caused by disruptions to the oil supply during the Iranian Revolution and increased global oil demand. January to July 1980: Second Energy Crisis and Inflation Recession The Fed had no choice but to lower interest rates to end the recession, but that set the stage for the truly runaway inflation of the late 1970s. In all, the 16-month recession saw a 3.4 percent reduction in GDP and a near doubling of the unemployment rate to 8.8 percent. The result was “stagflation,” a stagnant economy with high inflation and low consumer demand, and a recession that spanned five consecutive negative-growth quarters. Unfortunately, companies were forced to lay off workers in order to afford the new salaries, which still weren’t high enough for consumers to pay the new fixed prices. With the oil supply restricted, gas prices soared and Americans cut spending elsewhere.Īt the same time, Nixon tried to reduce inflation by instituting price and wage freezes in major U.S. This recession marked the longest economic slump since the Great Depression and was caused by a perfect storm of bad economic news.įirst, there was the Oil Embargo of 1973, imposed by the Organization of the Petroleum Exporting Countries (OPEC). due to energy crisis by order of the Mayor,' referring to the OPEC (Organization of Arab Petroleum Exporting Countries) oil embargo which led to a U.S. The sign reads 'Closed until Monday 6 a.m. View of a handwritten note on the padlocked door of a restaurant in Philadelphia, Pennsylvania, July 1973. November 1973 to March 1975: The Oil Embargo When the Fed lowered rates again in 1970, the economy cranked back into growth mode. Unemployment rose to 5.5 percent over the same period. In response, the Fed once again raised interest rates, which had the intended consequence of cooling the hot 1960s economy while only reducing GDP by 0.8 percent over an 11-month recession. economy went on a decade-long expansion that saw inflation rise to over 5 percent in 1969. This extremely mild recession was another course correction engineered by the Fed under the Nixon administration. December 1969 to November 1970: Putting the Brakes on 1960s Inflation: Not only did Nixon get the blame for starting the recession, but JFK took credit for ending it with a round of stimulus spending in 1961 and an expansion of Social Security and unemployment benefits. The second cause was the Fed again, which raised interest rates fast on the heels of the previous recession in an ongoing effort to rein in inflation. carmakers had to slash inventory and adjust to changing tastes, which meant a temporary reduction in profits. Consumers started buying more compact foreign cars and U.S. The first was what economists call a “rolling adjustment” in several major industries, most notable automobiles. There were two major causes of this 10-month recession, during which GDP declined 2.4 percent and unemployment reached nearly 7 percent. Kennedy in the 1960 presidential election. Nixon blamed the economic slump for his loss to John F. Nixon was vice president when the nation sunk into yet another recession. Richard Nixon's Paranoia Leads to Watergate Scandal At its peak, unemployment reached 7.9 percent in October 1949. Unemployment was up considerably, though, with all former GIs back in the job market. When the consumer spending boom began to level off in 1948, it triggered a “mild” 11-month recession in which GDP shrunk by only 2 percent. From 1945 to 1949, American households bought 20 million refrigerators, 21.4 million cars, and 5.5 million stoves. When wartime rations and restrictions were lifted after WWII, American consumers rushed to catch up on years of pent-up purchases. November 1948 to October 1949: Post-War Consumer Spending Slows At its worst, the unemployment rate was only 1.9 percent. But the manufacturing sector adapted to peacetime conditions faster than expected and the economy righted itself in a tidy eight months. But with the surrender of both Germany and Japan in 1945, military contracts were slashed and soldiers started coming home, competing with civilians for jobs.Īs government spending dried up, the economy dipped into a serious recession with GDP contracting by a whopping 11 percent. economy as the government infused tens of billions of dollars into manufacturing and other industries to meet wartime needs. World War II was an economic boon for the U.S.
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