America’s unemployment now stands at a 54-year low of 3.4%, a useful reminder that our post-COVID economy is similar to the post-World War II economy of 1947-1949. Much like today, that generation faced a tricky combination of high inflation and low unemployment. Our predecessors brought inflation down without significantly breaking the economy. Should we follow the same roadmap?
In January 1948, the unemployment rate fell to, yes, 3.4%. Inflation raged, with the Consumer Price Index (CPI) having hit 19% the previous April as war-time price controls came to an end. Many believed that the actions required to cool down the economy and defeat inflation would bring a recession. Nearly everyone remembered the pain of the Great Depression.
The economy was challenged by rapidly rising demand for houses, automobiles, and other consumer goods. These had been pushed to the side during the war, but with peace came demand, thanks to a huge buildup of wartime savings and good jobs and returning veterans going to work. Meanwhile, war-ravaged Europe and Asia were attempting to recover and rebuild. U.S. producers, including farmers, faced soaring demand and supply-chain challenges in getting goods where they needed to go.
