What was the Great Depression in Economic Terms?

This first blog is devoted to describing what the Great Depression was in economic terms.  Despite it being the most famous economic event in United States history, most people have a confused conceptual understanding of the Great Depression and know very few specific economic facts on the event.  This blog will give the economic facts of the period, which we will analyze further as we move through this series.
The Great Depression started in late 1929 and ended in 1941.  The stock market peaked at about 380 in early September of 1929 and unemployment stood at a low 3.2% in 1929 by November of 1929 the stock market had dropped to about 200(about a 50% drop) and during 1930 the unemployment rate had more than doubled to 8.7%. It was not until 1933 that the stock market  and unemployment bottomed out with the DOW at about 40 in July of 1933 and unemployment at a staggering 24.9%.  This would be like if today’s stock market dropping from 12,400 to about 1300 and instead of having 13.7 million people unemployed we would have about 38.5 million unemployed

Gross domestic product had also fallen by 25% from 1929-1933.  Another factor to keep in mind is money supply.  The total US money supply in 1929 peaked at a little over 28 billion dollars by 1933 the total supply of money had shrunk by about ⅓ to about 19 billion(We will talk more about money supply and monetary policy in a later post, but keep this factor in mind). There were also about 10,000 bank failures from 1929-1933. These first couple of years were really the worst of the depression with the stock market, unemployment, GDP, and consumption all hitting their lowest for the duration of the Great Depression.

What most people do not realize is that in the middle of the Great Depression there was a very strong economic recovery from 1933 to 1937.  The stock market rose from 40 in July of 1933 to a little over 190 in March of 1937.  Unemployment had also dropped from 24.9% to 14.3%.  We also saw total US consumption rise by about 50 billion dollars and GDP rise from about 225 billion in 1933 to about 300 billion in 1937.  There was also a steep rise in money supply from 1933-1937.  Total money supply rose by about 12 billion dollars from 1933-1937 to about 31 billion in 1937.

Unfortunately, in 1937 the US fell into a second recessionary period.  The money supply shrank by about 2 billion dollars, which was a lot of money at the time.  Additionally, the stock market dropped to about 120 from 190, unemployment rose to 19% in 1938 from 14.3%, and both GDP and consumption shrank from their 1937 highs.  While this recessionary period was not as severe as the 1929-1933 period its impacts were still felt in a painful way by the United States. 

It was not until 1941 that the Great Depression officially ended with GDP and consumption passing 1929 levels and unemployment falling to 9.9%, though it was not until 1954 that the stock market returned to its 1929 levels.

The facts and figures in this blog will be important to keep in mind for the rest of this series.  I think it is vital to know details like these if one wants to truly be able to understand and teach others about the depression.  I see these facts as the glue the holds the story of the Great Depression together. These facts and figures also raise some questions, like what caused almost 12 years of economic turmoil? Additionally, what brought us out of the most infamous economic downturns in US history? We will shed some light on these questions and more as we move through the series.

In the next post we will present a political overview of the period.