[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

30
25
20
PERCENT
15
10
5
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Figure 21.1
UNEMPLOYMENT, 1900–2003
The proportion of the labor force unemployed and seeking jobs rose to 25 percent during
the Great Depression. Since 1960, unemployment has fluctuated around an average
of about 6 percent, but it has risen to almost 10 percent (in 1983) and fallen to as low as
3.5 percent (in 1969). After reaching 7.5 percent in 1992, the unemployment rate fell
steadily over the rest of the 1990s and was at 4.0 percent in 2000. It then rose to 6.0
percent in 2003.
SOURCE: Economic Report of the President (2004), Table B-42.
talked of a “jobless recovery.” It was not until 2004 that employment growth fully
recovered.
When the Great Depression hit, it was not confined to the United States. Figure
21.2 shows that production declined in all the major industrial economies, with the
United States and Germany being hit the hardest. We often think of the “global economy”
and the close international linkages we have today as uniquely characteristic
of the modern world, but the economies of Europe and North America were also
linked in the 1920s, and economic crises took on a global dimension, just as they
can today.
The world economy recovered slowly from the dramatic depths of the Great
Depression. The United States produced less in 1936 than it had in 1929. And in 1937
another decline occurred, helping to solidify our view of the 1930s as an entire decade
of hardship. Only with the increased production associated with the advent of World
War II did incomes in the United States significantly surpass earlier levels and unemployment
return to more normal levels. The massive increase in orders to factories
for war materials stimulated firms to expand production and hire workers. By 1944,
the unemployment rate had fallen to 1.2 percent of those willing to work.
The end of World War II brought new worries that the economy would lapse
back into recession and the hard times of the 1930s. The fear was that when the
strong demand for production arising from the wartime needs of the government
ended, firms would again be idle and the era of massive unemployment would return.
Fortunately, while production declined from its wartime peaks, the economy did not
THE COMMITMENT TO FULL EMPLOYMENT AND GROWTH ∂ 475