Evan Soltas
Aug 27, 2012

The Great Depression in Graphs

The St. Louis Federal Reserve Bank's FRED database has uploaded a "macrohistory" collection from the National Bureau of Economic Research. For anyone interested in data like me, this is a treasure trove of time series on prices, employment, and other macroeconomic data from the 1800s through the Depression you've likely never seen before. I certainly hadn't.

For today's post, let's look at the Great Depression in graphs. Each is complemented by a brief explanation.
The Depression was nothing if not a broad collapse in production. At an abstract level, that is well known -- but looking at indexes of production and production levels of individual commodities, the magnitude and breadth of the slowdown stuns. Without any change in supply, consider the power of forces which cause coal production to fall 40 percent, metal production to fall 70 percent, silver production to fall 60 percent, ice cream production to fall 40 percent -- and across all manufacturing, a 40 percent drop.Construction shows a similar drop-off during the Depression; as if according to a higher order, the hammers, saws, and trucks fall almost completely silent from 1929 to 1933. Building for businesses, homeowners, and railways all fell to 20 percent of their former levels. Note that the macroeconomic calamity of the Great Depression was preceded by a massive boom-and-bust in residential construction -- that should seem familiar and perhaps raise questions of causation.

As production and construction came to a halt, work disappeared. Disposable personal income fell by half, and averagr weekly hours of labor fell 30 percent. The unemployment rate soared into the mid-20s.Never mind today's worrying over "exceptionally low" interest rates for extended periods of time: it took interest rates three to four decades to rise back from the Depression levels. Although wartime financial repression kept rates low during the 1940s, their pattern of recovery -- the sudden plummet to a basin, followed by a crawling rise through the 1950s and 1960s -- is remarkable.And yet, for me the best graph comes from corporate profitability. In 1929, net corporate profits hit a record high of $1.7 billion in current dollars, the equivalent of $22.4 billion today. Three years later, net corporate profits were negative; that is, the average (mean) firm was operating at a loss. But most astoundingly, the median firm was operating at a loss: only 40 percent of firms were running a profit by 1933, as compared to roughly 90 percent under normal macroeconomic conditions.