Great Depression Unemployment

A worldwide economic crisis preceding the Second World War, the Great Depression had a long-lasting effect on world economy. The timings were different in different nations, but usually it's believed that it started with the stock market crash of 1929 in the United States and continued till about the early 1940s. It was by far the longest economic recession ever. The lessons learned in those days is used today to frame economic policies so that the world economy does not decline to that extent ever. Effects of the Great Depression were devastating for every industrialized country, and there was a huge fall in income levels, besides drop in prices and plunge in international trade. During the Great Depression, unemployment levels rose to 25%, and in the US and in some countries it was as high as 33%. The construction industry in most countries came to a grinding halt. On top of that, farming suffered as prices of crops fell drastically. More on facts about Great Depression.

Great Depression Unemployment Facts

Even though it's said that the Great Depression started with the stock market crash of 1929, several historians see the crash in stock market as a symptom of a greater malaise, rather than the actual cause of depression. Six months before the stock market crash, there was a crash of the Wall Street. However, people didn't see the impending doom and there was still optimism around. In the first half of 1930, the stock market rose slightly, but was not enough to boost confidence of the people. People didn't start investing, rather they reduced expenses thereby aggravating the depression.

The slump in the US economy spread to other countries of the world. Several European countries had an intimate financial relationship with the US after the First World War. The US was a major donor and financier for those countries whose economies were weakened by war debts, especially Germany. So when there was a slump in the American economy, funding for these countries dried up, thereby hampering reconstruction efforts. European countries which were highly depended on the US, especially Britain and Germany suffered the most. In Germany, unemployment levels rose to 25% and 6 million people were rendered jobless. On the other hand, exports from Britain declined and remained in the same state till the Second World War. You may like to know more on unemployment during the Great Depression.

Most of the countries tried to protect domestic production by imposing additional taxes besides setting quotas on imported goods. These steps reduced international trade thereby reducing volume of trade between countries by half.

Great Depression Unemployment Rate

Three years after the stock market crashed in the New York stock exchange, the stock prices continued to decline till about the latter half of 1932. They dropped to such an extent that the value of shares in 1932 was just about 20% of 1929 levels. Other than having a great impact on individual investors, such sharp decline in the value of stock prices and assets strained the financial condition of banks and other financial institutions, especially those which held stocks. Therefore, several banks and financial institutions were forced to close down, and by 1933 out of 25,000 banks in the US, about 11,000 banks failed. People lost confidence in the economy and the combination of trust deficit and failure of banks resulted in reduced spending. When people spent less, it meant a loss in demand and when there was a loss in demand, production suffered, thereby aggravating the economic condition. The outcome was fall in output thereby increasing the levels of unemployment. By the year 1932, the manufacturing output fell by about half of what it was in 1929. The number of unemployed people rose to around 15 million, which meant that 25 to 30% of the population of the country were unemployed.

Read more on:

• Great Depression Unemployment Rate
• Great Depression Timeline

Thus, during the Great Depression, unemployment was high and people lost hope that the economy would recover fast enough. Several policies were framed to tide over the depression, but most of them failed as these policies were mainly directed at restricting the flow of goods from one country to the other, thereby aggravating the problem further. The Great Depression had a long-lasting impact on the world economy and the lessons learned during those dark days are still fresh in the minds of policymakers.