Employment_Nov1986.pdf - FEOERAL RESERVE BANK OF St LOUtS...

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tSBOU’I’40yearsago,inresponsetotheDepressionofthe1930s,CongresspassedtheEmploymentActof1946.Itssponsors believedthatearlierfailurestodealwithmassiveworldwideunemploymenthadcontrib-utedsignificantlytotheriseofNationalSocialism,whicheventuallyculminatedinWorldWarII.Thisbeliefurged theact’ssponsorstofindasolutiontotheproblemthathad caused“suchagreatmeltingawayofprosperityinsuchashortperiodoftime.”’Thelegislationfollowedontheheelsofarevolutioninmacroeconomictheory.‘Thisnewtheorysuggestedthatperiodicboomsandbustscouldbeavoidedifgovernmentpursuedapolicyof“compensatoryfinance.”Thenewtheorypromisedthesuccessofcentrallydirectedeconomicstabilizationpolicyandprovidedthenucleusaroundwhichtheproposedlegislationwasbuilt,Thebillthatwasinitiallyproposedstiredupcon-siderablecontroversy.Someconsideredit“agreatMagnaCartaofgovernmentplanningforfullemploy-men!.’’3Othersvieweditas‘‘utterlyalientoAmericaG.JSantoni isasenioreconomistattheFederalReserveBankofSt.Louis.ThomasA.Pollmannprovidedresearchassistance.‘FullEmploymentActof1945(1945),p.1110.2Hansen(1956),p.97.andhei’institutions.”~Overtheinterveningyears,dis-cussionsoftheEmploymentActhavebecomelessshrill,butwecontinuetoregardunemploymentasanimportantproblem.Thepurposeof this paperistoplacethispolicyconcerninitshistoricalcontextasitinitiallysurfacedincongressionaldebatesoftheFullEmploymentBillof1945andasitre-emergedinde-batesoftheFull EmploymentandBalancedGrowthBillof1976.Iit-w.icIlis1~o1~r.im.iChartIplotstheunemploymentratefrom1900—40.~Before1930,theunemploymentratemovedaroundanaverageofabout4.5percent. Beginningthatyear’,however,itrosesubstantially,reaching25percentof3FullEmploymentActof1945(1945),p.1138.4ThedataarefromHistoricalStatisticsoftheUnitedStates ColonialTimesto1970(1975),pp.122—23andp.126.Measurement,ofcourse,isneverperfect.These unemployment dataarebasedonestimatesofLebergott(1957):andRomer (1986)suggeststheyarerelativelynoisy.Furthermore,Darby(1976)arguesthatthesedatatendto overstateunemploymentafter1933becauseFederalEmer-gencyWorkers(employeesoftheCivilianConservationCorps,NationalYouthAdministration,Civil Works AdministrationandtheWorksProgressAdministration)werecountedasunemployed.NOVEMBER~9SE-FEOERAL RESERVEBANKOFStLOUtSTheEmploymentActof1946:SomeHistoryNotesC.J.SantoniThus,becauseoftheplanlessnes.softhetwentiesbecauseofthelackofcourageousactionimmediatelyfollowingthe collapsethenationlost105,000,000man-yearsofproductioninthethirties.Full EmploymentActof1945,Hearngs, p.1104
FEDERAL RESERVEDANKOFSI.LOUISNOVEMBERieee~thelaborforceby1933,thendeclinedfairlyslowlytoalevelofabout15percentin1940.Duringthe11-yearperiodfr’om1930—40,itaveragedabout18percent.

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