Prices and Wages in the Recession

June 11, 1958

Report Outline
Inflation in the Midst of Recession
Reasons for Present Price Inflexibility
Price-Wage Spiral Since World War II
Changes in Making of Prices and Wages
Special Focus

Inflation in the Midst of Recession

Anomaly of Rising Prices in Business Slump

Advance of the Consumer Price Index to another record high in April—eighth month of the worst recession since the 1930s—pointed up once more the puzzling anomaly of steadily rising prices in a period of sharply reduced business activity. A recession results from inadequate demand for the supply of goods and services which the country can provide with its labor force fully employed. Consequently, it might be expected that producers, conforming to the fundamental economic law of supply and demand, would have long since lowered prices to stimulate purchasing. On the contrary, consumer prices as reflected in the C.P.I. have been climbing from one new monthly peak to another.

The present round of price inflation, dating from the spring of 1956, is the third since World War II. Until March 1956, when the price index stood at 114.6 per cent of the 1947–49 average, it had not deviated more than one percentage point either way since the summer of 1952. But in the 20 months from August 1956 to April 1958, the index rose in every month except October and December 1957, and in those two months it remained stationary. At 123.5 in April of this year, the index was 2.5 points above its level of 121.0 in August 1957 when the business recession began.

Commissioner of Labor Statistics Ewan Clague said on May 22 that the current round of inflation had “shot its bolt.” He added: “There's no question about it—the big rises are now over.” However, Clague took care to avoid giving the impression that he expected the C.P.I. to fall; he predicted only that it would soon tend to level off. There is growing fear that if living costs no more than level off, another inflationary spiral can be expected when the upswing is well under way.

ISSUE TRACKER for Related Reports
Cost of Living and Wages
Apr. 17, 2020  Inequality in America
Sep. 08, 2017  Universal Basic Income
Apr. 08, 2016  Future of the Middle Class
Apr. 18, 2014  Wealth and Inequality
Jan. 24, 2014  Minimum Wage
Jun. 19, 2009  Rethinking Retirement
Mar. 06, 2009  Middle-Class Squeeze
Mar. 14, 2008  Gender Pay Gap
Dec. 16, 2005  Minimum Wage
Sep. 27, 2002  Living-Wage Movement
Apr. 17, 1998  Income Inequality
Oct. 27, 1978  Wage-Price Controls
Jun. 16, 1978  Military Pay and Benefits
Mar. 23, 1966  Rising Cost of Living
Oct. 25, 1961  Price-Wage Restraints in National Emergencies
Jun. 21, 1961  Wage Policy in Recovery
Jun. 11, 1958  Prices and Wages in the Recession
Sep. 18, 1957  Control of Living Costs
Nov. 02, 1955  Wages, Prices, Profits
Jan. 26, 1954  Minimum Wage Raise
Jan. 02, 1954  Cost of Living
Jan. 21, 1953  Guaranteed Annual Wage
Dec. 17, 1952  Future of Price and Wage Controls
Nov. 19, 1951  Fringe Benefits and Wage Stabilization
Dec. 06, 1950  Wage Control
Jun. 13, 1949  Wages in Deflation
Jun. 04, 1947  Guarantees of Wages and Employment
Oct. 29, 1946  Decontrol of Wages
Dec. 01, 1945  Minimum Wages
Sep. 29, 1945  Wage Policy
Oct. 27, 1944  Wage Security
May 17, 1943  Incentive Wage Payments
Aug. 25, 1941  Prices, Profits, and Wage Control
Apr. 28, 1941  Wartime Changes in the Cost of Living
Sep. 21, 1940  Two Years of the Wage-Hour Law
Nov. 01, 1938  Industry and Labor Under the Wage-Hour Act
Jan. 20, 1938  Wage Rates and Workers' Incomes
Apr. 11, 1935  The Cost of Living in the United States
Sep. 01, 1930  Wages and the Cost of Living
May 24, 1930  The Anthracite Wage Agreement
Feb. 20, 1925  Measure of Recovery in Profits and Wages Since 1920–21 Depression
Economic Crises