Working Paper

Labor Market Tightness during WWI and the Postwar Recession of 1920-1921

Abstract: The U.S. economy entered the 1920s with a robust job market and high inflation but fell into a recession following the Federal Reserve's discount rate hikes to tame inflation. Using a newly constructed data set, we study labor market dynamics during this period. We find that labor markets were tight when the Federal Reserve began tightening monetary policy, but they became loose following the tightening as the recession deepened. The demand-supply imbalance in the labor market was driven by a sharp decline in the number of job openings. We also show that the recession had an uneven effect on labor markets across sectors and by gender.

Keywords: Inflation; Recession of 1920-1921; Vacancies; Unemployment; Labor Market Dynamics;

JEL Classification: E32; E24; J23; J63;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2022-08-01

Number: 2022-049