During World War I, the federal government
created new agencies to manage the economy
to ensure a successful war effort. When the war
ended, the economic landscape in America changed
suddenly. Government agencies removed their
controls from the economy, and two million
soldiers returned home looking for jobs.
The economy, however, was going into
a postwar slump.
The end of wartime production and controls resulted in a sudden recession in the United
States. Both unemployment and inflation increased significantly in the years immediately
following the war. The rise in unemployment was largely a result of the end of government
orders for war materials and demobilization. Factories laid off workers and the military
discharged two million soldiers. With civilian employment down and a large population
of ex-soldiers looking for jobs, unemployment rose sharply.
Inflation resulted from the end of government controls. People raced to buy goods that had
been rationed, and with demand rising quickly, prices jumped. Businesses also moved to
raise prices that they had been forced to keep low during the war. The combination of
unemployment and inflation plunged the United States into an economic crisis and resulted
in suffering and a rise in labor disturbances.