Final answer:
In 1937, Roosevelt experienced the setbacks of a severe economic recession and widespread labor strikes, derailing the New Deal's progress and revealing systemic issues in labor conditions.
Step-by-step explanation:
Franklin Delano Roosevelt faced two significant setbacks in 1937: an economic recession and labor strikes. Although Roosevelt's early New Deal policies had yielded some economic improvements, by the end of 1937, optimism was shattered as the stock market experienced a second crash, with nearly a 50 percent decline. This downturn reversed many of the economic gains, pushing unemployment up to 18 percent. Furthermore, labor unrest grew as workers clashed with police and authorities, exposing deep class inequities and dissatisfaction with working conditions, leading to widespread strikes that highlighted the limitations of the New Deal's immediate relief efforts.