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Recession of 1958

The Recession of 1958, dated by the National Bureau of Economic Research as a contraction from the peak in August 1957 to the trough in April 1958, represented a mild postwar downturn in the United States economy, featuring a real GDP decline of about 3.7 percent and an unemployment rate that peaked at 7.5 percent in July 1958.^[1]^[2]^[3] This eight-month episode followed a period of robust expansion but was precipitated by the Federal Reserve's tightening of monetary policy, including raising the discount rate to 3.5 percent in 1957, to combat rising inflation pressures from prior booms in consumer durables and inventory accumulation.^[4]^[5] Industrial production fell sharply by around 10 percent, with sectors like automobiles and steel experiencing pronounced slumps due to weakened demand and excess inventories, while overall economic activity moderated without the severe banking crises or deflation seen in earlier depressions.^[2]^[6] The Eisenhower administration maintained fiscal restraint, prioritizing budget balance amid concerns over inflation, though the Federal Reserve's subsequent easing—lowering rates to 1.75 percent by mid-1958—facilitated a rapid recovery, with most lost ground in output regained by year-end and unemployment beginning to decline thereafter.^[5]^[7] This event underscored the potency of monetary policy in influencing business cycles, highlighting how prompt reversal of restrictive measures could mitigate downturns without resorting to expansive fiscal interventions.^[4]

Historical Context

Postwar Economic Expansion

The United States experienced a sustained economic expansion following World War II, transitioning from wartime production to consumer-driven growth amid pent-up demand accumulated during rationing and resource allocation for military needs. Factories reconverted to manufacturing automobiles, appliances, and housing materials, resulting in a boom in consumer spending; automobile production, for instance, rose from 70,000 vehicles in 1945 to over 8 million by 1950. Real gross domestic product (GDP) contracted sharply by 11.6% in 1946 as federal military expenditures plummeted from 37% of GDP to under 5%, but rebounded with 4.1% growth in 1948 as civilian output expanded.^[8] The Servicemen's Readjustment Act of 1944, known as the GI Bill, supported over 2.4 million veterans in pursuing higher education and home loans by 1956, fostering suburban development and increasing household formation rates.^[9] This period included interruptions from recessions in 1949 and 1953-1954, triggered by inventory adjustments and monetary tightening, yet the overarching trend featured average annual real GDP growth of about 3.8% from 1946 to the mid-1950s. The Korean War from 1950 to 1953 injected stimulus via elevated defense spending, which peaked at 14% of GDP in 1952, sustaining employment and industrial activity before a postwar-style contraction in 1953-1954. Consumer credit extended from $5.7 billion in 1945 to $45.5 billion by 1957, amplifying demand for durable goods and fueling sectors like construction, where housing starts surged from 1.0 million units in 1950 to a peak of 1.65 million in 1959.^[10] The expansion phase immediately preceding the 1958 recession, spanning May 1954 to August 1957, delivered robust recovery with real GDP growth reaching 7.1% in 1955, supported by business investment and exports. Unemployment averaged approximately 4.5% across the 1950s, reflecting labor market tightness amid population growth from the baby boom, which added over 75 million people between 1946 and 1964. Overall, the U.S. economy expanded by 37% in real terms during the decade, underpinned by productivity gains from technological advancements and infrastructure investments like the Interstate Highway System initiated in 1956.^[11] ^[12]

Inflationary Pressures and Initial Policy Tightening

Inflationary pressures intensified in the United States during the mid-1950s, following robust postwar economic growth that strained production capacities and fueled demand-pull inflation. The Consumer Price Index (CPI) increased by 0.4% in 1955 before accelerating to 3.0% in 1956 and remaining elevated at 2.9% in 1957, driven by strong consumer spending, rising wages, and bottlenecks in durable goods sectors.^[13] ^[14] These rates, though moderate compared to later decades, raised concerns among policymakers about eroding purchasing power and potential wage-price spirals amid near-full employment. The Federal Reserve responded with initial monetary tightening to contain these pressures, prioritizing price stability over unchecked expansion. Starting in mid-1955 and intensifying through 1956-1957, the Fed raised the discount rate and implemented open market operations to reduce liquidity, pushing short-term interest rates higher—reaching peaks around 3.5% by mid-1957.^[15] ^[5] This policy shift successfully moderated inflation but slowed credit-dependent investments, particularly in housing and business capital, setting the stage for economic contraction.^[16] Complementing monetary measures, the Eisenhower administration advocated fiscal discipline, resisting deficit spending and trimming federal outlays to reinforce anti-inflationary efforts. President Eisenhower repeatedly emphasized inflation as the paramount threat to prosperity, arguing that unchecked price rises undermined long-term growth more than temporary slowdowns.^[17] These combined policies reflected a commitment to sound money principles but inadvertently amplified vulnerabilities in inventory cycles and consumer durables demand.

Causes

Federal Reserve Monetary Policy

The Federal Reserve, seeking to counteract inflationary pressures from sustained postwar economic expansion, implemented progressively tighter monetary policy starting in mid-1954. The discount rate was raised from 1.5 percent in late 1954 to 3 percent by April 1956 through a series of increases, including four adjustments in 1955 alone as member bank borrowing surged amid robust credit demand.^[18]^[19] Concurrently, the Federal Open Market Committee (FOMC) directed open market operations to absorb excess reserves, which elevated short-term market interest rates, including the federal funds rate, and constrained bank credit availability.^[20] This restraint aimed to moderate speculative inventory accumulation and investment booms in sectors like automobiles and housing, where demand had outpaced supply.^[21] By early 1957, inflation had accelerated to approximately 3 percent year-over-year, prompting further hardening of policy; the discount rate reached 3.5 percent in August 1957, coinciding with peak tightness.^[15]^[22] The resulting higher borrowing costs— with prime rates climbing above 4 percent and Treasury yields rising—discouraged business fixed investment and consumer durables purchases, exacerbating an inventory overhang as sales slowed.^[23] Empirical evidence links this credit contraction to the recession's onset in August 1957, as monetary restraint amplified demand-side weaknesses without fiscal offsets, leading to a sharp contraction in industrial production by over 10 percent within months.^[16] Although some analyses argue the policy stance was not excessively contractionary relative to inflation risks, the timing and magnitude of reserve drainage directly contributed to the liquidity squeeze that tipped the economy into downturn, as evidenced by subsequent easing measures— including discount rate cuts to 2.25 percent by March 1958 and reserve requirement reductions— that facilitated recovery by mid-1958.^[24]^[22]^[25]

Inventory Liquidation and Investment Decline

Inventory liquidation emerged as a primary driver of the 1958 recession's contractionary phase, as businesses adjusted to weakening final demand following Federal Reserve tightening. Entering late 1957, firms held elevated inventories built up during the prior expansionary period, particularly in durable goods like automobiles and machinery. When sales softened due to higher borrowing costs and reduced consumer confidence, inventory-to-sales ratios rose, prompting aggressive liquidation to avert further losses. This process directly curtailed production, as output aligned more closely with diminished sales rather than prior accumulation targets.^[23] The scale of liquidation was substantial: from the third quarter of 1957 to the first quarter of 1958, it accounted for approximately two-thirds of the $17.6 billion (or 4 percent at annual rates) decline in gross national product (GNP).^[23] In the first quarter of 1958 alone, the change in business inventories registered a negative $9.0 billion, equivalent to an annual liquidation rate of about $9 billion—the largest recorded at the time.^[26] Durable goods manufacturers contributed disproportionately, with their stocks falling $2.5 billion since September 1957, representing two-thirds of the overall business inventory reduction; sectors such as automobiles saw particularly sharp drawdowns ahead of new model introductions.^[26] Total business inventory book values had declined $2.5 billion cumulatively from September 1957, underscoring the liquidation's breadth across industries.^[26] Business fixed investment also contracted amid the uncertainty, as declining orders and profitability tempered expansion plans. Commerce Department surveys in early 1958 revealed expectations for plant and equipment outlays to total $30.8 billion for the year, a 17 percent drop from $37.0 billion in 1957.^[26] Actual spending reflected this pessimism, with first-quarter 1958 outlays at a $32.5 billion annual rate, sliding to $30.5 billion by the third quarter; gross private domestic investment fell to $61.3 billion in the first quarter from $66.5 billion in the third quarter of 1957.^[26] Manufacturing anticipated a 25 percent reduction from 1957 levels, driven by lower new orders—for instance, machinery shipments like construction equipment halved from July 1957 to January 1958, and steel production dropped from 417.5 thousand tons in October 1957 to 288.4 thousand tons in March 1958.^[26] These cuts stemmed from excess capacity post-boom and heightened financing costs, reinforcing the demand shortfall. Together, inventory liquidation and investment retrenchment created a feedback loop: reduced capital spending lowered capacity utilization and employment (manufacturing jobs fell from 16.96 million in the second quarter of 1957 to 15.88 million in the first quarter of 1958), while liquidation depressed output and incomes, prolonging the adjustment.^[26] This dynamic, rooted in over-optimism during the expansion, amplified the recession beyond initial monetary impulses.^[23]

Sectoral and Demand-Side Factors

The 1958 recession featured pronounced weakness in demand for consumer durables and business capital goods, contributing to a 3.7% contraction in real gross national product from the second quarter of 1957 to the first quarter of 1958.^[27] A key demand-side driver was the shift from inventory accumulation to liquidation, as firms reduced stockpiles in response to softening sales; this process subtracted approximately 2% from GNP growth during the contraction phase, exceeding the typical contribution of inventory cycles in prior postwar downturns.^[28] Concurrently, business fixed investment outlays fell by over $17 billion (annual rate) from mid-1957 to early 1958, reflecting higher interest rates and diminished expectations for sales growth amid prior inflationary pressures.^[29] Sectorally, the automobile industry exemplified the demand contraction, with production and sales plunging amid reduced consumer purchases influenced by tighter credit and waning confidence; durable goods output, led by autos, declined 17.8% at the recession's trough.^[30] Unfilled orders for durable goods dropped sharply, signaling weakened forward demand and forcing cutbacks in manufacturing, particularly in steel and related inputs tied to auto and appliance production.^[31] Housing construction also faltered, with private starts and outlays for new units falling more steeply than in average recessions due to elevated mortgage rates and a prior boom's exhaustion, exacerbating job losses in construction and allied sectors.^[32] These sectoral imbalances amplified the overall demand shortfall, as multiplier effects from reduced spending in autos and housing rippled through supplier networks, though exports held relatively steady.^[33]

Course of the Recession

Timeline and Key Phases

The recession, as determined by the National Bureau of Economic Research, commenced at the cyclical peak in August 1957 and reached its trough in April 1958, spanning eight months of contraction in economic activity.^[34] This period followed a sustained postwar expansion but was precipitated by prior monetary tightening, leading to reduced investment and inventory accumulation. Key indicators such as industrial production peaked in July 1957 before declining sharply, falling by 13.5% from peak to trough amid cutbacks in durable goods manufacturing.^[16] Real GDP contracted in the fourth quarter of 1957 and first quarter of 1958, with an overall peak-to-trough decline of approximately 3.7%.^[35] The initial phase, from August to December 1957, featured a slowdown transitioning to outright contraction, driven by declining business investment and consumer durables spending. Industrial production dropped 5.7% in the fourth quarter of 1957 alone, reflecting inventory liquidation in sectors like automobiles and steel.^[36] Unemployment began rising from 4.4% in July 1957 to 5.6% by December, as manufacturing layoffs accelerated.^[37] The Federal Reserve initiated easing by cutting the discount rate from 3.5% in October 1957, though credit conditions remained tight initially.^[22] Contraction intensified in the first quarter of 1958, marking the deepest phase, with industrial output falling another 9% and GDP declining at an annualized rate exceeding 10%.^[38] Unemployment surged to 7.1% by March, affecting over 5 million workers, particularly in industrial Midwest states. Business fixed investment plummeted 12% year-over-year, exacerbating the downturn through reduced capital spending.^[2] By February to April 1958, stabilization emerged as inventory drawdowns concluded and early recovery signals appeared, including stabilizing retail sales and a rebound in housing starts. The NBER-identified trough in April 1958 preceded a lagged peak in unemployment at 7.7% in July, consistent with labor market dynamics where job losses trail output declines.^[16] Federal Reserve actions, including further rate cuts to 1.75% by mid-1958, supported the transition to expansion.^[5]

Major Economic Events

The recession commenced following the business cycle peak in July 1957, as determined by the National Bureau of Economic Research, with initial contractions evident in industrial production and freight carloadings by August. Industrial production, which reached an index level of 146 (1947-1949=100) in July, began a sustained decline, dropping approximately 10 percent to 130 by February 1958, reflecting sharp cutbacks in sectors such as automobiles and steel amid inventory liquidation. Leading economic indicators, including new orders and stock prices, confirmed the downturn by November 1957, four months after the peak, while exports fell by over $4 billion at an annual rate due to reduced foreign demand.^[39]^[33]^[6] In the first quarter of 1958, the contraction intensified, with real gross domestic product contracting at an annualized rate of nearly 10 percent, marking one of the sharper quarterly drops in postwar history up to that point. Unemployment rose from 4.1 percent in 1957 to around 7 percent by March 1958, driven by layoffs in manufacturing, where employment fell amid a 12 percent drop in industrial production from its July 1957 peak. Department store sales declined 5 percent, and manufactured goods sales fell 12.4 percent, exacerbating the slowdown in consumer durables; the Asian flu pandemic, which began spreading in the United States in autumn 1957 and peaked in winter, further dampened activity through reduced workforce participation and spending.^[40]^[41]^[42] By mid-1958, signs of stabilization emerged, with industrial production bottoming out around March before an upturn in June after eight months of decline, coinciding with the official trough in April. Unemployment continued to climb post-trough, peaking at 7.5 percent in July 1958, as labor market adjustments lagged other indicators. Personal income experienced only a modest decline relative to prior recessions, supported by transfers and government spending, while wholesale prices rose 1.6 percent over the period, indicating persistent inflationary undercurrents despite the contraction. Overall, real GDP declined 3.7 percent from peak to trough, underscoring the recession's moderate severity compared to deeper postwar downturns.^[43]^[5]^[39]

Economic Effects

Macroeconomic Indicators

The Recession of 1957–1958, as dated by the National Bureau of Economic Research (NBER), began with a peak in economic activity in August 1957 and reached a trough in April 1958.^[34] Real gross domestic product (GDP) contracted by approximately 3.7 percent from peak to trough during this period.^[44] Quarterly data from the Bureau of Economic Analysis indicate that real GDP fell at an annual rate of 10.0 percent in the fourth quarter of 1957 and 4.1 percent in the first quarter of 1958, reflecting sharp declines in fixed investment and inventory accumulation.^[45] The unemployment rate, reported by the Bureau of Labor Statistics, rose from 4.1 percent in July 1957 to a peak of 7.5 percent in July 1958, with monthly figures reaching 6.8 percent by December 1957 and remaining above 6 percent through much of 1958.^[3] This increase added over 2 million workers to the unemployed rolls, driven primarily by layoffs in manufacturing and construction sectors.^[37] Industrial production, as measured by the Federal Reserve, declined by 13.5 percent from its peak, underscoring the contraction in output.^[16] Inflation moderated during the downturn, with the Consumer Price Index (CPI) rising 2.9 percent in 1957, slowing to 1.8 percent in 1958, and 0.7 percent through the first half of the year.^[46] Personal income experienced minimal decline, supported by government transfers and stable consumer spending, which limited the depth of the consumption drop to about 2 percent.^[35] These indicators highlight a relatively mild recession characterized by investment-led contraction amid disinflationary pressures.^[5]

Sectoral and Labor Market Impacts

The labor market experienced notable strain during the 1958 recession, with the unemployment rate climbing from 4.1% in late 1957 to a peak of 7.5% in July 1958, reflecting a doubling from pre-recession levels.^[5] ^[16] ^[3] This rise led to roughly 2 million job losses, concentrated heavily in manufacturing, where employment declines were most acute due to reduced demand for industrial output.^[30] Construction and related trades also saw elevated unemployment as activity slowed, exacerbating overall labor market weakness.^[5] Sectoral impacts were pronounced in durable goods manufacturing, which recorded a 17.8% output drop at the recession's nadir, primarily driven by a slump in automobile production amid inventory overhang and weakened consumer demand.^[30] Steel production fell sharply, operating at approximately 51% of capacity by mid-1958, as orders for capital goods and autos evaporated.^[23] Consumer expenditures on durable goods declined by 10% between the third quarter of 1957 and the first quarter of 1958, contributing to broader cutbacks in manufacturing investment and employment.^[47] Overall industrial production contracted by 13.5%, with retail sales of manufactured goods falling 12.4% and department store sales dropping 5%.^[16] ^[41] Construction played a pivotal role in amplifying the downturn, with residential and nonresidential building activity contracting amid higher interest rates and reduced capital inflows, leading to deepened cyclical pressures.^[32] Industries such as lumber, mining, and textiles faced severe contractions tied to commodity demand weakness and inventory liquidation, resulting in outsized employment reductions relative to the economy's mild overall GDP decline of about 3.7%.^[30] These sectoral shifts accelerated a longer-term transition toward service-oriented employment, as manufacturing's share of total jobs diminished further during the period.^[30]

International Dimensions

The 1957–1958 recession in the United States contributed to a slowdown in global economic activity, primarily through reduced demand for imports and raw materials, which lowered commodity prices worldwide. U.S. imports declined sharply, exacerbating inventory adjustments in exporting nations and leading to a drop in the annual rate of U.S. exports by over $4 billion from mid-1957 to early 1958, while overall U.S. payments to the rest of the world increased due to a relatively milder fall in domestic absorption. This imbalance improved the U.S. balance of payments, resulting in reserve gains for foreign countries, including an estimated $1.5 billion in transfers to Western Europe, Japan, and Canada during the first half of 1958.^[33] In Western Europe, the U.S. downturn coincided with a halt in economic expansion, shifting from boom conditions in 1954–1956 to moderated growth amid declining raw material prices and softer external demand. Inventory recessions emerged in countries such as the United Kingdom, Belgium, and Sweden in late 1957 and early 1958, though overall output slowdowns were less severe than in the U.S., with many nations benefiting from strengthened reserves—U.K. official reserves, for instance, rose from $2.3 billion to $3.1 billion over 1958. The Bank for International Settlements noted that while Europe avoided a full recession, the U.S. contraction disrupted the prior synchronized upswing across the Atlantic and North America.^[48]^[49]^[50] Canada experienced a parallel recession, with industrial output and investment declining in tandem with the U.S., reflecting close trade linkages and shared exposure to inventory cycles in durable goods. U.S. demand contraction reduced Canadian exports of metals and materials, though Canada's reserve position improved alongside Europe's due to the U.S. payments surplus. Globally, the episode highlighted vulnerabilities in the nascent Bretton Woods system, fully operational for current-account convertibility by 1958, as U.S. policy-induced slowdowns transmitted via trade and capital flows without triggering widespread currency crises.^[49]^[33]^[51]

Policy Responses

Monetary Policy Adjustments

In response to the emerging severity of the recession, the Federal Reserve transitioned from a restrictive monetary policy—aimed at curbing inflation—to an accommodative stance beginning in November 1957.^[25] This shift involved multiple reductions in the discount rate, starting with a cut from 3.5% to 3% on November 26, 1957, followed by further decreases to 2.5% in February 1958 and reaching 1.75% by June 1958, which encouraged borrowing and liquidity provision to member banks.^[22] ^[52] Complementing these rate adjustments, the Board of Governors reduced legal reserve requirements on February 20, 1958, by 0.5 percentage points across categories of demand deposits, lowering them from 19.5% to 19% for central reserve city banks, from 17.5% to 17% for reserve city banks, and from 12% to 11.5% for country banks.^[53] ^[54] This action released approximately $500–600 million in excess reserves systemwide, enhancing banks' capacity to extend credit amid contracting economic activity.^[55] ^[56] The Federal Open Market Committee (FOMC), chaired by William McChesney Martin, also directed open market purchases of government securities to inject reserves and lower short-term interest rates, with the effective federal funds rate declining from around 3.5% in mid-1957 to approximately 1.75% by early 1958.^[57] ^[5] These operations aimed to counteract the credit contraction that had intensified since mid-1957, when free reserves had turned negative under prior tightening.^[25] By spring 1958, as recessionary pressures eased, the Fed began signaling a potential reversal to guard against renewed inflationary risks, reflecting its "lean against the wind" approach.^[24]

Fiscal Policy and Government Actions

The Eisenhower administration adopted a restrained fiscal approach to the 1958 recession, prioritizing long-term budget balance over aggressive discretionary stimulus, in line with the president's commitment to fiscal conservatism. While automatic stabilizers—such as reduced tax revenues and increased unemployment payments—naturally widened the deficit, deliberate expansions were limited to targeted extensions of existing programs rather than new large-scale spending initiatives. Federal expenditures rose by nearly $3 billion from the third quarter of 1957 to the third quarter of 1958, reflecting these built-in responses amid falling economic activity.^[16] A key action was the signing of the Temporary Unemployment Compensation Act on June 4, 1958, which provided additional federal payments to supplement state unemployment benefits from July 1958 through March 1959, effectively extending coverage for affected workers during the downturn's peak. This measure aimed to bolster household income without permanent program expansions, aligning with Eisenhower's preference for temporary relief over structural changes. However, the administration resisted broader congressional proposals for anti-recession spending; Eisenhower vetoed the Area Redevelopment Act in 1958, arguing it imposed insufficient local responsibility and risked inefficient federal intervention in distressed regions.^[58]^[59] The fiscal year 1958 budget (ending June 30, 1958) resulted in a deficit of approximately $2.8 billion, a shift from earlier projections of a $1.8 billion surplus, primarily driven by recession-induced revenue shortfalls totaling around $69.1 billion against spending of $71.9 billion. Eisenhower's annual budget messages continued to advocate debt reduction and spending restraint, with no major tax cuts enacted; instead, post-recession planning for fiscal year 1960 emphasized minor revenue adjustments and cuts to non-essential outlays to restore balance. This cautious stance contrasted with monetary easing by the Federal Reserve, underscoring the administration's view that excessive fiscal intervention could undermine private sector recovery and fuel inflation risks.^[60]^[61]^[62]

Recovery and Legacy

Path to Economic Recovery

The recession ended in April 1958, initiating a recovery phase characterized by the cessation of inventory liquidation and renewed growth in consumer spending, particularly on nondurable goods.^[16] This shift marked the trough of the inventory cycle, a common feature of postwar recessions, allowing business investment to stabilize and output to expand.^[63] Monetary policy easing by the Federal Reserve was instrumental, with the discount rate reduced stepwise from 2.75% on January 24, 1958, to 2.25% on March 7, and further to 1.75% on April 18, promoting ample credit availability and lower borrowing costs.^[64] These actions countered the prior tightening that had exacerbated the downturn, facilitating a prompt rebound in financial markets and lending.^[7] Fiscal policy under the Eisenhower administration remained conservative, prioritizing budget balance over expansive stimulus, though targeted measures such as temporary extensions of payment periods for certain obligations provided limited support.^[7] Government actions overall moderated the contraction but contributed modestly to the upturn compared to private sector dynamics.^[63] Economic indicators confirmed the recovery's momentum: real GDP grew at an annual rate of 2.66% in 1958, accelerating to 6.9% in 1959 as production and sales rebounded.^[65] ^[66] Unemployment, peaking near 7.5% in mid-1958, averaged 6.2% for the year and declined to 5.3% in 1959, reflecting improved labor market conditions.^[67] Sectoral recoveries bolstered the expansion, with manufacturing output rising as durable goods orders stabilized and agricultural incomes increased 20% due to favorable weather and bumper crops.^[30] Consumer debt repayment during the downturn positioned households for renewed durable goods purchases, further sustaining demand.^[30] This self-reinforcing cycle, aided by monetary accommodation, propelled sustained growth into the early 1960s.^[63]

Debates on Causes, Responses, and Lessons

Economists generally attribute the 1957–1958 recession primarily to the Federal Reserve's contractionary monetary policy, initiated in late 1955 and intensified through 1957, which raised interest rates and curtailed credit to combat inflation that had accelerated to around 3.7% annually by mid-1957 after outpacing productive capacity during the prior expansion.^[68] This tightening contributed to a sharp inventory liquidation, with business stocks shifting from a $2.2 billion annual accumulation to a $9.5 billion reduction, alongside a $7.4 billion drop in capital expenditures by the second quarter of 1958.^[69] Debate persists on secondary factors, with some analyses emphasizing structural declines in exports (down 20% from early 1957 to early 1958) and sectoral weaknesses like automobiles and steel, while others, including later Federal Reserve assessments, pointed to fiscal restraint under President Eisenhower, such as moderated defense outlays that maintained a full-employment budget surplus amid the downturn.^[69]^[70] However, empirical reconstructions using Taylor rule frameworks indicate the Fed's inflation response coefficient of approximately 1.18 during 1952–1958 aligned with aggressive but calibrated stabilization, suggesting monetary over-tightening was not the sole driver but amplified cyclical inventory adjustments.^[68] On policy responses, consensus holds that the Federal Reserve's easing measures—from cutting the discount rate from 3.5% in November 1957 to 1.75% by May 1958, reducing reserve requirements to free $1.5 billion in reserves (twice), and expanding open market purchases—facilitated a rapid recovery, with industrial production rebounding to 130% of the 1947–1949 average by June 1958 and the recession troughing in April.^[23]^[69] Fiscal actions under Eisenhower, yielding a $2.8 billion deficit in fiscal 1958 through accelerated public works, extended unemployment benefits ($390 million added), and defense spending increases to $40.3 billion requested for fiscal 1959, provided support via automatic stabilizers but avoided expansive deficits or tax cuts, prioritizing long-term balance amid inflation risks.^[69] Debates center on fiscal adequacy, with critics arguing restrained spending prolonged unemployment peaks at 7.7% in July 1958, potentially warranting more aggressive stimulus, whereas proponents of the administration's approach, informed by postwar recession experiences, contend that over-reliance on deficits could foster inflation without addressing underlying adjustments, as evidenced by the economy's snap-back without severe disinflation.^[69]^[68] Monetary policy's rehabilitation in scholarly reviews highlights its countercyclical precision, countering earlier critiques of operational rigidity.^[68] Key lessons from the episode underscore the efficacy of prompt monetary easing in mitigating downturns while maintaining inflation vigilance to avert buildup requiring abrupt corrections, as the Fed's post-recession tightening in September 1958 prevented renewed price pressures without derailing growth.^[68] The 1959 Economic Report emphasized flexible, timely interventions—monetary for liquidity and fiscal via stabilizers like unemployment insurance, which offset one-third of wage losses—over hasty tax reductions that might undermine fiscal discipline.^[69] Treasury market stresses during recovery, exacerbated by leveraged carry trades and shifting easy-money expectations, illustrated risks of policy-induced speculation and the need for margin regulations and enhanced liquidity facilities to prevent dealer overloads amid high public debt (57% of GDP).^[22] Overall, the recession reinforced that controlled inflation in the 1950s (averaging under 2%) yielded brief cycles, challenging views of inevitable output-inflation trade-offs and validating independent central banking post-1951 Accord for causal stability over discretionary fiscal dominance.^[68]^[22]

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[28]
The 1957-58 Business Contraction: New Model or Old? - jstor
Between the third quarter of 1957 and the second quarter of 1958, consumer expenditures on durable goods declined 12 per cent and expenditures on nondurable ...
[29]
Full text of Federal Reserve Bulletin : November 1958 | St. Louis Fed
The major contractive influence from the summer of 1957 to the first quarter of 1958 was a decline in business investment outlays of more than $ 17 billion, ...
[30]
Business: Business in 1958 | TIME - Time Magazine
The 1958 market kept climbing, not a bit disturbed by threats of war in Lebanon and Quemoy, and bad corporate news that showed a 30.5% drop in six-month ...
[31]
The Recession of 1958 - Photo Essays - TIME
Oct 15, 2008 · Fueled by a drop in unfulfilled orders for durable goods and a declining demand for commodities and other raw materials, the recession of 1958 ...
[32]
Construction in the 1958 Economy - jstor
Both housing starts and outlays for new dwelling units, which are derived from information from these sources, dropped much more sharply than usual during the ...
[33]
[PDF] 1957-58 Recession in World Trade - FRASER
Imports of metals and other materials declined no more in the 1957-58 recession than they had in 1953-54.
[34]
US Business Cycle Expansions and Contractions | NBER
contractions in economic activity — start in the month after a peak in the business cycle, and end in the month of the trough.
[35]
U.S. Recessions Throughout History: Causes and Effects
Duration: 16 months · GDP decline: 3%28 · Peak Unemployment Rate: 8.6%17 · Reasons and causes: This long, deep recession began following the start of the Arab Oil ...
[36]
The Fed - Industrial Production and Capacity Utilization - G.17
Mar 31, 2017 · "Monthly Production Indexes and Changes in Output per Manhour," in American Statistical Association Proceedings of the Business and Economic ...
[37]
Unemployment - Bureau of Labor Statistics
Unemployment rate. Mar 1940. 15.4. Apr 1940. 15.0. May 1940. 14.4. Jun 1940. 14.5. Jul 1940. 15.8. Aug 1940 ... data are from the U.S. Bureau of Labor Statistics.
[38]
History of Recessions - Kimberly Amadeo
This recession took place from August 1957 to April 1958.14 GDP fell 4.1% in the fourth quarter of 1957, then it contracted to a low of 10.0% in the first ...Early Recessions · 1929 To 1938 (the Great... · 21st Century Recessions<|separator|>
[39]
[PDF] CHANGES IN AGGREGATE ECONOMIC ACTIVITY DURING THE ...
One of the outstanding features of the first eight months of the 1957—58 contraction has been the relatively modest decline in personal income. The rise in ...Missing: fixed investment<|control11|><|separator|>
[40]
U.S. Economic Recessions: Causes, Impacts & History - NetSuite
Jun 8, 2022 · Real GDP shrank by nearly 10% in the first quarter of 1958, and unemployment reached 7.4% by the official end of the recession in April, before ...The Great Recession Of 2008... · The Gulf War Recession (july... · The Oil Crisis Recession...
[41]
How the 1958 economic recession put Edsel and DeSoto ... - Hagerty
Jun 17, 2020 · The 1958 recession officially started in August, 1957, and ended in April, 1958, with 2.5 million unemployed by December of '57, according to ...
[42]
13 US Economic Recessions Since the Great Depression—And ...
Apr 29, 2020 · The US economy has weathered 13 different recessions since World War II. On average, America's post-war recessions have lasted only 10 months.
[43]
PRODUCTION RATE SHOWS AN UPTURN; U.S. Industrial Index ...
... Decline -- Insured Jobless Drop U.S. Industrial Production Rises After 8 Months of Sharp Decline. https://www.nytimes.com/1958/06/14/archives/production-rate ...
[44]
What happened in every U.S. recession since the Great Depression
Apr 9, 2020 · Since 1900, the average recession has lasted about 15 months. Before 2020, the U.S. economy had entered into a recession a total of 13 times ...<|separator|>
[45]
National Income and Product Accounts - Data Tools
Sep 25, 2025 · National Income and Product Accounts ; 1, Gross domestic product, 2,458.5 ; 2, Personal consumption expenditures, 1,533.1 ; 3, Goods, --- ; 4 ...
[46]
U.S. Inflation Rate by Year (1913-2025) - Macrotrends
Chart ; 1960, 1.36% ; 1959, 1.73% ; 1958, 1.76% ; 1957, 2.90%.<|control11|><|separator|>
[47]
[PDF] Survey of Current Business October 1958 - Data Tools
... decline slackened. The stock-sales ratio is below a year ago. In addition, prospects have been strength- ened by the recent rising trend of demand ...
[48]
I The World Economy in 1958-59 in - IMF eLibrary
The recession in the United States was still deepening, and raw material prices continued to decline. In the other industrial countries, output had slowed down ...
[49]
[PDF] 28th annual report of the Bank for International Settlements - 1958
In the years 1954-56 western Europe, the United States and Canada ... And in the United States and Canada a recession developed during the last ...
[50]
[PDF] BANK OF CANADA 1958
Official U.K. reserves rose from. $2.3 billion to $3.1 billion in the course of 1958, and increases were also recorded by most other Western European countries, ...
[51]
[PDF] [ 1958 ] Part 1 Sec 2 Chapter 1 The World Economic Situation
The present recession in the United States, unlike earlier post-war recessions, was accom- panied by a halt in economic growth in Western. Europe, he ...
[52]
FEDERAL RESERVE ORDERS RATE CUT FOR THREE BANKS
It was the third reduction in the discount rate since the present recession began. In November the rate was reduced from 3½ per cent to 3 per cent and in ...
[53]
Full text of Federal Reserve Bulletin : February 1958 | St. Louis Fed
... Federal Reserve Bank of Dallas. CHANGES IN RESERVE REQUIREMENTS On February 19, 1958, the Board of Governors reduced by one-half of one percentage point ...
[54]
FEDERAL RESERVE FREES 500 MILLION TO COMBAT SLUMP
The action reduced by one-half of 1 per cent the reserves required to be held against demand deposits in the 6,400 banks that belong to the Federal Reserve ...
[55]
[PDF] annual rejport - Federal Reserve Board
During this period, the discount rates of all Federal Reserve Banks had been increased from the 2 per cent level to 2 1/2 per cent-a rise that conformed to the ...Missing: 1955-1958 | Show results with:1955-1958
[56]
[PDF] Recession less severe in district
Thus, the proportion of cash xeceipts coming frorn the sale of crops decreased to ~0 percent, down 2 percent frorn 1956. Livestock and live- stock product sales ...
[57]
Federal Reserve Monetary Policy Timeline - FRASER
The FOMC under Chairman Martin begins to lower interest rates in response to recession. This began what would later be known as the era of "lean against the ...
[58]
Special Collections - Social Security History
June 4, 1958 The temporary Unemployment Compensation Act was passed providing for paying, from July 1958 through March 1959, additional unemployment benefits ...
[59]
Area Redevelopment Bill Vetoed - CQ Almanac Online Edition
Mr. Eisenhower vetoed the bill largely because it called for too little “local responsibility.” He said that since the 85th Congress had not appropriated funds ...
[60]
2.8 BILLION DEFICIT REPORTED BY U. S.; Receipts Cut by ...
Treas, Budget Bur rept $2813388661 deficit, fiscal '58; recession linked; spending totaled $71896545201, revenues $69083156540.
[61]
Annual Budget Message to the Congress for Fiscal Year 1958.
This budget provides for further reductions in the public debt for the current fiscal year and for the fiscal year 1958.
[62]
THE BUDGET: Deficits Ahead - Time Magazine
Instead of a $1.8 billion surplus for fiscal 1958, ending June 30, the Federal Government will run up a deficit of more than $3 billion as it is.
[63]
[PDF] What Ends Recessions? - National Bureau of Economic Research
Federal Reserve believed that a recession was either under way or was immi- nent. Concern about inflation and money growth, however, prevented policy-.<|separator|>
[64]
Table Data - Discount Rate Changes: Historical Dates of ... - FRED
Jul 23, 2003 · Table Data - Discount Rate Changes: Historical Dates of Changes and Rates (DISCONTINUED) ; Board of Governors of the Federal Reserve System (US).
[65]
US Real GDP Growth Rate by Year - Multpl
US Real GDP Growth Rate by Year ; Dec 31, 1959, 4.58% ; Dec 31, 1958, 2.66% ; Dec 31, 1957, 0.35% ; Dec 31, 1956, 2.00%.
[66]
United States (USA) GDP - Gross Domestic Product 1959
Date, Annual GDP, GDP Growth (%). 1959, $521,700M, 6.9%. 1958, $481,200M, -0.7%. 1957, $474,000M, 2.1%. 1956, $449,400M, 2.1%. 1955, $425,500M, 7.1%.
[67]
Historical U.S. Unemployment Rate by Year - Investopedia
What Affects the Unemployment Rate? ; 1957, 5.2%, Recession ; 1958, 6.2%, N/A ; 1959, 5.3%, Expansion ; 1960, 6.6%, Recession.
[68]
[PDF] A REHABILITATION OF MONETARY POLICY IN THE 1950S
The tendency of researchers to criticize or ignore monetary policy in the 1950s seems strangely at odds with economic performance in this decade. Inflation, ...
[69]
[PDF] Economic Report of the President 1959
The 1958 recession ended with a recovery by year's end. The report notes a potential upturn in business capital outlays and residential construction.<|separator|>
[70]
[PDF] President Eisenhower, Economic Policy, and the 1960 Presidential ...
17 In addition, although fiscal policy became more contractionary during the. 1953-1954 recession, the full-employment budget showed a rather large deficit in ...