Economic Dislocation, 1927-28

Unemployment was low – calculated at only 3.2 percent. And during the years of Coolidge's presidency many people saw their lives as better than their parents' lives had been. Real wages for the skilled and unskilled were higher in the twenties than they had been at the beginning of the century, and real wages meant an improved quality of life. In general, the poor were healthier than they had been in previous decades.

The United States had its poor, some people with incomes too small for buying beyond bare subsistence. People working in coal mining and the textile or leather industries were suffering. Among the working poor were those who, if they were frugal and unburdened by health problems, could save a little money to invest in property or in advancing themselves in other ways. But they were a minority among the poor.

Manufactured goods still cost a lot more relative to family incomes than manufactured goods would in decades to come. And many families had incomes too low to afford labor saving devices such as vacuum cleaners and washing machines. A washing machine, for example, cost from 60 to 200 dollars, while the average factory worker was earning only about 100 dollars a month.

And pressure from organized labor for a greater share of wealth going to the common wage earning was down. By the late 1920s labor union membership was again below 11 percent of the labor force, down from 17 percent in 1924.

There were no food stamps, which would have created the greater demand that farmers needed for their products. There was still no social security as income for the elderly. There was no unemployment insurance. People were taking care of their own unemployed family members, their elderly, their brothers, brothers-in-law – compelling family togetherness.

The ability to produce had increased, but the ability to consume was limited. Free enterprise was not automatically producing in balance between the two. This had happened with grain production and the tractor in the early twenties. Farmers responded to the drop in grain prices (because of increased supply) and the individual farmer increased production even more to keep his income up. What was right for the individual didn't always correct an imbalance.

In manufacturing, businessmen were encouraged by a growth in sales. They were optimistic. Many who were warned about market saturation laughed. What was market saturation? For example, the number of people lacking alarm clocks had declined. And many who could afford cars had cars, with not enough people willing or able to buy a new car every year. Market saturation was not a concept readily understood. Want was infinite, but the wealth to buy was not. Over-production and declining profits was not a widely recognized phenomenon. Enthusiasm and optimism were patriotic, and the economy appeared healthy to many market watchers. But the boom years of 1925 and 1926 had tapered off. Production in the United States had begun to decline, most notably in automobiles and in building materials such as steel, rubber and other materials for the automobile. Home buying and home building were also down. Not enough people could afford to buy a home. Too many people were paying rent rather than making payments on their own home, a benefit to landlords but for common people an unfortunate distribution of wealth upwards.

Among people with money to invest, including bankers, there was a slowness in adjusting from the years of boom: 1925 and 1926. There was a failure in measuring the potential for profits, as if there were no limits. Many people with money to invest didn't notice the economic bubble in the making. Like many across the span of history, they were not as wise as they thought themselves to be.

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