Recession of 1958

There were many major factors in the decline that exerted a growing downward pressure on production and employment, resulting in a general reduction of economic activity. Housing construction slowed due to higher interest rates in 1955 and 1956. By 1957, new house construction had fallen to about 1.2 million units. There was a gradual decrease in incoming business of capital goods industries, which resulted in the ending of an expansive boom. The initial trouble began in 1956 with a deceleration in business planning for replacement of equipment and expansion of manufacturing facilities, resulting in a drop in new orders for equipment. This created a widening gap between the supply and the use of industrial capacity. Federal Reserve economists believed that the Eisenhower administration had contributed to the recession by cutting back on United States Department of Defense purchases in 1957. == Effects ==

Durable goods manufacturing fell, and lumber, mining, and textiles were three of the industries that were hit the hardest. Due to a severe drop in unfulfilled orders for durable goods and a decreasing demand for commodities and other materials, the recession of 1958 forced over five million people out of work. In the United States, unemployment rose but there was little to no decline in personal income. Overall, employment decreased by 6.2%, resulting in 2 million job losses and 1.3 million people drawing unemployment insurance. Unemployment was highest in industrial areas in the Northeast and Midwest and in mining areas in Pennsylvania, West Virginia and the West. Michigan suffered the most of any state with an unemployment rate of 11%, as Detroit maintained a record high of 20%. In large part, this was a result of a 47% decline in automobile production. When unemployment rates rose beyond 5.1 million in January 1958, they were higher than at any point since 1941. Price and costs , a measure of inflation, 1952–1963The effect on prices and costs was an apparent paradox, as prices continued to rise while production and employment were declining. In past recessions, prices tended to fall during recessionary conditions, but this time they went up, apart from raw materials. The U.S. consumer prices rose 2.7% from 1957 to 1958, and after a pause, they continued to push up until November 1959. Wholesale prices rose 1.6% from 1957 to 1959. The continued upward creep of prices became a cause of concern among many well-known economists analyzing the economy, such as Arthur F. Burns. ==Government response==

Government efforts to promote a prompt economic recovery played an important role in the moderation of the recession. President Dwight D. Eisenhower, Council of Economic Advisors Chairman Raymond J. Saulnier, Secretary of the Treasury Robert B. Anderson, and Senate Majority Leader Lyndon B. Johnson were some of the important figures playing major roles in this effort. Eisenhower's main focus was to stimulate recovery while keeping the government's financial “house in order”. On the other hand, in the United States the Democratic Party won control of the United States Congress in the 1958 midterm elections in a landslide after the Republican Party was blamed for the economic crisis. ==References ==