Great Depression: Black Thursday, Facts & Effects (2024)

What Caused the Great Depression?

Throughout the 1920s, the U.S. economy expanded rapidly, and the nation’s total wealth more than doubled between 1920 and 1929, a period dubbed “the Roaring Twenties.”

The stock market, centered at the New York Stock Exchange on Wall Street in New York City, was the scene of reckless speculation, where everyone from millionaire tycoons to cooks and janitors poured their savings into stocks. As a result, the stock market underwent rapid expansion, reaching its peak in August 1929.

Stock Market Crash of 1929

By then, production had already declined and unemployment had risen, leaving stock prices much higher than their actual value. Additionally, wages at that time were low, consumer debt was proliferating, the agricultural sector of the economy was struggling due to drought and falling food prices and banks had an excess of large loans that could not be liquidated.

The American economy entered a mild recession during the summer of 1929, as consumer spending slowed and unsold goods began to pile up, which in turn slowed factory production. Nonetheless, stock prices continued to rise, and by the fall of that year had reached stratospheric levels that could not be justified by expected future earnings.

Stock Market Crash of 1929

On October 24, 1929, as nervous investors began selling overpriced shares en masse, the stock market crash that some had feared happened at last. A record 12.9 million shares were traded that day, known as “Black Thursday.”

Five days later, on October 29, or “Black Tuesday,” some 16 million shares were traded after another wave of panic swept Wall Street. Millions of shares ended up worthless, and those investors who had bought stocks “on margin” (with borrowed money) were wiped out completely.

As consumer confidence vanished in the wake of the stock market crash, the downturn in spending and investment led factories and other businesses to slow down production and begin firing their workers. For those who were lucky enough to remain employed, wages fell and buying power decreased.

Many Americans forced to buy on credit fell into debt, and the number of foreclosures and repossessions climbed steadily. The global adherence to the gold standard, which joined countries around the world in fixed currency exchange, helped spread economic woes from the United States throughout the world, especially in Europe.

Bank Runs and the Hoover Administration

Despite assurances from President Herbert Hoover and other leaders that the crisis would run its course, matters continued to get worse over the next three years. By 1930, 4 million Americans looking for work could not find it; that number had risen to 6 million in 1931.

Meanwhile, the country’s industrial production had dropped by half. Bread lines, soup kitchens and rising numbers of homeless people became more and more common in America’s towns and cities. Farmers couldn’t afford to harvest their crops and were forced to leave them rotting in the fields while people elsewhere starved.In 1930, severe droughts in the Southern Plains brought high winds and dust from Texas to Nebraska, killing people, livestock and crops. The “Dust Bowl” inspired a mass migration of people from farmland to cities in search of work.

In the fall of 1930, the first of four waves of banking panics began, as large numbers of investors lost confidence in the solvency of their banks and demanded deposits in cash, forcing banks to liquidate loans in order to supplement their insufficient cash reserves on hand.

Bank runs swept the United States again in the spring and fall of 1931 and the fall of 1932, and by early 1933 thousands of banks had closed their doors.

In the face of this dire situation, Hoover’s administration tried supporting failing banks and other institutions with government loans; the idea was that the banks in turn would loan to businesses, which would be able to hire back their employees.

FDR and the Great Depression

Franklin D. Roosevelt's First Fireside Chat

Hoover, a Republican who had formerly served as U.S. secretary of commerce, believed that government should not directly intervene in the economy and that it did not have the responsibility to create jobs or provide economic relief for its citizens.

In 1932, however, with the country mired in the depths of the Great Depression and some 15 million people unemployed, Democrat Franklin D. Roosevelt won an overwhelming victory in the presidential election.

By Inauguration Day (March 4, 1933), every U.S. state had ordered all remaining banks to close at the end of the fourth wave of banking panics, and the U.S. Treasury didn’t have enough cash to pay all government workers. Nonetheless, FDR (as he was known) projected a calm energy and optimism, famously declaring "the only thing we have to fear is fear itself.”

Roosevelt took immediate action to address the country’s economic woes, first announcing a four-day “bank holiday” during which all banks would close so that Congress could pass reform legislation and reopen those banks determined to be sound. He also began addressing the public directly over the radio in a series of talks, and these so-called “fireside chats” went a long way toward restoring public confidence.

During Roosevelt’s first 100 days in office, his administration passed legislation that aimed to stabilize industrial and agricultural production, create jobs and stimulate recovery.

In addition, Roosevelt sought to reform the financial system, creating the Federal Deposit Insurance Corporation (FDIC) to protect depositors’ accounts and the Securities and Exchange Commission (SEC) to regulate the stock market and prevent abuses of the kind that led to the 1929 crash.

The New Deal: A Road to Recovery

Among the programs and institutions of the New Deal that aided in recovery from the Great Depression was the Tennessee Valley Authority (TVA), which built dams and hydroelectric projects to control flooding and provide electric power to the impoverished Tennessee Valley region, and the Works Progress Administration (WPA), a permanent jobs program that employed 8.5 million people from 1935 to 1943.

When the Great Depression began, the United States was the only industrialized country in the world without some form of unemployment insurance or social security. In 1935, Congress passed the Social Security Act, which for the first time provided Americans with unemployment, disability and pensions for old age.

After showing early signs of recovery beginning in the spring of 1933, the economy continued to improve throughout the next three years, during which real GDP (adjusted for inflation) grew at an average rate of 9 percent per year.

A sharp recession hit in 1937, caused in part by the Federal Reserve’s decision to increase its requirements for money in reserve. Though the economy began improving again in 1938, this second severe contraction reversed many of the gains in production and employment and prolonged the effects of the Great Depression through the end of the decade.

Depression-era hardships fueled the rise of extremist political movements in various European countries, most notably that of Adolf Hitler’s Nazi regime in Germany. German aggression led war to break out in Europe in 1939, and the WPA turned its attention to strengthening the military infrastructure of the United States, even as the country maintained its neutrality.

African Americans in the Great Depression

One-fifth of all Americans receiving federal relief during the Great Depression were Black, most in the rural South. But farm and domestic work, two major sectors in which Black workers were employed, were not included in the 1935 Social Security Act, meaning there was no safety net in times of uncertainty. Rather than fire domestic help, private employers could simply pay them less without legal repercussions. And those relief programs for which African Americans were eligible on paper were rife with discrimination in practice since all relief programs were administered locally.

Despite these obstacles, Roosevelt’s “Black Cabinet,” led by Mary McLeod Bethune, ensured nearly every New Deal agency had a Black advisor. The number of African Americans working in government tripled.

Women in the Great Depression

There was one group of Americans who actually gained jobs during the Great Depression: Women. From 1930 to 1940, the number of employed women in the United States rose 24 percent from 10.5 million to 13 million Though they’d been steadily entering the workforce for decades, the financial pressures of the Great Depression drove women to seek employment in ever greater numbers as male breadwinners lost their jobs. The 22 percent decline in marriage rates between 1929 and 1939 also created an increase in single women in search of employment.

Women during the Great Depression had a strong advocate in First Lady Eleanor Roosevelt, who lobbied her husband for more women in office—like Secretary of Labor Frances Perkins, the first woman to ever hold a cabinet position.

Jobs available to women paid less but were more stable during the banking crisis: nursing, teaching and domestic work. They were supplanted by an increase in secretarial roles in FDR’s rapidly-expanding government. But there was a catch: over 25 percent of the National Recovery Administration’s wage codes set lower wages for women, and jobs created under the WPA confined women to fields like sewing and nursing that paid less than roles reserved for men.

Married women faced an additional hurdle: By 1940, 26 states had placed restrictions known as marriage bars on their employment, as working wives were perceived as taking away jobs from able-bodied men—even if, in practice, they were occupying jobs men would not want and doing them for far less pay.

Great Depression Ends and World War II Begins

With Roosevelt’s decision to support Britain and France in the struggle against Germany and the other Axis Powers, defense manufacturing geared up, producing more and more private-sector jobs.

The Japanese attack on Pearl Harbor in December 1941 led to America’s entry into World War II, and the nation’s factories went back into full production mode.

This expanding industrial production, as well as widespread conscription beginning in 1942, reduced the unemployment rate to below its pre-Depression level. The Great Depression had ended at last, and the United States turned its attention to the global conflict of World War II.

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Great Depression: Black Thursday, Facts & Effects (2024)

FAQs

What were the effects of the Black Thursday? ›

(1) The stock market crash of 1929 shattered confidence in the American economy, resulting in sharp reductions in spending and investment. (2) Banking panics in the early 1930s caused many banks to fail, decreasing the pool of money available for loans.

What were the effects of the Great Depression? ›

Reduced prices and reduced output resulted in lower incomes in wages, rents, dividends, and profits throughout the economy. Factories were shut down, farms and homes were lost to foreclosure, mills and mines were abandoned, and people went hungry.

What happened 5 days after Black Thursday? ›

Five days later, on October 29, or “Black Tuesday,” some 16 million shares were traded after another wave of panic swept Wall Street. Millions of shares ended up worthless, and those investors who had bought stocks “on margin” (with borrowed money) were wiped out completely.

Why was Black Thursday so devastating? ›

Many investors—both institutional and individual—had borrowed or leveraged heavily to buy stocks, and the crash that began on Black Thursday wiped them out financially, leading to widespread bank failures. That, in turn, became the catalyst that sent the United States into the Great Depression of the 1930s.

How did Black Tuesday affect people? ›

Black Tuesday triggered a chain of catastrophic macroeconomic events in the US and Europe, which included mass bankruptcies and unemployment, and dramatic declines in production and money supply. The US stock market did not fully recover from the consequences of Black Tuesday until the 1950s.

What were three significant effects of the Great Depression? ›

Although it originated in the United States, the Great Depression caused drastic declines in output, severe unemployment, and acute deflation in almost every country of the world.

Who suffered during the Great Depression? ›

The country's most vulnerable populations, such as children, the elderly, and those subject to discrimination, like African Americans, were the hardest hit. Most white Americans felt entitled to what few jobs were available, leaving African Americans unable to find work, even in the jobs once considered their domain.

How did the Great Depression affect African Americans? ›

The Great Depression of the 1930s worsened the already bleak economic situation of African Americans. They were the first to be laid off from their jobs, and they suffered from an unemployment rate two to three times that of whites.

What are the 8 causes of the Great Depression? ›

Among the suggested causes of the Great Depression are: the stock market crash of 1929; the collapse of world trade due to the Smoot-Hawley Tariff; government policies; bank failures and panics; and the collapse of the money supply. In this video, Great Depression expert David Wheelock of the St.

Who got rich during the Great Depression? ›

Not everyone, however, lost money during the worst economic downturn in American history. Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.

How did the Great Depression affect schools? ›

Schools in the big cities were better off than rural schools during the Great Depression, but they still had problems. Schools had less money, which meant fewer teachers, and teachers were paid less. New supplies and books could not be bought for students, and classes like PE, art, and music were taken out of schools.

Why was it called Black Thursday? ›

October 24th, 1929, is referred to as Black Thursday because it was the day when the stock market began to crash.

How bad was the Great Depression? ›

The U.S. economy shrank by a third from the beginning of the Great Depression to the bottom four years later. Real GDP fell 29% from 1929 to 1933. The unemployment rate reached a peak of 25% in 1933. Consumer prices fell 25%; wholesale prices plummeted 32%.

How did the Great Depression affect people? ›

As stocks continued to fall during the early 1930s, businesses failed, and unemployment rose dramatically. By 1932, one of every four workers was unemployed. Banks failed and life savings were lost, leaving many Americans destitute. With no job and no savings, thousands of Americans lost their homes.

What was the impact of Black Monday? ›

Black Monday (also known as Black Tuesday in some parts of the world due to time zone differences) was the global, severe and largely unexpected stock market crash on Monday, October 19, 1987. Worldwide losses were estimated at US$1.71 trillion.

How were farmers affected by the Great Depression? ›

When prices fell they tried to produce even more to pay their debts, taxes and living expenses. In the early 1930s prices dropped so low that many farmers went bankrupt and lost their farms.

What were the results of the 1929 stock market crash? ›

Men and women lost their life savings, feared for their jobs, and worried whether they could pay their bills. Fear and uncertainty reduced purchases of big ticket items, like automobiles, that people bought with credit. Firms – like Ford Motors – saw demand decline, so they slowed production and furloughed workers.

What two things dropped as a result of the Great Depression? ›

How did the Great Depression affect the American economy? In the United States, where the Depression was generally worst, industrial production between 1929 and 1933 fell by nearly 47 percent, gross domestic product (GDP) declined by 30 percent, and unemployment reached more than 20 percent.

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