Employment Act of 1946

Employment Act of 1946

Enacted by	the 79th United States Congress
Citations
Public law	Pub.L. 79–304
Statutes at Large	ch. 33, Sec. 2, 60 Stat. 23
Legislative history
Introduced in the Senate as S. 380 by James E. Murray (D-MT) on January 22, 1945 Committee consideration by Senate Banking, House Expenditures Passed the Senate on September 28, 1945 (71–10) Passed the House as the Employment-Production Act of 1945 on December 14, 1945 (255–126) Reported by the joint conference committee on February ?, 1946; agreed to by the House on February 6, 1946 (322–84) and by the Senate on February 8, 1946 (unanimous consent) Signed into law by President Harry S. Truman on February 20, 1946
Major amendments
Humphrey–Hawkins Full Employment Act (1978)

The Employment Act of 1946 ch. 33, section 2, 60 Stat. 23, codified as 15 U.S.C. § 1021, is a United States federal law. Its main purpose was to lay the responsibility of economic stability of inflation and unemployment onto the federal government. The Act stated: it was the "continuing policy and responsibility" of the federal government to:

Liberals wanted an emphasis on "full employment" but conservatives were in control and they did not get it. Stein (1969) notes, "The failure to pass a 'Full Employment Act' is as significant as the decision to pass the Employment Act." The Act also created the Council of Economic Advisers, attached to the White House, which provides analysis and recommendations, as well as the Joint Economic Committee. In practice, the government has relied on automatic stabilizers and Federal Reserve policy for macroeconomic management, while the Council of Economic Advisers has focused primarily on discussions of microeconomic issues.

By 1940 depression was finally over. A remarkable burst of economic activity and full employment came during the war years (1941–45). Fears of a postwar depression were widespread, since the massive military spending was ending, the war plants were shutting down, and 12 million soldiers were coming home. Congress, fearful of a return to depression, sought to establish preemptive safeguards against economic downturn.

The White House relied on Keynesian economic theory to develop its strategy. The theory, set forth by economist John Maynard Keynes and his American disciples such as Alvin Hansen at Harvard, contends that unemployment is caused by insufficient aggregate demand relative to the possible aggregate supply generated by full employment. Swings in aggregate demand create a phenomenon known as a business cycle that leads to irregular downsizing and hiring runs, causing fluctuations in unemployment. Keynes argued that the biggest contributor of these shifts in aggregate demand is investment.

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