Comparison of major 19th and early 20th century recessions | ||
---|---|---|
Downturn | Length | Business activity |
1873–79 | 65 mos. | -33.6% |
1882–85 | 38 mos. | -32.8% |
1893–94 | 17 mos. | -37.3% |
1907–08 | 13 mos. | -29.2% |
1921-22 | 18 mos. | -38.1% |
The Depression of 1882–85 or Recession of 1882–85 was an economic contraction in the United States that lasted from March 1882 to May 1885, according to the National Bureau of Economic Research. At 38 months in length this is the third-longest recession in the NBER's chronology of business cycles from 1854 to present. Only the Great Depression of 1929-1941 and the Long Depression of 1873–79 were longer.
The Depression of 1882-85 was not inaugurated by financial disaster or mass panic, but was rather an economic downturn that came about through a protracted and gradual process. The downturn was preceded by a period of prosperity over the years 1879 to 1882, a growth powered by expansion of the American railroad industry and the opening of economic opportunities associated with the development of the transportation system. During this interval annual railroad construction quadrupled, growing from 2,665 miles (4,289 km) in 1878 to 11,569 miles (18,619 km) in 1882. According to one 1997 estimate, the expansion of this sector represented a full 15% of American capital formation during the decade of the 1880s.
In addition, the United States experienced a favorable international balance of trade during the 1879-1882 period of growth — a fact which had the effect of expanding the country's money supply, facilitating credit and investment.
In 1882 this trend reversed, resulting in a decline in railroad construction and a decline in related industries, particularly iron and steel. Mismanagement and rate wars negatively affected profitability and the luster of railroads as an investment was dulled; money dried up and construction of new lines was negatively impacted, falling from 11,569 miles in 1882 to 6,741 miles in 1883.
A major economic event during the recession was the Panic of 1884.
The 1884 downturn was severe with an estimated 5% of all American factories and mines completely shuttered during the 12 months running from July 1, 1884, to July 1, 1885. In addition another 5% of such enterprises were said to have closed down for part of the year. Approximately 1 million American workers were out of work during this economic trough.
Like the Long Depression that preceded it, the Depression of 1882–85 was more of a price depression than a production depression — in that prices and wage rates contracted while gross output remained more or less constant.