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Economic growth and unemployment (1933–1941)

From 1933 to 1941, the economy expanded at an average rate of 7.7% per year. Despite high economic growth, unemployment rates fell slowly.

John Maynard Keynes explained that situation as an underemployment equilibrium where skeptic business prospects prevent companies from hiring new employees. It was seen as a form of cyclical unemployment.

There are different assumptions as well. According to Richard L. Jensen, cyclical unemployment was a grave matter primarily until 1935. Between 1935 and 1941, structural unemployment became the bigger problem. Especially the unions successes in demanding higher wages pushed management into introducing new efficiency-oriented hiring standards. It ended inefficient labor such as child labor, casual unskilled work for subminimum wages and sweatshop conditions. In the long term, the shift to efficiency wages led to high productivity, high wages and a high standard of living, but it necessitated a well-educated, well-trained, hard-working labor force. It was not before war time brought full employment that the supply of unskilled labor (that caused structural unemployment) downsized.