One commenter pointed out that RGDP fell by over 12% between 1945 and 1946, and that lots of women left the labor force after WWII. So does a shrinking labor force explain the disconnect between unemployment and GDP? As far as I can tell it does not, which surprised even me. But the data is patchy, so please offer suggestions as to how I could do better.
You could do better by taking the RGDP figure with a tablespoon of salt. The way that the Commerce Department adjusts nominal GDP for price changes is pretty unreliable for that period. Part of the reason is that there was so much shifting between public sector output (who knows how much of that is “real” vs. nominal?) and private sector output, and part of the reason is that as you move away from the base year (either many years ahead or many years behind) the adjustment process gets screwy. 1946 is now many, many years away from the base year that is used to calculate real GDP. I think that if you can find old publications from the Commerce Department, you will see very different patterns of real GDP for 1946, resulting from shifts in the base year from 1958 to 1975 to ….
I think that for 1946 you are safer sticking to nominal GDP numbers.
By the way, here is a piece I wrote on that period.
As a first guess, would a PSST theory also predict significant disruption and delay in establishing a healthy ‘new normal’ from such a substantial and rapid transformation in the overall economy as accompanied the huge changes from the post-war demobilization? Would we expect the same thing to happen today?
Why is 1946 so bad in particular for measurement in comparison to 1945 or 1947, besides the public/private shift?
Someone once mentioned on Econtalk that CPI figures during WWII were suspect. The reason is that we had price controls in place, so you could see a price of $X on an item that was out of stock virtually everywhere, i.e. the true market price was much higher. I’ve always wondered if anyone quantified this effect.
You also had massive price changes after war-time price controls were lifted with the CPI and PPI rising about 20% in the year after controls were lifted.and the rate of inflation did not slow to small single digit rates until 1948.
This gives you an idea of how much inflation was suppressed late in the war.