For some, 1982 was a year to remember; for many more, a year to forget
It was a year of shocks and surprises, and a time when the astonishing and the contradictory became almost routine. Not in almost half a century had the suffering U.S. economy gone through more wrenching changes in a shorter period than during 1982, a year when interest rates at long last slumped but unemployment soared; when bankruptcies ballooned but the stock market roared; when recession spread across the economy like oil on a mud puddle but business boomed for a growing list of high-tech games and products for computer-crazed consumers. It was, in short, a year of mind-boggling contrasts. More than anything else, 1982 was the year when the three-year-old inflation-fighting policy of Federal Reserve Chairman Paul Volcker, the nation's top central banker, finally paid off, but only while exacting a painful economic toll in the process.
Monthly rises in the Consumer Price Index flattened out and, though interest rates broke sharply at about midyear and kept falling, the contracting economy proved staggeringly painful for businesses and individuals alike. At 10.8% of the labor force, unemployment reached the highest level since 1941, and business failures surged to more than 24,000, higher than in any year since 1932. Nowhere in the country was the misery of economic downturn more acute than in the factory towns of the nation's industrial heartland. As consumers lost confidence in promises of economic recovery, household spending stalled out, shaking the already depressed auto industry. In a slide since 1979, new-car sales skidded to a 21-year low of about 5.7 million units, while unemployment surged to 23% of the auto industry's 1.1 million-worker labor force. The unwillingness, and often even the actual inability, of businesses to expand their plants and production facilities in the face of shrinking demand sent shock waves out through virtually all of heavy manufacturing. International Harvester Co. of Chicago (1981 sales: $7 billion), already deeply in debt to banks across the country because it borrowed to stay afloat as sales plummeted, teetered throughout the year on the brink of outright collapse, surviving on credits from reluctant bankers and suppliers. Hardest hit of all in the downturn were the nation's producers of basic metals such as steel and copper. As demand for metals lurched lower and layoffs swelled, the once pulsing industrial belt that stretches from Illinois across to western New England took on the grim, ground-down demeanor of a half-century earlier, acquiring the glumly descriptive epithet of Rust Bowl. By December, the nation's steelmakers were operating at less than 35% of capacity, the lowest rate since 1938, and at least one concern, the steelmaking division of Lukens, Inc. of Coatesville, Pa., planned virtually to close up for ten days over the Christmas and New Year's holidays, idling 2,600 employees for lack of orders.