The 1969-70 Recession: A Mild Downturn That Did Not Stop Inflation
The 1969-70 recession ran 11 months, from December 1969 to November 1970 (NBER). Real GDP fell only 0.2% peak to trough, but unemployment rose from 3.5% to 6.1%. It followed Federal Reserve tightening against Vietnam-era inflation, and it ended the 106-month expansion of the 1960s.
The recession in numbers
- NBER peak and trough
- December 1969 to November 1970 (Q4 1969 to Q4 1970) · NBER
- Real GDP, peak to trough quarter
- -0.2% · BEA, FRED GDPC1
- Worst quarter
- Q4 1970, -4.2% annualised · BEA, FRED GDPC1
- Unemployment rate
- 3.5% (Dec 1969) to 6.1% (Dec 1970) · BLS, FRED UNRATE
- Consumer price inflation
- 5.4% (1969), 5.9% (1970), annual averages · BLS CPI, FRED CPIAUCSL
- Federal funds rate
- 9.19% (Aug 1969) to 4.90% (Dec 1970) · Federal Reserve, FRED FEDFUNDS
- Industrial production
- -7.0%, October 1969 to November 1970 · Federal Reserve, FRED INDPRO
- Preceding expansion
- 106 months, February 1961 to December 1969 · NBER
- Following expansion
- 36 months, to November 1973 · NBER
The end of the 1960s boom
The expansion that began in February 1961 ran 106 months, the longest on NBER's record at the time. By its final years the economy was running hot: unemployment was 3.5 percent in December 1969 (BLS), and consumer prices rose 5.4 percent in 1969 on an annual-average basis, against 1 to 2 percent at the start of the decade. Defence spending for the Vietnam War and new domestic programmes added demand to an economy with little spare capacity.
The Federal Reserve tightened. The federal funds rate rose from 6.30 percent in January 1969 to 9.19 percent in August (monthly averages, FRED FEDFUNDS). NBER places the peak of the expansion in December 1969.
A shallow fall in output
Measured by GDP, this was one of the mildest postwar recessions: real GDP was only 0.2 percent lower in Q4 1970 than in Q4 1969 (BEA). Industrial production fell further, 7.0 percent from October 1969 to November 1970 (Federal Reserve). The worst quarter was the last one, Q4 1970, at a 4.2 percent annualised decline, when a national UAW strike at General Motors from mid-September to late November halted most of the company's US output. Real GDP grew at an 11.3 percent annualised rate in Q1 1971 as production resumed.
The labour market took more of the strain. Unemployment rose through 1970, from 3.5 percent to 6.1 percent in December, and it was still 6.1 percent in August 1971.
Easing, and inflation that stayed
The Fed eased through 1970: the funds rate averaged 4.90 percent in December 1970 and 3.71 percent in March 1971. NBER dates the trough to November 1970. But consumer prices still rose 5.9 percent in 1970 (annual average), and inflation stayed well above its early-1960s rate. On 15 August 1971 President Nixon ordered a 90-day freeze on wages and prices and closed the gold window, ending the dollar's convertibility into gold (Federal Reserve History).
The lesson later drawn from 1969-70 is that a mild recession did not bring inflation down. The next downturn, the 1973-75 recession, came with an oil shock on top of inflation that had never been squeezed out, and it took the 1981-82 recession to break it.
Frequently Asked Questions
When was the 1969-70 recession?
NBER dates it from a December 1969 peak to a November 1970 trough, eleven months. It ended the expansion that began in February 1961, at 106 months the longest US expansion on record at that time.
How bad was the 1969-70 recession?
Mild in output, harder on jobs. Real GDP fell just 0.2 percent from Q4 1969 to Q4 1970 (BEA), one of the smallest declines of any postwar recession. Unemployment rose from 3.5 percent in December 1969 to 6.1 percent in December 1970 (BLS), and industrial production fell 7.0 percent from October 1969 to November 1970.
What caused the 1969-70 recession?
Federal Reserve tightening against rising inflation. Consumer prices rose 5.4 percent in 1969 and 5.9 percent in 1970 (BLS CPI, annual averages), up from 1 to 2 percent in the early 1960s, as Vietnam War and Great Society spending ran on top of a fully employed economy. The federal funds rate climbed to 9.19 percent in August 1969 (monthly average), and growth stalled.
Why did GDP fall so sharply at the end of 1970?
Real GDP fell at a 4.2 percent annualised rate in Q4 1970 (BEA). A national United Auto Workers strike at General Motors ran from mid-September to late November 1970 and shut most of the company's US production. Output bounced back with an 11.3 percent annualised rise in Q1 1971 as production resumed.
Did inflation fall after the 1969-70 recession?
Only a little, and that is why the recession matters. Unemployment stayed near 6 percent through 1971 while inflation remained well above its early-1960s rate. On 15 August 1971 the Nixon administration froze wages and prices for 90 days and ended the dollar's convertibility into gold. The episode is often treated as the start of the stagflation decade that ran through the 1973-75 and 1980-82 recessions.
How these figures were made: NBER's monthly and quarterly turning points; real GDP change between NBER's peak and trough quarters, computed from BEA chained-dollar GDP (FRED GDPC1); unemployment and interest rates are monthly values from FRED as published in October 2026. Sources: NBER business cycle dates; BEA real GDP (FRED GDPC1); BLS unemployment (FRED UNRATE); BLS CPI (FRED CPIAUCSL); federal funds rate (FRED FEDFUNDS); industrial production (FRED INDPRO); NPR: the 1970 GM strike; Federal Reserve History: Nixon ends convertibility.