I dug up two interesting articles. In case I am more interested in this than you are, I will put this post below the fold.1. In 1991, Gary L. Anderson wrote about the effect of the 1946 election on wartime price controls.

The War Production Board (WPB) became America’s central planning agency, replacing allocation of resources by the market with allocation by Federal bureaucrats. Instead of offering market prices for military items, the federal government used the WPB to force industry to convert to war production from consumer goods. In this way, the government coerced private industry to accept prices for war goods far lower than the free market would have determined. The War Labor Board regulated wages. The Office of Civilian Supply administered the civilian sector. And the Office of Price Administration (OPA) controlled virtually all prices. These various “war agencies” employed 151,551 people in 1945. In that year, the various bureaucracies that controlled prices and wages alone cost $389.1 million to operate.

Federal price controls weren’t restricted to goods directly related to the war effort, like armor plate or chemicals needed for explosives, but were essentially universal. All important consumer goods were price controlled. Rents were especially tightly controlled. All told, about 650 separate price controls were in effect during the war years.

…During the period 1941-1945, the federal government seized under Presidential authority (and, in effect, temporarily nationalized) 73 industrial plants.

…Nothing strikes fear in the hearts of politicians like an election. Price Administrator Chester Bowles, who on November 4 (the day before the election) had called for a halt to price decontrol “until supply and demand came into balance,” had a sudden change of heart and approved immediate removal of virtually all remaining controls on November 10 (five days after the election). The day before, President Truman had ordered the immediate removal of all remaining controls. This policy shift must be one of the most abrupt on record.

2. In 2005, Alexander J. Field wrote that the second World War was an adverse supply shock, in terms of productivity. (Believe it or not, many historians had argued that wartime innovations “created the conditions” for subsequent prosperity.)

What interested me was data that pertain to Recalculation. Field tabulates the gains and losses in jobs in various sectors over two time periods: 1941-1943 (the big war buildup); and 1943-48 (from the peak of war production to the complete conversion to a less-militarized economy). He explains the 1943 break point thusly:

By the time of D-Day, the military goods production machine had already begun to wind down.

In the short span of two years, between 1941 and 1943, the US automobile industry shut down and reconverted to defense production. Nondefense construction largely ground to a halt, as military and naval construction soared. People streamed out of farms and wholesale and retail trade into defense factories and the military, and they were joined by hundreds of thousands, indeed millions more from the ranks of the unemployed and not in the labor force. Billions of dollars were spent by the Defense Plant Corporation to build government owned privately operated plants and equip them with machine tools to jump start the airframe and shipbuilding industries, produce aviation fuel and synthetic rubber, and aluminum. Then, before the economy could catch its breath, most of the ordnance was expended, the war was won, and full scale demobilization was underway.

For 1941-1943, the biggest gainers and losers were, in thousands (1941 levels in parentheses):
Other transportation equipment…………… 2,596 (675)
Iron and steel and their products, incl. ordnance. 819 (1641)
Machinery, except electrical…………….. 370 (1087)
Electric and electronic equipment………… 353 (607)
Chemicals and allied products……………. 269 (580)
Railroad transportation…………………. 249 (1285)

Motor vehicles and equipment…………….. -330 (655)
Contract Construction…………………….-208 (1774)
Wholesale trade……………………………. -200 (1952)
Farms………………………………………….-179 (2201)
Retail trade………………………………. -109 (5075)

In addition, the government sector gained, mostly because of more than 7 million entering the military. Overall, according to Field’s reading of Commerce Department figures, the economy added over 11.2 million jobs, of which over 7.5 million were in the government sector.

My own thinking (Field does not address this point) is that some of the gains in “other transportation equipment” and some of the losses in “motor vehicles and equipment” involved no physical movement of workers. For example, I picture a plant that stopped making passenger cars and started making military trucks and tanks.

Anyway, the top 1943-1948 gainers and losers were 1943 levels in parentheses):

Retail trade………………………………. 1,511 (4,966)
Services………………………………….. 756 (5,226)
Contract Construction ………………712 (1,566)
Wholesale trade……………………………. 676 (1,752)
Motor vehicles and equipment…………….. 441 (325)
Finance, insurance, and real estate………….. 281 (1,389)
Telephone and telegraph…………………. 202 (490)

Other transportation equipment…………… -2,800 (3,271)
Iron and steel and their products, incl. ordnance. -588 (2,460)
Chemicals and allied products……………. -126 (849)
Electric and electronic equipment………… -73 (960)
Agriculture, Forestry, Fisheries……………-56) (2,121)
Nonferrous metals and their products …-32 (508)
Railroad transportation…………………. -31 (1,534)

The state and local government sector gained 1.1 million jobs (on a base of just 2.8 million,) canceling out a comparable decline in the Federal civilian labor force. A decline in government military employment of 7.5 million meant that overall the government released 7.9 million workers, of which the private sector absorbed 2.4 million, meaning that 5.5 million jobs were lost on net over this peaetime conversion period.

I would say that much of this job loss was voluntary exit from the labor force, since the unemployment rate in 1948 was only 3.4 percent. About 800,000 GI Joes went to college, and perhaps even more Rosie the Riveters went back to the kitchen, although the longer-term trend was for women to increasingly work outside the home.

Note that using 1943 as the peak may make sense from a war production standpoint. However, as Field points out, 1944 was the peak for military employment, so that the government outflows would look different from 1944-1948.

Overall, I was surprised to see so much of the employment gain from 1943-48 taking place outside of automobiles and construction. (In percentage terms, those two were indeed large gainers.) The two combined accounted for fewer new jobs than retail trade.

Remember my mantra of macroeconomics, that economic activity = PSST: patterns of sustainable specialization and trade. The postwar period created an awful lot of PSST in a very short time. This suggests that the economy back then had the ability to Recalculate rapidly. I wonder if it has that same ability today.