The 1930s were a period of economic downturn, dominated by the presence of the Great Depression which began in 1929 and lasted for 10 years until 1939.
Originating from the United States, the Great Depression was the longest and most severe economic depression experienced by the western industrialised world, resulting in drastic declines in output and acute inflation which spread worldwide and severe unemployment.
The Great Depression in fact, started off mildly in the summer of 1929, possibly as early as June. The initial downturn was only accelerated by the crash of the stock market at the end of October - sending wall street into a panic and wiping out millions of investors. During the 1920s, stock market underwent a historic expansion in which by the end of the decade, investing was seen as an easy way to make money even for your ordinary day citizen. Millions of shares were being carried on margin, in which that investors would purchase shares with loans that were specifically meant to be repaid with the profits generated by the then increasing stock prices. This however, also meant that the losses from falling prices would be larger. Once stock prices began to inevitably decline, millions of shareholders rushed to liquidate their holdings, exacerbating the decline and causing further panic. By this point, many of the holdings owned by investers were practically worthless or of minimal value. With most of the population suffering from a significantly worse financial situation, consumer demeand decreased and add to that, financial panics and misguided government policies caused economic output to fall. The impact of the great depression was enormous, including profound psychological impact, extreme human suffering and the loss of confidence in the economy with consumers and busineses, but also forced profound changes in economic policy.
Another affect of the Great Depression came with was the widespread bank closure that took place around the early 1930's. Many banks had actually used their depositer's money to invest in the stock market - now that their assests were made up of huge uncollectable loans and worthless stock certificates, people rushed to withdraw their savings. Unable to raise fresh funds from the Federal Reserve system, many banks began failing by the hundreds during this time. By 1933, one-third of all banks in existance in 1930 had failed and the banking system had ceased to function. This lead to other serious outcomes, decreasing consumer spending again and business spending as there were fewer banks to lend money.
One of the key factors that played a key role in transmitting American downturn to other countries was the gold standard, which linked nearly all countries in a network of fixed currency exchange rates. Because of this monetary standard, a countries currency value was directly linked to how much gold they had in their reserves. To deter people from hoarding gold and depleting the supply, the governments of the world kept interest rates high, making it too expensive for people and businesses to borrow. It was not until the gold standard was abandoned, did the economy finally began to recover.
Between the September and November of 1929, stock prices fell 33%, by 1932-33 the stock market had hit rock bottom and was down 80% from their highs in the 1920's. Consumer spending decreased following these losses and investment drops, leading to a decline in industrial output. Companies began failing and were forced to lay off employees. By the time the Great Depression reached its lowest point in 1933, 15 million Americans were unemployed and as the government provided no unemployment insurance, the loss of a job quickly resuted in homelessness and extreme poverty. The U.S. poverty rose ended up rising from 30% in 1910 to 45% in the mid 1930s and did not decline until 20 or so years later.
Real total GNP fell 10.2% from 1929-30, while real GNP per capita fell 11.2%. Industrial production in the US fell 47% and real GDP fell 30%. As a comparison, the Great Recession of 2007-2009 - the second largest economic down turn in U.S. history - saw a GDP decline of 4.3%, with unemployment rates reaching slightly less than 10%, whereas unemployment rate during the Great Depression exceeded 20%.
The economy began to slightly recover in 1937, but this was soon thwarted when an overconfident then Roosevelt adminsistration cut federal spending to balance the federal budget. This ended up resulting in the national economy descending into a second depression, labelled by economists as a "recession" coining the term that is now used today. Eventually renewed federal spending pulled the nation out of the 1937 recession and with another war looming, the days of unemployment were finally soon to end. By the beginning of the next decate, jobs at shipyards and aircraft factories were now being filled by the previously unemployed. The depression was now a mere memory.
A thougher financial situation and great adversity faced meant a lot more people were less willing to take risks with their wardrobe, a level of modesty resurfaced in both economics and fashion.
Womens fashion evolved from the boyish look of the 1920s, and the silhouette became more feminine with a slender, elongated torse, wide shoulders and skirts flared out in the ankle. This signature look with exaggerated shoulders on suits and dresses was achieved through padding, fabric layers, or other embellishments. Many styles from the early 1930s were in fact similar to the popular garconne look of the 1920s in terms of simplicity. But while simplicity in the previous decade formed a curve-less silhouette and slim straight shape (often enhanced through slimming undergarments and long, narrow skirts), the simple lines of the 30s hugged these curves.
The wallstreet crash of 1929 and the subsequent depression that followed brought hemlines crashing back down to ankle length. Waistlines also rose back up to their natural place. Women still wore slightly shorter skirts hemmed between mid calf to just above the ankle for the day, much more conservative than the decade prior. Only for evening dresses did the hemline reach the floor, which was typical for evening wear across much of history. This was because only wealthier women could afford longer dresses with more fabric.
By the end of the decade, fashion evolved into the popular style of broad, padded shoulders, nipped-in waists and shorter A-line skirts that would dominate the 1940s.
(Black Thursday, n.d.) 
1937 suit coat ("Williams Fashion Shop," 1937)