Wars have a tendency to soak up the unemployed. But war is not productive economic activity. See: "broken window fallacy."
Allow me to be the second to compliment you on your excellent post. If I may add....employment is a direct result of wealth creation as investment in wealth creating projects increases demand for labour. The problem with government is that it doesn't create wealth. Thus, every government employee must be paid with taxes levied on wealth creating enterprises, putting increasing pressure on private enterprise and decreasing the incentive to invest. The end of that particular cycle can be best summed up by Gorbachev: "Our workers pretend to work and we pretend to pay them." Employment is the result of wealth creation, not the cause of it.
It is a myth that the Great Depression did not end until after WW2. Economic production went up sharply, and unemployment decreased significantly, well before 1939.
Really, are you talking about Nazi Germany because in the U.S there was no real recovery until after WWII. We entered a second recession in 1937. Just as we will probably have a second recession, if we are even successful in getting of this one from the sheer debt we face. http://en.wikipedia.org/wiki/Recession_of_1937 Anyone who thinks that the policies of FDR and the congress did not directly contribute to the longest recession in modern history is mindless drone. The New Deal inspired a generation of statists. In the end every conceivable attempt in the modern century of government central planning has failed miserably in its original purpose. From Socialist Utopias of Communism to the Great Society and the War on Poverty. We continue to play this game because the people are sheep and those in power have found a perpetual motion machine for retaining it (power). Keep the masses hungry and they will look to the state for food. Those who attempt to feed themselves will be persecuted.
I am quite familiar with the facts and figure. You made the claim of a recovery prior to WWII, please cite. Specifically which FDR programs were the economic magic dust we so desperately need was it the - National Recovery Administration -Works Progress Administration I recommend you read up the FDR programs and his brain trusts. Headed by socialists Roosevelt formed what he called the Brain Trust, a group of academic advisers to assist in his recovery efforts. Their solutions to the economic crisis called for more extensive government regulation of the economy. Donald Richberg, the send head of the NRA, said "A nationally planned economy is the only salvation of our present situation and the only hope for the future." Sound familiar like Obamas Panels of Economic Advisers on Housing, Auto, Banking. Roosevelt instituted price controls via Agricultural Adjustment Act in farming, which led a collapse in output, which made life even more miserable. the increase in gross income for farmers was largely paid for through government subsidies. Despite the reduced production, food price increases between 1933 and 1937 were negligible.[2] Consumers bore the brunt of higher food prices and were "horrified with its policy of enforced scarcity."[5] A Gallup Poll printed in The Washington Post revealed that a majority of the American public opposed the AAA So yeah Governments suck ass at running economies. But you continue to think otherwise, might I recommend a weekend in Cuba.
I'd like to know what caused the bubble that led to the Great Depression, according to Austrian economics. Since, obviously, it's pretty fucking hard to get out of one once you're already in it.