Less than a year before August Sandburg and Clara Anderson were married, a major financial collapse  occurred in the United States. On September 18, 1873, the Jay Cooke and Company brokerage house had gone out of business. It was unable to market millions of dollars of bonds for construction of the Northern Pacific Railroad. Thirty-seven other brokerage houses failed the same day. Two days later, with stock prices falling, the New York Stock Exchange closed, not to reopen for ten days. The federal government put millions of dollars into circulation, hoping to stem the tide of financial failure. The downturn didn't improve until 1879. It was called the “Great Depression” until another financial disaster of greater proportions occurred in the 1930s.

August Sandburg had a job with the Chicago, Burlington and Quincy Railroad, earning $6 a week. In 1873 he  had purchased a three-room cottage, not much more than a tarpaper shack, with the idea of getting married. While working near Abingdon, he chanced to meet Clara Anderson. They were able to converse in their first language and he asked her to marry him. Reverend S.P.A. Lindahl of the First Lutheran Church in Galesburg performed the ceremony on August 7, 1874.

Their first child, Mary, was born May 30, 1875. Their second child, Carl, was  born January 6, 1878. Both were born in that three-room home, with the aid of a midwife.

The 1873 downturn was the result of overproduction, too much speculation and inflated money.  After the Civil War ended companies continued to manufacture products as if there was still a war on. With the building of 33,000 miles of railroad track across the country, there was too much money being invested into railroads, and the returns were not immediate. Even so, the overwhelming feeling of people at the time was that anybody could make money and prosperity would be the result.

By 1876, over half of the railroad companies were in receivership. The economy fell to the bottom in 1878 with more than 10,000 businesses lost since the beginning of the depression. There was widespread unemployment in the cities. Competition became severe and men like John D. Rockefeller and Andrew Carnegie seized control of many smaller companies within the oil and steel industries, wielding disproportionate influence on the economy. Many companies reorganized using more efficient management and production systems in order to survive. It often, resulted in the reduction of the workforce or another cut in wages.

Tensions developed between management and labor which lasted through the rest of the century. The railroad strike of 1877 began in the East and spread to rail hubs in the Midwest. Troops were called out to protect the property of the large companies. That made the workers feel even more that they were at the mercy of capitalists. Many were incited to violence and some railroad companies had large amounts of their rolling stock, destroyed as the result of the strike.

The downturn affected the economies of countries in Europe and around the world. Millions of their citizens began emigrating to the United States and continued to do so until the 1920s. They believed that however bad conditions might be in the United States, they were far worse in their native lands.

The Panic of 1873 had effects on the politics of the United States with Republicans losing control of Congress and many local offices. It altered the economic methods of business. It changed the attitudes of workers toward management and created conflict between classes of people. The effects of the Panic of 1873 had an influence on the population and elected officials for several decades afterward.

The Sandburg family did not feel they had achieved prosperity until almost 1900. By that time, several of the children were working and bringing home money to help support the family.