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At first Truman enjoyed a honeymoon, as the nation continued to be involved in a two front war, with Germany and Japan. By that time, the Allied Powers were close to defeating Germany, but it was unclear how long war with Japan would continue. As vice president, Truman had been kept in the dark about major initiatives relating to the war, including the top-secret Manhattan Project, which was about to test the world's first atomic bomb. Truman was told briefly on the afternoon of April 12 that the Allies had a new, highly destructive weapon, but he was given a fuller briefing on April 25 by Secretary of War Henry Stimson. Germany surrendered on May 8, 1945, ending the war in Europe. Truman flew to Berlin for the Potsdam Conference, to meet with Soviet leader Joseph Stalin and British leader Winston Churchill regarding the post-war order. While at the Potsdam Conference, Truman was informed that the Trinity test of the first atomic bomb on July 16 had been successful. He hinted to Stalin that the U.S. was about to use a new kind of weapon against the Japanese, but Stalin was already aware of the bomb project, having learned about it long before Truman, through his network of spies.
In August 1945, the Japanese government ignored surrender demands. Truman approved the schedule of the military's plans to drop atomic bombs on the Japanese cities of Hiroshima and Nagasaki. Hiroshima was bombed on August 6, and Nagasaki three days later, leaving approximately 135,000 dead; another 130,000 would die from radiation sickness and other bomb-related illnesses in the following five years. Japan agreed to surrender on August 10, on the sole condition that Emperor Hirohito would not be forced to abdicate.
The transition from a wartime economy to a peacetime one was a challenge for the new President. Truman proposed an ambitious domestic liberal agenda known as the Fair Deal, a follow-up to his predecessor's New Deal. However nearly all his initiatives were blocked by the conservative coalition of Republicans and conservative Southern Democrats. After the war, Truman was confronted by a large national debt and persistent inflation. The United States had emerged from the Great Depression in large measure because of the war production that was required for World War II. Many Americans feared that the nation would sink into another depression with the end of the war, but there was no consensus on the best methods of post-war economic transition or even about the role that the federal government should have in economic affairs.
Truman faced a Congress that was controlled by the conservative coalition, an informal alliance of Republicans and conservative Southern Democrats. This group opposed many of Truman's policies and were also opposed to a strong role for the executive branch. Truman wanted to address the problem of unemployment. Almost 2 million people lost jobs within days of the Japanese surrender, and Truman feared even greater unemployment to come. Liberal New Dealers pushed for an federal commitment to ensuring "full employment," but Congress passed the Employment Act of 1946, which mandated the federal government "to foster and promote free competitive enterprise" among other goals.
The United States had instituted price controls and wage controls during the war in order to avoid large-scale inflation or deflation. Debate arose within the Truman administration, between lifting these controls immediately in order to allow private industries to hire new workers or keeping them in place to prevent runaway inflation. Truman looked for a middle course between the two. Price controls on many nonessential items were lifted by the end of September 1945, but others remained in place. Truman reimposed some price controls in December 1945, but this proved to be an unpopular move. By July 1946, average prices rose at the unprecedented rate of 5.5 percent. Unemployment remained relatively low, but labor unrest, inflation, and other issues badly damaged Truman's popularity
Organized labor had kept its promise to refrain from striking during the war, but labor leaders were eager to share in the gains from a postwar economic resurgence. After several labor disputes broke out in September and October 1945, Truman convened a national conference between leaders of business and organized labor in November, at which he called for collective bargaining in order to avoid labor-related economic disruptions. The conference failed to sole the problems of labor unrest. A wave of major strikes occurred and by February 1946 nearly 2 million workers were engaged in strikes or other labor disputes.
When a national rail strike threatened in May 1946, Truman seized the railroads to continue operations, but two key railway unions struck anyway. The entire national railroad system was shut down. Public anger grew. Truman actually drafted a message to Congress that called on veterans to form a lynch mob and destroy the union leaders, but his top aide Clark Clifford toned down the speech. Truman addressed the nation, calling for Congress to pass a new law to draft all the railroad strikers into the army. As he was concluding his speech he read a message just handed to him that the strike had been settled on terms he saw as favorable. Truman's speech marked the end of the strike wave, but the labor unrest had led to real wages of blue collar workers falling by over 12% after the surrender of Japan.
The 1946 mid-term elections were largely seen as a referendum on Truman, whose approval rating had sunk to 32%. Americans were unhappy over Truman's handling of the nationwide railroad strike and also over Truman's dithering about whether to end unpopular wartime price controls. After having been in the minority of both chambers of Congress since 1932, Republicans took control of both the House and the Senate. Republicans gained 12 seats in the senate, going from 39 seats to 51, while Democrats went down from 56 seats to 45. In the House, Republicans gained 55 seats and now held 246 seats to 188 for the Democrats.
The Republican majority in Congress was short-lived however, with Democrats winning control of the both the House and the Senate two years later. It was part of Truman's miraculous upset victory in 1948 when he campaigned against an "obstructionist" Congress (or the "Do Nothing Congress" as he called it) which had blocked many of his initiatives. He was aided by the fact that the U.S. economy recovered from the postwar recession of 1946–47 by election day.