In classical economics, unemployment only occurs when wages are held unnaturally high, for example, by a minimum wage or unions. This theory was often a tough sell when applied to the entire U.S. economy, but it was never tougher than during the Great Depression. At the start of the Depression, the minimum wage didn't even exist, unions were hardly significant, and unemployment still soared to 25 percent. Classical economics wasn't just wrong, it was spectacularly wrong, making it easier for Keynesian economics to replace it. Classical economics was dethroned but managed to survive largely intact by retreating to the more limited domain of microeconomics. It was acceptable to use classical theory to explain individual markets but not necessarily the entire economy.
Not all classical economists accepted this demotion willingly. The Chicago School led by Milton Friedman never surrendered although the real economy didn't help their cause. If the minimum wage and unions caused unemployment, then the economy had a strange way of proving it. By the time a minimum wage was passed and union membership began to soar in the 1950s, unemployment fell to historic lows. With so much actual evidence contradicting their theory, it was a tough time to be a classical economist.
The University of Chicago provided a safe haven for classical economists and maintained somewhat of training camp for their assaults on the dominant Keynesian theory. They made relatively little progress until the 1970s when oil price shocks temporarily surprised all economists, including Keynesians.