The 'Misery Index' developed during the Reagan campaign to show how dad the economy was and how Carter was to blame for the 'misery' is now at the lowest level for any President since the inception of the index;
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As inflation rises, the cost of living increases, and as unemployment rises more people cross the economic line into poverty. Therefore, this index is a quick and dirty metric to gauge the health of the economy since both high unemployment and high inflation are major economic factors for the average wage earner.
Unfortunately, although data for the annual inflation rate is available back to 1914 (the CPI index began in 1913), data for the misery index is only available back to 1948 due to the lack of unemployment numbers prior to 1948. The original Misery index was created by economist Arthur Okun during the Johnson administration in the 1960s, not by Robert Barro as some people mistakenly believe. Barro created the “Barro Misery Index” (BMI) in 1999, which added interest rates and Gross Domestic Product (GDP) trend into the mix.
Approximately ten years later, Steve Hanke updated Barro’s work by applying it to other countries outside the United States. Hanke’s modified misery index uses unemployment, plus inflation, as Okun did, but then adds interest rates, and then subtracts the year-over-year percent change in per-capita GDP growth. Assuming that high-interest rates also add to the “Misery” but growth in GDP reduces the misery. Interestingly, when the original misery index was conceived by Okun the index was actually quite low by recent standards.
Recent events in the post-COVID era seem to bear out this conclusion as the country seems to be suffering less with high inflation and very low unemployment. Those suffering the most are those on fixed incomes who must deal with the declining purchasing power of their limited budgets.
Current Misery Index:
With inflation skyrocketing in early 2022, the misery index was approaching the miserable levels of 2011, when it reached 12.73% with high unemployment and low inflation. But this time, conditions were reversed. People still had jobs, and household savings were at record-high levels. Just before the pandemic, households held about $1 trillion in what was effectively cash, a figure that had ballooned to $4.7 trillion by the second quarter of 2022. So, despite the fact that rising wages have not kept up with inflation, and although inflation hit those on fixed incomes especially hard, the general populace was able to fall back on the savings they amassed during the pandemic.
In this chart, we can see the peaks and valleys of the index, with most of the low points occurring above 5%, with only a couple in the 1940s and 1950s that are below 5%. Those were generally during times of war when unemployment was excessively low. Only twice in the current millennium has the misery index fallen close to 5%. Even in the boom of 2006, it was 5.71%.
Conversely, the misery index can rise drastically when inflation or unemployment gets high. The highest point since the government began tracking unemployment in 1948 was in June of 1980, under Jimmy Carter, when the misery index reached 21.98% (even the COVID shutdown didn’t drive it that high).
In September 2019, the Misery index bottomed near all-time lows at 5.21%. By March 2020, it had climbed slightly to 5.94%. But in April, due to the COVID-19 shutdown and consequent high unemployment, the Index shot up to 15.03% based on 14.7% unemployment, but inflation was a minuscule 0.33%.
In May, both inflation 0.12% and Unemployment 13.30% fell, resulting in an index reading of 13.42%. So there was low inflation and high unemployment. By the end of 2021, the conditions had reversed… to low unemployment and high inflation.
In 2020, the peak occurred at 15.03% in April when the country shut down due to the COVID scare. This was just two months after making the low for the year at 5.83%.
In 2021, the low was in January at 7.70%, and it steadily increased to 11.29% in June. Despite falling unemployment, inflation rose faster than unemployment fell. From there is declined for a couple of months but then shot back up to 11.01% in November and finished the year at 10.94% in December.
January 2022 began with another massive increase in inflation to 7.49%, although Unemployment fell slightly to 4.0% taking the misery index up to 11.48%. The misery index peaked at 12.66% in June with 9.06% inflation and 3.60% unemployment.
January 2023 began with inflation down from its 2022 peak to 6.41%, and Unemployment near record lows of 3.40% taking the misery index down to 9.81%.
Note: During times of deflation (i.e. negative inflation) the misery index might not be truly representative of the actual misery of the general population. Although falling prices can help alleviate suffering, deflation does not necessarily guarantee “good times” if that were the case the “Great Depression” would have to be renamed “Happy Days” since prices fell 9% in 1931 and then another 10% in 1932.
Misery Index
The misery index shows how people are doing economically by adding the inflation and unemployment rate.
What is the Misery Index?
The misery index attempts to quantify how the average citizen is doing economically. It is calculated by simply adding the Annual inflation rate to the Seasonally Adjusted unemployment rate. One of the charts below includes inflation, unemployment, the misery index, and who was President at the time.As inflation rises, the cost of living increases, and as unemployment rises more people cross the economic line into poverty. Therefore, this index is a quick and dirty metric to gauge the health of the economy since both high unemployment and high inflation are major economic factors for the average wage earner.
Unfortunately, although data for the annual inflation rate is available back to 1914 (the CPI index began in 1913), data for the misery index is only available back to 1948 due to the lack of unemployment numbers prior to 1948. The original Misery index was created by economist Arthur Okun during the Johnson administration in the 1960s, not by Robert Barro as some people mistakenly believe. Barro created the “Barro Misery Index” (BMI) in 1999, which added interest rates and Gross Domestic Product (GDP) trend into the mix.
Approximately ten years later, Steve Hanke updated Barro’s work by applying it to other countries outside the United States. Hanke’s modified misery index uses unemployment, plus inflation, as Okun did, but then adds interest rates, and then subtracts the year-over-year percent change in per-capita GDP growth. Assuming that high-interest rates also add to the “Misery” but growth in GDP reduces the misery. Interestingly, when the original misery index was conceived by Okun the index was actually quite low by recent standards.
Surveying Happiness and Weighting the Misery Index
According to a paper in the American Economic Review called “Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness unemployment causes 1.7 times as much misery as inflation, so the misery index should probably be calculated by multiplying unemployment by 1.7 and then adding it to inflation, but that is NOT the way it is done.Recent events in the post-COVID era seem to bear out this conclusion as the country seems to be suffering less with high inflation and very low unemployment. Those suffering the most are those on fixed incomes who must deal with the declining purchasing power of their limited budgets.
Current Commentary:
Current Misery Index:
Unemployment 3.7% + Inflation 4.05% = 7.75%
With inflation skyrocketing in early 2022, the misery index was approaching the miserable levels of 2011, when it reached 12.73% with high unemployment and low inflation. But this time, conditions were reversed. People still had jobs, and household savings were at record-high levels. Just before the pandemic, households held about $1 trillion in what was effectively cash, a figure that had ballooned to $4.7 trillion by the second quarter of 2022. So, despite the fact that rising wages have not kept up with inflation, and although inflation hit those on fixed incomes especially hard, the general populace was able to fall back on the savings they amassed during the pandemic.In this chart, we can see the peaks and valleys of the index, with most of the low points occurring above 5%, with only a couple in the 1940s and 1950s that are below 5%. Those were generally during times of war when unemployment was excessively low. Only twice in the current millennium has the misery index fallen close to 5%. Even in the boom of 2006, it was 5.71%.
Conversely, the misery index can rise drastically when inflation or unemployment gets high. The highest point since the government began tracking unemployment in 1948 was in June of 1980, under Jimmy Carter, when the misery index reached 21.98% (even the COVID shutdown didn’t drive it that high).In September 2019, the Misery index bottomed near all-time lows at 5.21%. By March 2020, it had climbed slightly to 5.94%. But in April, due to the COVID-19 shutdown and consequent high unemployment, the Index shot up to 15.03% based on 14.7% unemployment, but inflation was a minuscule 0.33%.
In May, both inflation 0.12% and Unemployment 13.30% fell, resulting in an index reading of 13.42%. So there was low inflation and high unemployment. By the end of 2021, the conditions had reversed… to low unemployment and high inflation.
Misery Index 2021-2023
| Month | Unemployment | Inflation | Misery Index |
| January 2021 | 6.3% | 1.40% | 7.70% |
| February 2021 | 6.2% | 1.68% | 7.88% |
| March 2021 | 6.0% | 2.62% | 8.62% |
| April 2021 | 6.1% | 4.16% | 10.26% |
| May 2021 | 5.8% | 4.99% | 10.79% |
| June 2021 | 5.9% | 5.39% | 11.29% |
| July 2021 | 5.4% | 5.37% | 10.77% |
| August 2021 | 5.2% | 5.25% | 10.45% |
| September 2021 | 4.8% | 5.39% | 10.19% |
| October 2021 | 4.6% | 6.22% | 10.82% |
| November 2021 | 4.2% | 6.81% | 11.01% |
| December 2021 | 3.9% | 7.04% | 10.94% |
| January 2022 | 4.0% | 7.48% | 11.48% |
| February 2022 | 3.8% | 7.87% | 11.67% |
| March 2022 | 3.6% | 8.54% | 12.14% |
| April 2022 | 3.6% | 8.26% | 11.86% |
| May 2022 | 3.6% | 8.58% | 12.18% |
| June 2022 | 3.6% | 9.06% | 12.66% |
| July 2022 | 3.5% | 8.52% | 12.02% |
| August 2022 | 3.7% | 8.26% | 11.96% |
| September 2022 | 3.5% | 8.20% | 11.70% |
| October 2022 | 3.7% | 7.75% | 11.45% |
| November 2022 | 3.7% | 7.11% | 10.81% |
| December 2022 | 3.5% | 6.45% | 9.95% |
| January 2023 | 3.4% | 6.41% | 9.81% |
| February 2023 | 3.6% | 6.04% | 9.64% |
| March 2023 | 3.5% | 4.98% | 8.48% |
| April 2023 | 3.4% | 4.93% | 8.33% |
| May 2023 | 3.7% | 4.05% | 7.75% |
Misery Index Table 2014-2023:
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
| 2023 | 9.81% | 9.64% | 8.48% | 8.33% | 7.75% | |||||||
| 2022 | 11.48% | 11.67% | 12.14% | 11.86% | 12.18% | 12.66% | 12.02% | 11.96% | 11.70% | 11.45% | 10.81% | 9.95% |
| 2021 | 7.70% | 7.88% | 8.62% | 10.26% | 10.79% | 11.29% | 10.77% | 10.45% | 10.19% | 10.82% | 11.01% | 10.94% |
| 2020 | 6.09% | 5.83% | 5.94% | 15.03% | 13.42% | 11.75% | 11.19% | 9.71% | 9.27% | 8.08% | 7.87% | 8.06% |
| 2019 | 5.55% | 5.32% | 5.66% | 5.60% | 5.39% | 5.35% | 5.51% | 5.45% | 5.21% | 5.36% | 5.55% | 5.79% |
| 2018 | 6.17% | 6.31% | 6.46% | 6.36% | 6.60% | 6.87% | 6.85% | 6.60% | 5.98% | 6.22% | 5.88% | 5.81% |
| 2017 | 7.30% | 7.44% | 6.88% | 6.60% | 6.17% | 6.03% | 6.03% | 6.34% | 6.43% | 6.14% | 6.30% | 6.21% |
| 2016 | 6.27% | 5.92% | 5.85% | 6.13% | 5.72% | 5.91% | 5.74% | 5.96% | 6.46% | 6.54% | 6.29% | 6.77% |
| 2015 | 5.61% | 5.47% | 5.43% | 5.20% | 5.46% | 5.42% | 5.47% | 5.30% | 5.06% | 5.17% | 5.50% | 5.73% |
| 2014 | 8.18% | 7.83% | 8.21% | 8.25% | 8.43% | 8.17% | 8.19% | 7.80% | 7.56% | 7.46% | 7.12% | 6.36% |
| 2013 | 9.49% | 9.68% | 9.07% | 8.56% | 8.96% | 9.35% | 9.36% | 8.82% | 8.38% | 8.26% | 8.24% | 8.20% |
Summary:
In 2019, the peak was 5.79% in December, and the Low was in September at 5.21%. Previous peaks were 6.87% in July 2018 and 7.44% in February 2017.In 2020, the peak occurred at 15.03% in April when the country shut down due to the COVID scare. This was just two months after making the low for the year at 5.83%.
In 2021, the low was in January at 7.70%, and it steadily increased to 11.29% in June. Despite falling unemployment, inflation rose faster than unemployment fell. From there is declined for a couple of months but then shot back up to 11.01% in November and finished the year at 10.94% in December.
January 2022 began with another massive increase in inflation to 7.49%, although Unemployment fell slightly to 4.0% taking the misery index up to 11.48%. The misery index peaked at 12.66% in June with 9.06% inflation and 3.60% unemployment.
January 2023 began with inflation down from its 2022 peak to 6.41%, and Unemployment near record lows of 3.40% taking the misery index down to 9.81%.
Note: During times of deflation (i.e. negative inflation) the misery index might not be truly representative of the actual misery of the general population. Although falling prices can help alleviate suffering, deflation does not necessarily guarantee “good times” if that were the case the “Great Depression” would have to be renamed “Happy Days” since prices fell 9% in 1931 and then another 10% in 1932.
