Monday , 15 July 2019


The Misery Index: What’s It Saying About the U.S. Economy These Days?

Since both high unemployment and high inflation are major factors to the average wage earner, the Misery Index is a quick and dirty metric to gauge the health of the economy because as inflation rises the cost of living increases and as unemployment rises more people cross the economic line into poverty.

By Lorimer Wilson, editor of munKNEE.com – A site for sore eyes and inquisitive minds

The Misery Index: A Definition

The Misery Index is defined as a measure of the economic well-being of the country based on how the average citizen is doing economically and is calculated by taking adding the unemployment rate and the inflation rate. It was created in the 1960s by economist Arthur Okun, an adviser to President Lyndon Johnson, as the Economic Discomfort Index and renamed by Ronald Reagan. A higher Misery Index score reflects a higher level of “misery,” and it’s a simple enough metric that a busy president, without time for extensive economic briefings, can understand at a glance. It is assumed that both a higher rate of unemployment and a worsening of inflation both create economic and social costs for a country and a rise in the misery index.

The Misery Index for 98 Nations 

The Index has been modified several times, first by Robert Barro of Harvard and then by Steve Hanke. This article uses Hanke’s model as its source and his modified Misery Index is the sum of the unemployment, inflation and bank lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable. These are offset by a “good” (GDP per capita growth), which is subtracted from the sum of the “bads.”

In the accompanying table, you can find Misery Index rankings for the 98 nations that report relevant data on a timely basis. For consistency and comparability, all data come from the Economist Intelligence Unit. Contrary to most lists, the misery index is a list where economies want to be as far from the top as possible and, speaking of the top, any way you slice it, Venezuela is the most miserable economy.

Of note in the above table is the Misery Index ranking of the following countries:

  • Japan @ 3.3
  • China @ 4.2
  • Germany @ 5.6
  • U.S. @ 8.7
  • UK @ 9.6
  • Australia @ 10.6
  • France @ 10.7
  • Canada @ 10.8
  • Italy @13.7
  • Russia @ 15.7

and the Misery Index of some of the countries in Central & South America:

  • Venezuela @ 1,746,439.1
  • Argentina @ 105.6
  • Brazil @ 53.6
  • Nicaragua @ 31.3
  • Honduras @ 26.8
  • Guatemala @ 17.3
  • Mexico @ 15.4
  • El Salvador @ 12.0

Chart of U.S. Misery Index: 1948-Present

The chart below (Source) includes inflation, unemployment, misery index and who was President:

Which party has performed better?

  • Democratic Presidents have done slightly better with an average overall misery index of 8.87% while
  • Republicans have had an average overall misery index of 9.61%.

However, if we look at only the more recent average since Jimmy Carter we see

  • Democrats with 9.91% and
  • Republicans with 9.87%.

 

 

 

 

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