What the Misery Index Really Means
Let me explain the misery index to you directly—it's a straightforward measure of the economic pain everyday people feel from potential job loss combined with rising living costs. You calculate it by adding the seasonally adjusted unemployment rate to the inflation rate. Since both unemployment and inflation hurt your economic well-being, their sum gives a clear picture of the economy's health. This index gained traction in the 1970s during stagflation, when high inflation and unemployment hit at the same time.
How to Understand the Misery Index
You need to know the two main parts: the unemployment rate and the inflation rate. Unemployment is the percentage of able-bodied adults actively seeking work out of the total workforce. Inflation is how fast money loses its buying power as prices rise. These often move inversely—when unemployment drops, prices might climb, and the reverse. To get the index, add the seasonally adjusted unemployment rate to the annual inflation rate. Economists see full employment at 4% to 5%, and the Fed aims for 2% inflation, so a good misery index sits around 6% to 7%.
Breaking Down the Components
First, the seasonally adjusted unemployment rate removes seasonal job patterns to give a true sense of employment levels—it's the percentage of the workforce that's job-hunting but can't find work, excluding retirees or those who've given up. The Bureau of Labor Statistics reports this monthly. Second, the annual inflation rate tracks the percentage rise in prices for goods and services, measured by the BLS in the consumer price index each month. As of December 2024, the misery index is 6.99, from 4.1 unemployment plus 2.89 inflation.
The History Behind It
Arthur Okun created this index in the 1970s while at the Brookings Institution, after advising President Johnson. He added inflation and unemployment for a quick economy snapshot—the higher it is, the more misery for citizens. In the 1970s, after Nixon cut dollar-gold ties, stagflation brought recessions and a falling dollar value, challenging theories like the Phillips curve. Jimmy Carter used it in 1976 to attack Ford's 12.7% index, and Reagan did the same to Carter in 1980.
Limitations You Should Know
Don't rely on the misery index as a perfect measure—it's shorthand for misfortune but has flaws. Unemployment only counts active job-seekers, missing those who've stopped looking. Low inflation might hide a stagnant economy with rising joblessness and falling asset values, yet yield a low index. Plus, it treats a 1% unemployment rise the same as 1% inflation, but unemployment likely causes more pain.
Common Criticisms
Critics point out it ignores economic growth, though that's not its purpose—it's about citizen pain, not overall performance. It only uses current data, overlooking future worries that add to stress, and unemployment lags, understating early recession misery. During good times like the Great Moderation, it's rarely used since low figures don't grab attention.
Updated Versions of the Index
People have tweaked it over time. Robert Barro added interest rates and the GDP growth gap in 1999 to rate post-WWII presidents. Steve Hanke expanded it in 2011 for global use, summing unemployment, inflation, lending rates minus real GDP per capita change—his 2021 list had Libya as least miserable and Cuba as most. Tom Lee made a Bitcoin Misery Index for crypto investors, based on winning trades and volatility. Bloomberg's version topped with Argentina, South Africa, and Venezuela in 2020, while Thailand, Singapore, and Japan were happiest, though low figures can mask issues like Japan's stagflation.
Misery Index Under U.S. Presidents
You can compare presidents using this index. The worst was 25.7% in 1933 under Roosevelt during the Depression, dropping to 3.5% by 1944. Nixon and Carter had highs of 20% and 22%. It fell under Reagan, Bush Sr., and Clinton, rose under Bush Jr., peaked at 12.7% under Obama from the Recession, hit 5.06% in 2015, stayed low under Trump until COVID pushed it to 15%. Averages vary, like Carter's 16.26 and Trump's first term at 6.91.
Frequently Asked Questions
How miserable is the U.S.? As of December 2024, it's 6.99. Who created it? Arthur Okun in the 1970s, originally the Economic Discomfort Index. What's the most miserable country? Argentina at 321.8 in 2023, per World Population Review.
The Bottom Line
In summary, the misery index from Arthur Okun adds unemployment and inflation to show economic health and citizen distress—it's simple but flawed since it skips growth data and isn't a full macro measure.
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