Misery Index

Renowned economist Arthur Okun formulated the misery index in the 1960s. (He was an adviser to US President Lyndon Johnson). The misery index is the sum of the inflation rate and unemployment rate. Economists state that both rising rates of unemployment and inflation create social costs for an economy. They are directly linked to rising misery index values and indicate a decline in economic performance of a nation. (Rate of inflation is that rate at which cost of commodities and services are increasing. The unemployment rate is a measure of the number of people out of work).

Misery Index = Unemployment rate + Inflation rate

US Misery Index stood at 11.47% in August 2008. (It was highest compared to figures for the preceding 17 years). This can be alternatively represented as follows:

Misery Index (11.47) = Unemployment rate (6.1) + Inflation rate (5.37)

As per records US misery index was lowest in July 1953 at 2.97%.

High inflation rates along with high unemployment rates suppress consumer expenditure, which may ultimately lead to slowing down of the pace of economic growth and development. US presidents William J. Clinton and Dwight D. Eisenhower (in post-WW II period) had the distinction of presiding over eight consecutive years of single-digit values of misery indexes. President GW Bush was not as lucky as his predecessors in view of economic tumultuous times that his country was going through, thanks to mortgage loan crisis. It is trying time for the US economy and also for other nations worldwide, as, in a modern-day interconnected world, economic repercussions transcend borders and spill over with grave concerns for the global economy at large. Misery index is not only a matter of concern for job seekers; it has also blown up into an election issue in America at present. A whole lot of people in the US are finding it hard to maintain even middle-class lifestyle as depicted by the misery index.

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