Beautiful Virgin Islands

Wednesday, Jul 16, 2025

Here's one reason people hate this economy, despite low unemployment: A return of the misery index

Here's one reason people hate this economy, despite low unemployment: A return of the misery index

This is the best labor market most workers have ever experienced in their lives. So why are so many Americans feeling gloomy about the state of the US economy?

The simple answer is inflation, as measured by the consumer price index, which is showing the fastest rate of price increases in nearly 40 years. To see how much economic pain that is causing, it's useful to look at another economic measure from that earlier era -- the misery index.

The misery index was created by Arthur Okun, a top economic adviser to President Lyndon Johnson. It became more widely known in the 1970s and early 1980s. It adds together two measures of economic pain -- the unemployment rate and the CPI's measure of inflation -- to create a single number. The lower the number, the happier consumers -- and voters -- were likely to be. The higher, the more unhappy.

Right now the measure stands at a level Americans haven't consistently seen since the Great Recession and the years that followed.


The misery index has been in double digits since April, standing at 11 or higher since December. The next CPI report is Thursday.

That's where it also stood in late 2008 as the Great Recession took hold, and in late 2009, when unemployment peaked at 10.2%. That was a mirror of today's conditions -- high unemployment in a badly wounded labor market, but coupled with very low, even negative, inflation.

The misery index returned to double-digit territory in 2011 and early 2012 when unemployment remained stubbornly high and prices temporarily surged -- at about half the current rate. The misery index was briefly higher than its current level during the brief spike in unemployment in the early months of the pandemic.

Still, the misery index was significantly higher at its peak in the 1970s and early 1980s, when the economy was struggling with much higher inflation and unemployment.

It was in the teens -- or higher -- for about a decade from late 1973 to mid-1983, climbing above 20 for most of 1980.

A good 'rule of thumb'


Economists agree the misery index is not a particularly sophisticated measure. Other economists since the 1980s have come up with more precise measures.

But, in its original form, the misery index is useful nonetheless.

"It's short-hand, it's a rule of thumb," said David Wessel, director of the Hutchins Center on Fiscal & Monetary Policy at Brookings Institution. "The average person can understand it. You don't need a PhD in Economics to add together two numbers."

The reason people are upset about high prices -- beyond the squeeze on their budgets -- is that it's a factor that they confront on a continuing basis. Even during periods of high unemployment, more than 85% of Americans will keep working. But nearly 100% of people are paying higher prices during periods of high inflation.

"High unemployment and inflation, either one is upsetting," said Wessel. "If you're out of work you're more worried about unemployment. If you have a job, you're more worried about inflation."

Economic worries despite low unemployment


The labor market is exceptionally strong right now. There are more job openings than there are job seekers. That's allowed Americans able to quit jobs they don't like, often to take better jobs. Wages are rising as a result. The latest consumer confidence report from The Conference Board, an economics research firm, found 55% said jobs were plentiful, five times as much as those who said jobs are hard to get.

The Conference Board's survey found Americans generally positive about the state of the economy, especially compared to during the depths of the Great Recession.

But other surveys cast a more negative outlook.

The most recent CNN poll on the economy in December found three-quarters of those surveyed say they are worried about the state of the economy in their own community, and 63% say the nation's economy is in poor shape. It also found 80% expressing concern about inflation and 54% disapproving of the way President Joe Biden's performance dealing with the economy.

Gallup's poll in early January found only 23% saying the economy is in good or excellent shape, while 37% say it is in poor shape, down only slightly from the 42% who said it was in poor shape in December. That represents the highest percentage of people who believe the economy is in poor shape since 2012.

In some ways, the misery index does a better job of predicting political reaction to the economy than explaining the economic reality, noted Steve Hanke, professor of applied economics at the Johns Hopkins University and a member of President Ronald Reagan's Council of Economic Advisers.

"It's not a pain gauge. It's a polling gauge," said Hanke, who has come up with a revised version of the index to compare economies in different countries.

"That was the whole purpose of the thing. The bottom line is the original one gives politicians what they need to know."

A misery index close to these readings is typically bad news for political leaders. Presidents Gerald Ford, Jimmy Carter and George H.W. Bush all became one-term presidents with a misery index in double-digits in the run-up to the election.

The good news for Biden is there is time for the economy to improve in the eyes of voters. Many economists believe current prices are a temporary condition caused by the pandemic and that the inflation rate could come down between now and the 2022 midterm elections, let alone the next presidential election in 2024. Hanke said what is most important for politicians is that people have a sense that things are improving -- that's more important than the misery index reading itself.

For proof, the misery index stood near the current reading in the fall of 1984, but that was down nearly 50% from four years earlier. It allowed Reagan to base his campaign on an improving economy, with his ads proclaiming "It's morning in America."

But if economists are wrong and inflation remains persistent, or if efforts to curb it cause a strong labor market to sour and unemployment to rise, history suggests it will be very bad news for Biden and Democrats.

"It would be inconvenient for Biden if we were running the election now," said Wessel.

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Dimon Warns on Fed Independence as Trump Administration Eyes Powell’s Succession
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Jeff Bezos Considers Purchasing Condé Nast as a Wedding Gift
Ghislaine Maxwell Says She’s Ready to Testify Before Congress on Epstein’s Criminal Empire
Bal des Pompiers: A Celebration of Community and Firefighter Culture in France
FBI Chief Kash Patel Denies Resignation Speculations Amid Epstein List Controversy
Air India Pilot’s Mental Health Records Under Scrutiny
Google Secures Windsurf AI Coding Team in $2.4 Billion Licence Deal
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
South African Police Minister Suspended Amid Organised Crime Allegations
Nvidia CEO Claims Chinese Military Reluctance to Use US AI Technology
Hong Kong Advances Digital Asset Strategy to Address Economic Challenges
Australia Rules Out Pre‑commitment of Troops, Reinforces Defence Posture Amid US‑China Tensions
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
U.S. Resumes Deportations to Third Countries After Supreme Court Ruling
Excavation Begins at Site of Mass Grave for Children at Former Irish Institution
Iranian President Reportedly Injured During Israeli Strike on Secret Facility
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Defends Attorney General Pam Bondi Amid Epstein Memo Backlash
Renault Shares Drop as CEO Luca de Meo Announces Departure Amid Reports of Move to Kering
Senior Aides for King Charles and Prince Harry Hold Secret Peace Summit
Anti‑Semitism ‘Normalised’ in Middle‑Class Britain, Says Commission Co‑Chair
King Charles Meets David Beckham at Chelsea Flower Show
If the Department is Really About Justice: Ghislaine Maxwell Should Be Freed Now
NYC Candidate Zohran Mamdani’s ‘Antifada’ Remarks Spark National Debate on Political Language and Economic Policy
President Trump Visits Flood-Ravaged Texas, Praises Community Strength and First Responders
From Mystery to Meltdown, Crisis Within the Trump Administration: Epstein Files Ignite A Deepening Rift at the Highest Levels of Government Reveals Chaos, Leaks, and Growing MAGA Backlash
Trump Slams Putin Over War Death Toll, Teases Major Russia Announcement
Reparations argument crushed
Rainmaker CEO Says Cloud Seeding Paused Before Deadly Texas Floods
A 92-year-old woman, who felt she doesn't belong in a nursing home, escaped the death-camp by climbing a gate nearly 8 ft tall
French Journalist Acquitted in Controversial Case Involving Brigitte Macron
Elon Musk’s xAI Targets $200 Billion Valuation in New Fundraising Round
Kraft Heinz Considers Splitting Off Grocery Division Amid Strategic Review
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
EU Proposes New Tax on Large Companies to Boost Budget
Trump Imposes 35% Tariffs on Canadian Imports Amid Trade Tensions
Junior Doctors in the UK Prepare for Five-Day Strike Over Pay Disputes
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
Bitcoin Reaches New Milestone of $116,000
Biden’s Doctor Pleads the Fifth to Avoid Self-Incrimination on President’s Medical Fitness
Grok Chatbot Faces International Backlash for Antisemitic Content
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
×