Arthur Okun, economic advisor to President Lyndon Johnson created the misery index in the 1960s. One calcu-lates the index by adding the unemployment rate to the inflation rate. It is assumed that both a higher rate of unem-ployment and elevated inflation produce economic pain and social costs for a country’s citizens.
Since the U.S. recession ended in 2009, America’s misery index has expanded from 7.5 to its current level of 12.7. That is, a combination of rising inflation and more people out of work indicate a deterioration in economic performance and a rise in economic distress. In fact for August 2011, the U.S. misery index rose to its highest level since 1984’s misery index of 12.7 when the nation’s rate of unemployment was 7.8% and its inflation rate was 4.9%. Today’s misery index matches that of 1984 with an unemployment rate of 9.1% and an rate rose to 3.6% producing a misery index of 12.7.
But today’s misery index falls well short of measuring the true misery of those seeking job opportunities. In August 2011, there were 14.0 million Americans out of work and looking for a job (the only individuals counted in the unemployment rate by the federal government). This number ignores the 8.8 million workers who were working part-time, but desired full-time work and the 2.6 million Americans that got so discouraged with job search that they left the labor force.
Summing all U.S. workers not fully employed means that in August 2011, 16.5% of U.S. workers were seeking greater job opportunities with a resulting misery index of 20. Additionally, teenagers, with an August 2011 unemployment rate of 25.4 percent, are experiencing “misery” unmatched since the Great Depression. Little wonder that consumers remain cautious regarding the purchase of anything beyond the necessities of life.
Ernie Goss.
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