During 1980, with an election to win, Ronald Reagan (reputedly) gave the Economic Discomfort Index a new name. Seeing it soar, he called it the Misery Index. He won the election against Jimmy Carter and the Misery Index was born.
Our question though is which gives us more misery…inflation or unemployment?
The Misery Index
To calculate the simplest version of the Misery Index, we just add together the annual inflation rate and the unemployment rate. Below, you can see its peaks from the mid-1970s to the early 1980s:
The July 2022 Misery Index
Fast forwarding to now, we can ask about our own Misery. At 11.98, the July Misery Index combined 3.5 percent unemployment and 8.5 percent inflation rate.
Political Misery
Below, comparing presidents, the Change column dictated the order. It starts with the worst performance and ends with the best. So, for Richard Nixon, Misery ascended by 9.21 during his presidency. By contrast it dropped by more than 10 when Harry Truman was president:
Updating the statistic for President Biden, we can note his 11.98 score for July.
Our Bottom Line: Inflation or Unemployment?
According to a study from three New Zealand economists, the pain from unemployment far exceeds the suffering created by inflation. Covering 2005 to 2019, households indicated an economic mood that was six times worse from high unemployment than price increases. Furthermore, the ripple from unemployment, with jobs lost, business activity contracting, and state revenue declining affects us more than inflation.
So, we can ask why the 3.7 percent unemployment rate is not creating even a bit of cheer.
My sources and more: Looking up the Misery Index, I discovered this Insider article. It led me to the New Zealand study on inflation and unemployment. And, if you would like more, econlife looked at the Baseball Misery Index.
Please note that several sentences from today’s post were in a previous econlife.
