The Misery Index is a creation of economists dating back to the gloomy financial days of the 1970s. The Misery Index is a simple calculation and is easy to understand, as it involves just adding current US unemployment to current US consumer price index inflation. The number is considered a valuable gauge of how average Americans are doing in the actual consumer economy and is a marker of how well government policies are handling economic variables and challenges.
The current unemployment rate of 3.90 percent added to the inflation rate of 7.04 produces the current Misery Index of 10.94 percent. That is slightly better than the number last month, 11.01 percent.
The Misery Index is also helpful as it appeals to common sense. Even though the Biden administration claims it oversees a remarkable economic recovery, people’s daily experience working and struggling to get by tells a different story. If anything, the current index understates the proper condition of the US labor market.
Even though the unemployment rate appears low because of the way it is calculated, last month’s Bureau of Labor Statistics data indicates that the economy still sits at 3.6 million fewer jobs than just before the COVID-19 pandemic began. Meanwhile, employers struggle to find qualified employees to work in open positions.
Since World War II, calculations of the Misery Index show a low number of under three percent in July 1953 to a high of about 22 percent in June 1980 at the end of the Carter Administration. The index climbed throughout the first year of the Biden Administration. Before Biden, the last time the index was over 10 percent was May 2012, when it hit 10.4 percent. During the recovery from the 2008 financial crisis, the most significant part of the index was unemployment, as inflation was held to levels consistent with the years since the middle part of the Reagan Administration.
In the latest Misery Index surge, inflation has taken center stage, with the current consumer price index shooting up 7 percent last month compared to December 2020. That jump was the largest in four decades.
As Joe Biden continues to lay blame on COVID and the supply chain crisis for rising consumer prices, ordinary Americans are smart enough to feel the real-world pain of “too many dollars chasing too few goods.” At some point, politicians and mainstream economists will have to admit that America has a production problem made worse by insane levels of government money-printing and spending. We hope there will still be time to do something about the issue by then.