Given the traction the Occupy Wall Street movement has gained across the nation, it’s safe to say that a good number of Americans are unhappy with their financial circumstances. And, with the national unemployment hovering around just over 9 percent, who could blame them?
Almost every economic indicator available would point to the fact that Americans of most stripes are having a pretty difficult time weathering a difficult economy. But what if you could actually quantify just how unhappy Americans were with their particular financial predicaments?
Enter the Misery Index: a tool that’s been used by the U.S. government since the Lyndon B. Johnson administration. As of this past September the U.S. Misery Index stood at 12.97 percent—the highest rate seen since its all-time high in 1980. As the index’s website says, the tool rightfully shows that “[a] combination of rising inflation and more people out of work implies a deterioration in economic performance and a rise in the misery index.”
The Misery Index is a simple number calculated by adding the inflation and unemployment rates:
Inflation + Unemployment = Misery Index
Back in June of 1980 the Misery Index reached an all-time high of 21.98. At that time the U.S. unemployment rate stood at 7.6 percent—not as bad as it is today, but what made things terrible at the time was the rate of inflation (14.38 percent at the time). The term staglation—high inflation along with slow economic growth—was also used to describe the U.S.’s economic situation during that time. High interest rates and an energy crisis brought years earlier when Organization of the Petroleum Exporting Countries (OPEC) imposed an embargo on the shipment of crude oil to the United States further pushed the economy into chaos.
During President Carter’s time in office, the average Misery Index also reached a high of 16.26, and fell to an average of 12.19 during Reagan’s two terms in office. Just five months later, in November of 1980 the nation would oust Democratic President Jimmy Carter from office and replace him with Republican darling Ronald Reagan.
The Misery Index reached its lowest levels during the month of July 1953 under the wing of then-President Dwight D. Eisenhower. That year marked the beginning of long period of economic growth that lasted through the early 1970s.
Misery Index: A Brief History:
The Misery Index was developed by a economist named Arthur Okin—a former scholar at The Brookings Institute and member of President Johnson’s Council of Economic Advisors. Since that time, it’s done a pretty good job of deciding presidential elections, and contributed in part to the defeats of both Carter and Gerald R. Ford before him.
Another economist by the name of Robert J. Barro later created his own version of the Misery Index—appropriately named the Barro Misery Index—to include gross domestic product and interest rates to the measure. According to Barro, his measure of misery was more comprehensive than Okun’s because it incorporated changes over the course of a President’s term rather than simply looking at a period of time in isolation. Despite Barro’s improvements, the U.S. still uses Okin’s calculation to determine the nation’s level of misery.