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Economy in Brief

U.S. Misery Index Highest Since 1991
by Tom Moeller October 6, 2008

The so-called misery index is a constructed U.S. business cycle indicator. It adds the year-to-year change in the CPI to the unemployment rate. Thus, for those who are employed it measures the degree to which their incomes are being eroded by higher prices. For those who are unemployed that erosion hits the diminished level of dollars from an unemployment benefit.

During the past year, the misery index has climbed to 11.5 which was its highest level since early 1991.

The increase during the past year from 6.7 is due to gains in both of the two components of the index, but the 4.8 point jump since August of last year has been more driven by the rise in energy prices. Higher gasoline prices drove the change in the CPI up 3.5 points to 5.4%. Higher unemployment caused the unemployment rate to rise a lesser 1.4 points.

Over the very short term the recent decline in gasoline prices likely will cause the misery index to level out. The CPI's increase should drop to roughly 4.0%. However, a continued increase in the unemployment rate will offset at least some of that decline. The combination would leave the index still above last year's average and on a monthly basis near the highest level since 2005.

The misery index can be found in Haver's USECON database under Business Cycle Indicators.

Oil Prices and Inflation from the Federal Reserve Bank of San Francisco can be found here.

Back to the Future with Keynes from the Federal Reserve Bank of Minneapolis is available here.

U.S. Misery Index August July Y/Y  2007 2006 2005
Misery Index 11.5 11.3 6.7 2.9 3.2 3.4
  CPI 5.4  5.5 1.9 2.9 3.2 3.5
 Unemployment Rate 6.1 5.7 4.7 4.6 4.6 5.1
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