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Economy in Brief

U.S. Misery Index Falls Sharply With Lower Energy Prices
by Tom Moeller April 27, 2009

During the past year, the misery index has fallen sharply as a result of the decline in energy prices which have offset the rise in the unemployment rate. During the last three months the decline stalled, however, as the decline in prices stabilized and unemployment moved higher. The March index reading of 8.1 compares to 9.6 in 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 reflects the degree to which their incomes are being eroded by higher prices. For those who are unemployed, it reflects the diminished income and the anxieties produced by a higher level of joblessness.

Lower prices for gasoline (-39.3% y/y) and for heating oil (-30.5% y/y), along with reduced growth in "core" prices (1.8% y/y), have dropped the gain in overall consumer prices to -0.4%. This first negative reading on record has gone some way in bolstering real consumer spending power. That gain works for all consumers, whether employed or unemployed. And it counters the drastic increase in the number of those unemployed as reflected in the rise to 8.5% in the jobless rate, nearly double the low of two years ago.

Along with lower taxes, these forces together recently have combined to lift the gain in real disposable income to 2.2% from 1.3% during all of last year. During the last twenty year there has been a negative 55% correlation between the level of the misery index and the growth of real disposable income.

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

A white paper describing the process and methodologies employed by the federal banking supervisory agencies in their forward-looking capital assessment of large U.S. bank holding companies was published on Friday. It can be found here.

Recession Catches Rural America from the Federal Reserve Bank of Kansas City can be found here.

U.S. Misery Index March February  March '08 2008 2007 2006
Misery Index 8.1 8.2 9.2 9.6 7.5 7.8
  Consumer Price Index -0.4  0.1 4.1 3.8 2.9 3.2
 Unemployment Rate 8.5 8.1 5.1 5.8 4.6 4.6
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