How the Misery Index Works

Okun's Misery

Although it shot up during Richard Nixon's first term as president, the Misery Index beat a hasty retreat in time for his re-election.
Although it shot up during Richard Nixon's first term as president, the Misery Index beat a hasty retreat in time for his re-election.
NBCU Photo Bank

Okun's Misery Index provides a snapshot of the economy. Combining the inflation rate with the unemployment rate also gives a sense of how people are experiencing the economic conditions on the ground. Unemployment tends to outpace inflation, especially in the post-stagflation era when authorities have used more aggressive interest rate controls to manage the country's money. Using the index, Okun was able to look back in time at previous eras and measure past economies against the present. His data, however, screeched to a halt at 1948; there are no reliable unemployment statistics before that year.

Nevertheless, looking back, economists were able to note a correlation between the Misery Index and the fortunes of the U.S.'s two rival political parties. In 1956, for instance, the Misery Index was a modest 6.53 percent. Was it just a coincidence that Dwight Eisenhower coasted to reelection that year? Many economists think the state of the economy was an important factor in his success.

By contrast, in 1968 when Johnson's presidency came to an end, the index was up to 8.13. Johnson's replacement for the Democratic candidacy, Hubert Humphrey, was duly defeated by Richard Nixon. The index rose to 11.67 during Nixon's first term but then began a steady decline, clearing the way for Tricky Dick to return to the White House in 1972. Directly afterward, misery was back with a vengeance, clawing all the way up to 17.01 by 1974 when the Watergate scandal forced Nixon's resignation.

During Gerald Ford's short-lived presidency, the index slid back down to 12.66, but he still lost to Jimmy Carter in 1976. During his campaign, Carter talked a lot about the Misery Index in his effort to showcase how badly change was needed. After all, Ford's 12.66 was better than Nixon's 17.01, but it was a far cry from the glory days of Eisenhower's 6.53. Unfortunately for Carter, the Index came back to bite him. By 1980 it had reached an all-time high of 21.98.

Reagan, canny campaigner that he was, used Carter's earlier index-citing words against him and was soon nestling into the White House. By the end of his two terms, the index had been wrestled down to 9.55 just in time to elect George Bush Sr. Then it inched up to 10.45, giving Bill Clinton the opening he needed to slide into the Oval Office in 1992. It was down even further to 7.35 in 2000, but it was climbing fast and, in a rare departure from the norm, the candidate for the rival party, Bush Jr., was able to squeak in despite a low index.

Under George W., the index pumped up to 11.40 in 2008 and then suddenly dove to 7.87 from September to November of that year when Barack Obama came into office. But this was an example of a flaw in the index. Despite the low number, people were actually quite miserable at the time because unemployment was rising fast and the stock market had crashed. And that crash had caused an abrupt deflation in the value of the U.S. dollar, throwing off the index, which relies on inflationary numbers for its measurement of wretchedness [source:].

In fact, for some time, economists had noted that the Misery Index needed some tweaking. Several of them had started to take on the challenge.