The New Misery
Critics of the misery indexes discussed so far opine that the numbers rendered are deeply flawed. For starters, they say, the two main sources, standard unemployment statistics and the annual consumer price index (for inflation) are considered inaccurate by some. Unemployment stats, for instance, don't typically include people who are working part-time or, for that matter, those who have abandoned the job hunt. The consumer price index, for its part, might not give adequate weight to essentials like fuel and food.
But say you do give gas prices their due — that has no bearing on people who don't have cars. And when we're talking about misery, shouldn't we also factor in things like house foreclosures, evictions, bankruptcy, loan defaults and loss of health coverage?
Accordingly, efforts have been made to create yet more accurate measurements of population-wide misery. In 2009, for instance, The Huffington Post created a metric it calls the Real Misery Index.
Traditionally, the various misery indexes have used something called U3 unemployment statistics. The U.S. Bureau of Labor Statistics (BLS) actually has six different statistical measurements of unemployment (U1 through U6). U3 is the official one you hear in news reports, but it only measures the number of people who are officially unemployed. U4, U5 and U6 increasingly broaden the scope of who is considered truly unemployed. U6, the broadest of the metrics, includes people who've become so discouraged they've given up trying to find work, as well as those who are employed part-time because there's no full-time work available [source: Investopedia].
HuffPost's Real Misery Index uses the U6 statistic. It then averages out seven other stats: the inflation rate of food/drink, fuel and healthcare; the rate of credit card delinquency; the cost of housing; how many people are using food stamps; and home equity loan deficiencies. With the average of those seven numbers added to the U6 stat, the Real Misery Index had a wildly different result from traditional indices. The Okun Misery Index for 2009 was 8.1. But HuffPost's Real Misery Index registered a stunning 29.9 [source: Parks]. By March 2010 it was all the way up to 33. Happily, that was the peak. That summer, it dropped back down to 24, hinting at the slow but steady recovery to come. Too bad the Post hasn't kept up their index; it would be interesting to see where we stand now.
Author's Note: How the Misery Index Works
I'm old enough to remember the 70s very well. What I remember is a lot of long feathered hair, big old rusty cars, hand-me-down bell-bottoms, super-wide collars and a general atmosphere of DIY scrappiness. But what I don't recall is any overall sense of misery. When the 80s came, suddenly the cars were smaller and shinier, everybody's hair was shorter, collars were narrow, pant-legs tapered and people bought stuff new instead of making it themselves. Were we better off? I'm not so sure.
More Great Links
- Baram, Marcus. "Real Misery Index Dropped During Summer Months, Hinting At Recovery." Huffington Post. May 25, 2011. (May 7, 2016) http://www.huffingtonpost.com/2010/09/08/real-misery-index-dropped_n_709401.html
- Encyclopedia Britannica. "Arthur M. Okun: American Economist." Sept. 8, 2014. (May 3, 2016) http://www.britannica.com/biography/Arthur-M-Okun
- Geewax, Marilyn. "JFK's Lasting Economic Legacy: Lower Tax Rates." NPR. Nov. 14, 2013. (May 3, 2016) http://www.npr.org/2013/11/12/244772593/jfks-lasting-economic-legacy-lower-tax-rates
- Gordon, Robert J. and Robert E. Hall. "Arthur M. Okun 1928-1980." (May 3, 2016) http://www.brookings.edu/~/media/Projects/BPEA/1980-1/1980a_bpea_gordon_hall.PDF
- Hanke, Steve. "Measuring Misery Around the World." Cato Institute. 2014. (May 6, 2016) http://www.cato.org/publications/commentary/measuring-misery-around-world
- Hanke, Steve. "The Misery Index: A Reality Check." Cato Institute. 2009. (May 6, 2016) http://www.cato.org/publications/commentary/misery-index-reality-check
- Investopedia. "The True Unemployment Rate: U6 Vs. U3." (May 7, 2016) http://www.investopedia.com/articles/investing/080415/true-unemployment-rate-u6-vs-u3.asp
- Kadlec, Charles. "Nixon's Colossal Monetary Error: The Verdict 40 Years Later." Forbes. Aug. 15, 2011. (May 4, 2016) http://www.forbes.com/sites/charleskadlec/2011/08/15/nixons-colossal-monetary-error-the-verdict-40-years-later/#30b97b316682
- Klein, Matthew. "A Brief History of Macro: How We Got Here." The Economist. Jan. 21, 2013. (May 2, 2016) http://www.economist.com/blogs/freeexchange/2013/01/brief-history-macro
- Kollewe, Julia. "Inflation: What You Need to Know." The Guardian. Feb. 15, 2011. (May 4, 2016) https://www.theguardian.com/business/2011/feb/15/inflation-q-and-a#ixzz2UgsEGuCM
- Krugman, Paul. "The Stagflation Myth." The New York Times. June 3, 2009. (May 2, 2016) http://krugman.blogs.nytimes.com/2009/06/03/the-stagflation-myth/?_r=0
- McMahon, Tim. "Misery Index." InflationData.com. 2016. (May 2, 2016) http://inflationdata.com/articles/misery-index/
- Nessen, Ron. "The Brookings Institution's Arthur Okun – Father of the 'Misery Index.'" Brookings. Dec. 17, 2008. (May 2, 2016) http://www.brookings.edu/research/opinions/2008/12/17-misery-index-nessen
- Parks, Cara. "HuffPost's Real Misery Index: Recalculating the Hard Times." May 25, 2011. (May 3, 2016) http://www.huffingtonpost.com/2009/07/20/how-the-recession-affects_n_241557.html
- Phillips-Fein, Kim. "The Legacy of the 1970s Fiscal Crisis." The Nation. April 16, 2013. (May 3, 2016) http://www.thenation.com/article/legacy-1970s-fiscal-crisis/
- Piraee, Khosrow and Maryam M. Barzegar. "The Relationship between the Misery Index and Crimes: Evidence from Iran." Asian Journal of Law and Economics. Vol. 2, Iss. 1. 2011. (May 2, 2016) https://www.researchgate.net/publication/227377732_The_Relationship_between_the_Misery_Index_and_Crimes_Evidence_from_Iran
- Prachowny, Martin F.J. "The Kennedy-Johnson Tax Cut: A Revisionist History." June 2000. (May 3, 2016) http://qed.econ.queensu.ca/faculty/prachowny/CEA.HTM
- Resnick, Brian. "What America Looked Like: The 1970s Gas Crisis." The Atlantic. May 31, 2012. (May 4, 2016) http://www.theatlantic.com/national/archive/2012/05/what-america-looked-like-the-1970s-gas-crisis/257837/
- United States Misery Index. (May 12, 2016) http://www.miseryindex.us/
- U.S. Department of State. "Oil Embargo, 1973-1974." (May 4, 2016) https://history.state.gov/milestones/1969-1976/oil-embargo
- Yale University Department of Economics. "Arthur Okun: Biography." (May 3, 2016) http://economics.yale.edu/sites/default/files/files/Okun-Lectures/Okun-Biography.pdf