Misery index

The misery index is constructed by adding the unemployment rate to the inflation rate.

The misery index is an economic indicator which is closely associated with stagflationary conditions. American economist Arthur Okun created it in the 1960s, in response to rising joblessness and increasing living costs. The idea was to give a rough measurement of how much economic pain the average American was enduring at any given time. The index simply takes the inflation rate and adds it to the unemployment rate – the higher the combined figure, the greater the level of misery.

In the US, the index remained in double-digit territory for the majority of the 1970s. It fell sharply, alongside inflation, in the early 1980s, and since then – with the exception of spikes during recessions, mostly driven by rising unemployment – it has tended to trend lower as both inflation and joblessness have generally been in decline.

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