Owing to the economic slump and high inflation, the U.S. misery index has swung upward at the fastest pace since 1980s.
Almost thirty years ago, while President Jimmy Carter confronted the economic recession and rising inflation, the term misery index began to gain public attention. Now, as the presidential election is just around the corner, this almost-forgotten index has become a focal point of topic.
The misery index is the sum of the unemployment rate and the inflation rate over the preceding 12 months. In general, the two indexes of unemployment and inflation usually move in different directions, with inflation easing when unemployment rises, and climbing when the economy gets stronger and unemployment decreases.
This year, the misery index climbs high as both the unemployment rate and the inflation rate stay afloat. The U.S. Labor Department will report Tuesday on the inflation rate, as measured by the consumer price index, for August. According to the Wall Street analysts forecast, it might stand at about 5.6 percent. With the Labor Departments already announced August unemployment rate 6.1 percent, we estimate that the misery index would be 11.7 percent, higher than the July figure of 11.2 percent.
This reveals that the U.S. misery index is rising. As of July, the misery index is up 4.2 percentage points from a year earlier. If the figure estimated by the Wall Street analysts is accurate, the August misery index will be 5.1 points higher than the same month of the previous year.
Before the administration of George Bush, there were only three presidential terms in which the misery index jumped up at least four percentage points from a year earlier. In each case, the incumbent party failed to win the following election. The last was Democratic President Jimmy Carters term, when hiking oil prices caused inflation and economic recession, the misery index hit a new record high of 21.9 percent. Carters intention of seeking re-election was smashed by Republican Reagan.
The misery index is of great significance economically and politically. If the index had declined over the most recent 12 months in a 4-year span, it means the economy is getting better in both the short and the long term. Instead, the reverse means the economy is getting worse. Purely observing this years rising misery index, the situation is seemingly more favorable for the Democratic candidate Obama.