A:

The

most miserable month ever according to the Misery Index was June of 1980. The all-time high for the Misery Index was reached on June 1, 1980, when it hit 21.98%.

The Misery Index was devised by the economist Arthur Okun in the 1960s. Okun, an advisor to President Johnson, wanted a simple way to express the social costs of policy in terms of inflation and unemployment. To achieve this, he added the rates of inflation and unemployment together and called the sum the Misery Index.

From the 1960s to the '80s, oil cartels, the Cold War and the Vietnam War all took a toll on the economy, driving up inflation and unemployment. When Gerald Ford ran for re-election, his Democratic opponent, Jimmy Carter, used the high Misery Index of 13% as proof of Ford's inability to steer the economy. Carter was elected president, but he unwittingly tied the rope from which he'd later hang.

Under the Carter administration, a taxing regime and price controls were implemented. While this slowed inflation, it also meant that businesses were given less incentive to profit and, thus, less incentive to hire. Unemployment rose sharply and the Misery Index hit an all-time high of 21.98% during Carter's presidency.

After having called attention to the index through his own election campaign, Carter tried to minimize the index's importance during his re-election campaign. This strategy failed and Reagan was elected president, ushering in his own solutions in the form of Reaganomics.

For related articles, read Economic Indicators: Overview and Laffer Curve Key to Ideal Tax Rate.

This question was answered by Andrew Beattie.

RELATED FAQS
  1. What is the difference between inflation and stagflation?

    Inflation is a term used by economists to define broad increases in prices. Inflation is the rate at which the price of goods ... Read Answer >>
  2. What happens when inflation and unemployment are positively correlated?

    Learn about the historic relationship between inflation and unemployment and the implications that occur when they are positively ... Read Answer >>
  3. Do rising unemployment rates tend to increase or decrease investor sentiment and ...

    Discover whether rising unemployment rates tend to increase or decrease consumer confidence and investor sentiment. Unemployment ... Read Answer >>
  4. Unemployment resulting from changes in the basic composition of the economy ... ...

    The correct answer is a. An example of structural unemployment is the technological revolution. Computers might have eliminated ... Read Answer >>
  5. How can inflation be good for the economy?

    Find out why some economists and public policy makers believe that inflation is a good, or even necessary, phenomenon to ... Read Answer >>
Related Articles
  1. Investing

    The Misery Index: Measuring Your Misfortune

    The Misery Index measures a combination of unemployment and inflation, but what does it mean for your finances?
  2. Insights

    Unemployment and Economic Growth: Okun's Law

    Unemployment and economic growth? Okun has a law for that.
  3. Investing

    How Does Okun's Law Describe Unemployment?

    Okun’s law explores the statistical relationship between a country’s unemployment rate and its economic growth rate.
  4. Insights

    5 Presidents Who Couldn't Secure A Second Term

    These U.S. presidents couldn't get re-elected because of policy, stiff competition or lackluster performances in their first terms.
  5. Investing

    T-Mobile CFO: What to Expect Under Trump (TMUS)

    T-Mobile's CFO expects more openness to consolidation and a lower corporate tax rate under a Trump Presidency.
  6. Investing

    How Inflation and Unemployment Are Related

    How can inflation affect unemployment, and vice versa? Here we examine wage inflation, stagflation and the Phillips Curve.
  7. Investing

    Moat: My Favorite Financial Term

    Kevin Carter, founder of Big Tree Capital, shares his favorite financial term.
  8. Personal Finance

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  9. Investing

    Steps To Buying A Home

    No matter what type of property you’re eyeing, there are steps you can take to protect your investment.
  10. Insights

    9 Common Effects of Inflation

    Is inflation ever good? Maybe if you like your job it is.
RELATED TERMS
  1. Misery Index

    A measure of economic well-being for a specified economy, computed ...
  2. Okun's Law

    The relationship between an economy's unemployment rate and its ...
  3. Okun Gap

    A macroeconomic term that describes the situation when an economy's ...
  4. Reaganomics

    A popular term used to refer to the economic policies of Ronald ...
  5. Laffer Curve

    Invented by Arthur Laffer, this curve shows the relationship ...
  6. Unemployment

    Unemployment occurs when a person who is actively searching for ...
Hot Definitions
  1. Restricted Stock Unit

    Compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock ...
  2. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  3. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  4. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  5. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center