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. Is it possible to invest in an index?

    First, let's review the definition of an index. An index is essentially an imaginary portfolio of securities representing ... Read Answer >>
  4. 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 >>
  5. How does short selling help the market and investors?

    Find out how short sellers provide a service to the market by acting as a check against overvalued companies and exposing ... Read Answer >>
  6. In economics, what is an index number?

    Read about the role of an index number in economics and how index numbers can be applied to all kinds of data, such as inflation ... Read Answer >>
Related Articles
  1. Economics

    Okun's Law: Economic Growth And Unemployment

    Learn about Okun's Law, why it is important and how it stood the test of time since first being published.
  2. Economics

    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.
  3. Dictionary

    My Favorite Financial Term: Moat

    Kevin Carter, founder of Big Tree Capital, shares his favorite financial term.
  4. Your Practice

    How the Election Year Will Impact Your Practice

    Who wins the presidency isn't the only political factor that will impact business and your practice this year. Here's what else to expect.
  5. Investing Basics

    The Pros and Cons of Indexes

    Learn about the advantages and disadvantages of stock indexes and passive index funds. Discover how there is an opportunity cost to using index funds.
  6. Investing Basics

    What is an Index?

    An index is a statistical means of calculating a change in an economy or market.
  7. Economics

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  8. Options & Futures

    Using Index Futures To Predict The Future

    Want to know whether the stock market will open up or down? Check out the index futures.
  9. Economics

    How the Presidents Rate on Investment Performance

    During which U.S. presidency did stocks, bonds, and cash perform best? Let's take a look and find out why.
  10. Economics

    Understanding the Unemployment Rate

    The unemployment rate is the percentage of people in the labor force who are unemployed but seeking a job.
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. Indexation

    Linking adjustments made to the value of a good, service or other ...
  5. Natural Unemployment

    The lowest rate of unemployment that an economy can sustain over ...
  6. Unemployment Rate

    The percentage of the total labor force that is unemployed but ...
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center