Misery Index

DEFINITION of 'Misery Index'

A measure of economic well-being for a specified economy, computed by taking the sum of the unemployment rate and the inflation rate for a given period. An increasing index means a worsening economic climate for the economy in question, and vice versa.

BREAKING DOWN 'Misery Index'

The index was invented by Arthur Okun and used to characterize the current economic condition. The main assumption in this index is that an increasing unemployment rate and relatively high inflation have a negative impact on economic growth. At its highest, the misery index for the U.S. was at 21.98% in June 1980. At its lowest, it was 2.97% in July 1953. In March 2006, the index was at 8.1%.

In economic terms, a rise in inflation coupled with high unemployment leads to lower consumer expenditures and contributes to an economic slow-down.