Misery Index: Definition, Components, History, and Limitations

What Is the Misery Index?

The misery index is a measure of economic distress felt by everyday people, due to the risk of (or actual) joblessness combined with an increasing cost of living. The misery index is calculated by adding the seasonally adjusted unemployment rate to the inflation rate.

Since unemployment and inflation are both considered detrimental to one's economic well-being, their combined value is useful as an indicator of overall economic health. The original misery index was popularized in the 1970s with the development of stagflation, or simultaneously high inflation and unemployment.

Key Takeaways

  • The first misery index was created by Arthur Okun in the 1970s to provide a snapshot of the U.S. economy.
  • The misery index equals the inflation rate and unemployment rate; the higher the index, the greater the misery felt by average citizens.
  • It has broadened in recent times to include other economic indicators, such as bank lending rates.
  • The misery index is considered a convenient but imprecise metric.
  • Variations of the original misery index have become popular as ways to gauge the overall health of a national economy.

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Understanding the Misery Index

The misery index has two components. They are the unemployment rate and the inflation rate. U.S. unemployment is the number of able-bodied adults who are actively looking for work, as a percentage of the total workforce.

Inflation refers to the rate at which money loses buying power, due to the rise of consumer prices. In most cases, these numbers are inversely correlated; when the unemployment rate goes down, prices tend to go up, and vice versa.

The misery index is calculated by adding the seasonally adjusted rate of unemployment and the annual inflation rate.

Misery index = Seasonally Adjusted Rate of Unemployment + Annual Inflation Rate

Economists generally consider full employment to mean an unemployment rate of 4%–5%. The Federal Reserve (Fed) targets an inflation rate of 2%. Therefore, a satisfactory misery index rating would be in the range of 6%–7%.

Components of the Misery Index

Seasonally Adjusted Rate of Unemployment 

The unemployment rate is adjusted to remove seasonal employment patterns so that it can provide good insight into the relative level of employment.

The seasonally adjusted unemployment rate is measured as a percentage. It reflects the portion of the workforce that is able to work and seek employment actively, but can’t find a job. Workers who are retired but working and those who have stopped trying to find a job are excluded from the seasonally adjusted rate.

The Bureau of Labor Statistics (BLS) reports unemployment data each month.

Annual Inflation Rate

The annual inflation rate is the percentage increase in the prices of the goods and services consumed by the buyers. In short, it measures the prices of all goods and services existing in the economy.

The BLS reports inflation data each month in its consumer price index (CPI) release.

Misery Index as of December 2022

Misery Index = 9.95

Unemployment rate (3.5) + Inflation rate (6.45)

History of the Misery Index

Arthur Okun's Concept

The first misery index was created by economist Arthur Okun in the 1970s when he was a scholar at the Brookings Institution. He had previously served on President Lyndon Johnson's Council of Economic Advisers.

Okun combined the nation’s annual inflation rate and unemployment rate to provide an easily understood snapshot of the economy’s relative health. The higher the index, the greater the misery felt by the average citizen.

Period of Stagflation

During the 1970s, after President Nixon restricted and then severed the final links between the U.S. dollar and gold, the U.S. experienced several years of simultaneously elevated price inflation and unemployment, known as stagflation.

The American people were caught in a squeeze between the hardships of joblessness as the economy hit a series of recessions and a rising cost of living as the dollar rapidly lost value.

This phenomenon did not fit with dominant macroeconomic theories at the time, based on the Phillips curve. It led economists to explore alternative ideas to describe and explain what was going on.

At the time, the misery index was novel because mainstream economists had previously believed that inflation and unemployment would offset one another rather than rise at the same time.

Use in Presidential Campaigns

During the 1976 campaign for U.S. president, candidate Jimmy Carter popularized Okun’s misery index as a means of criticizing his opponent, incumbent Gerald Ford. By the end of Ford administration, the misery index was a relatively high 12.7%.

During the 1980 presidential campaign, Ronald Reagan in turn pointed out that the misery index had increased under Carter.

Limitations of the Misery Index

While it is a convenient shorthand for economic misfortune, the misery index should not be considered a precise metric for economic health.

For one thing, both components of the misery index have inherent blind spots. The unemployment rate only counts the unemployed who are actively looking for work. It does not include those who have given up looking for work, as might be the case for long-term stretches of unemployment.

Likewise, low inflation can also be accompanied by unexpected misery. For example, no inflation, or even deflation, can be signs of a stagnant economy, which can be a hardship for many due to the potential for rising unemployment and falling equity and real estate valuations. However, the low rates would produce a very low misery index.

In addition, the misery index treats unemployment and inflation equally. However, a 1% increase in unemployment likely causes more misery than a 1% increase in inflation.


The Okun misery index is considered a convenient but highly imprecise metric, due to the inherent flaws of inflation and unemployment as measurements of economic health.

Criticisms of the Misery Index

The Okun misery index has faced some criticism from economists.

  • It doesn't include some key factors. Some believe it is not a good indicator of economic performance because it doesn't include economic growth data. However, this mistakes the misery index for a measure of general economic performance rather than for a measure of the pain felt by the average citizen.
  • It only considers current data. As a measure of personal economic distress, the misery index may underweight the role of expectations and uncertainty by looking only at current unemployment and inflation rates. Much of the stress and worry that people actually feel may be for their future economic prospects (in addition to current conditions). In particular, the unemployment rate is generally considered to be a lagging indicator that likely understates perceived misery early in a recession and overstates it even after the recession is over.
  • It's used inconsistently. During the Great Moderation, the prevalence of low unemployment and low inflation figures across much of the world meant that the misery index was used only from time to time, during brief recessions and crises. Bad news sells, so periods of simultaneously low inflation and unemployment simply don't generate the same impetus to measure and track economic misery.

There have been several attempts to modernize the misery index by including other metrics.

Newer Versions of the Misery Index

By Robert Barro

The misery index has been modified several times, first by Harvard economist Robert Barro. In 1999, Barro created the Barro misery index, which adds consumer lending interest rates and the gap between actual and potential gross domestic product (GDP) growth to evaluate post-WWII presidents.

By Steve Hanke

In 2011, Johns Hopkins economist Steve Hanke modified Barro's misery index and broadened its application to be a cross-country index. Hanke's annual misery index is the sum of unemployment, inflation, and bank lending rates, minus the change in real GDP per capita.

Hanke publishes his global list of misery index rankings annually for the countries that report relevant data on a timely basis. For 2021, his list included 156 nations, with Libya being identified as the world’s least miserable country and Cuba as the world's most miserable country.

By Tom Lee

The concept of a misery index has also been expanded to asset classes. For example, Tom Lee, co-founder of Fundstrat Advisors, created the Bitcoin Misery Index (BMI) to measure the average bitcoin investor's misery. The index calculates the percentage of winning trades against total trades and adds it to the cryptocurrency's overall volatility. The index is considered "at misery" when its total value is less than 27.

By Bloomberg

A variation of the original misery index is the Bloomberg misery index. Argentina, South Africa, and Venezuela, countries beset by widespread inflation and unemployment, topped the index in 2020.

On the other end, Thailand, Singapore, and Japan were considered the happiest countries according to economist estimates.

But low inflation and low unemployment rates can also mask low demand. Japan is a textbook case of persistently low demand due to an economy that has suffered from stagflation for the last two decades.

It's smart for investors to build an emergency fund in case of an economic downturn or job loss.

Misery Index Under Different Presidents

Although the misery index was first popularized in the 1970s, it is possible to evaluate the economic misfortunes under different presidents by comparing their inflation and unemployment figures.

Unsurprisingly, the most miserable year on record occurred during the Great Depression. The misery index reached 25.7% in the first year of Franklin Roosevelt's presidency (1933). It fell to 3.5% by 1944, likely due to full employment during the Second World War.

Richard Nixon (1969–1974) and Jimmy Carter (1977–1980) have the unenviable distinction of presiding over the most miserable economies of the post-war period. The misery index rose to 20% under Nixon and 22% under Carter. The index fell sharply under Ronald Reagan, and it continued to trend downwards during the George H.W. Bush and Clinton presidencies.

During the presidency of George W. Bush, the misery index again trended upwards. It reached a peak of 12.7% under President Obama due to the ongoing Great Recession. The index fell to a low of 5.06% in 2015 and remained low through most of the Trump presidency (2017–2020). However, the COVID-19 pandemic caused a sharp increase in unemployment, pushing the misery index to 15%.

Average Misery Index by U.S. President
President  Term Average
Joseph Biden 2021-present 10.85
Donald Trump 2017-2020 6.91
Barack Obama 2009-2016 8.83
George W. Bush 2001-2008 8.11
Bill Clinton 1993-2000 7.80
George H. W. Bush 1989-1992 10.68
Ronald Reagan  1981-1988 12.19
Jimmy Carter  1977-1980 16.26
Gerald Ford 1974-1976 16.00
Richard Nixon 1969-1974 10.57

Source: United States Misery Index

What Is a Recent Misery Index?

The Misery Index as of December 2022 is 9.95 (Unemployment rate of 3.5 + Inflation rate of 6.45).

Who Created the Misery Index?

The Misery Index was created by economist Arthur Okun in the 1970s and it was initially called the Economic Discomfort Index.

What's the Most Miserable Country in the World?

According to the Misery Index for 2021, Cuba was the most miserable country in the world with a misery index score of 1,227.6, followed by Venezuela (774.3) and Sudan (397.2).

The Bottom Line

The misery index, created by economist Arthur Okun, is an economic indicator that is calculated by adding the seasonally adjusted rate of unemployment and the annual inflation rate. Broadly speaking, it serves as a measure of the nation's economic health and the economic distress of the average citizen.

While the misery index became a popular measure due to its simplicity, it is widely regarded as an ineffective measure of macroeconomic conditions since it doesn't consider economic growth data.

Article Sources
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