What Is the Misery Index?
There are few institutions examined more scientifically or mathematically than the U.S. economy. After all, in-depth understanding of economic conditions mean billions of dollars to the right people and policy makers. Unfortunately, a nation’s economy is a complex machine composed of an almost infinite number of moving parts. Economists seek to study and understand the economy in many ways, often by simplifying things with numbers and formulas. One of my favorite names for an economic statistic is the Misery Index. How to Calculate Misery Index The original Misery Index was surprisingly simple. You calculate the Misery Index by adding the unemployment rate to the inflation rate. The idea is that both unemployment and inflation are negative factors acting against a positive economy. By combining them, you could get some idea of how much of a headwind the economy is facing. Under this methodology, things would be worst during a time where unemployment was high and inflation was also high. Also, check out this review of Credit Karma Ironically, the Misery Index can peak right before a strong recovery. Consider a situation where there has been a recession or depression. Unemployment rises as companies lay off workers to reduce costs and …