- The “misery index” adds up the rates of unemployment and inflation.
- In the past, it’s been a good indicator of whether a president will be reelected.
- But there are signs the gauge may now be broken, with many people still gloomy about the economy.
The gap between how economists and many people feel about the state of the nation has rarely been so wide.
Number crunchers including Paul Krugman and Mohamed El-Erian have touted lower inflation, better-than-expected growth, and a resilient jobs market as signs that the economy is enjoying a post-pandemic rebound.
But Main Street has taken a decidedly gloomier view, with recession worries persisting and big-name companies ramping up layoffs. Polls suggest that the majority of Americans don't like "Bidenomics," while many workers are unhappy that their pay hasn't kept pace with inflation.
As a result, the widely-followed "misery index" — used as a simple way of judging the state of an economy — might be broken as a tool for assessing presidents.
Cooling inflation, steady unemployment
Arthur Okun, an economist in the Johnson administration, came up with the misery index in the early 1970s as a means of judging the state of an economy at a specific moment.
It's easy to calculate — all you need to do is add up the inflation and seasonally-adjusted unemployment rates.
Over the first two years of Biden's presidency, the gauge climbed to just under 13%. Since then, the Federal Reserve's aggressive interest-rate hikes have helped tame inflation, while the unemployment rate has held steady at under 4% in the face of that tightening campaign.