Lisa Simpson
Aug 19,2009
In: Finance

The Real Misery Index Has Been Coined in a New Way

The Real Misery Index seeks to give an overall view of what is happening to millions of Americans as a consequence of the ongoing hardships. The economy is in a tailspin and America is perhaps witnessing what can be called the deepest recession in recent times. Unemployment is at its zenith and there is general feeling of ill-being all around.

HuffPost in its new feature reflects all this in the new coinage of the Real Misery Index. This formula was created by eminent economist Arthur Okun. It is a total of the present unemployment rate and the annual increase of inflation or the consumer price index. The number is often quoted by the media to give an idea of the state of the economy. Is it on the growth track or is it doing badly? The index gives a clear picture.

Some say this statistics is not a useful one. To start with, the unemployment rate does not include those who have part-time jobs. It also does not include people who have given up their job search as well. The consumer price index has also been criticized for not giving importance to essential goods like gas and food.

The traditional Misery Index also does not include many other economic indicators that affect the lives of many Americans. This does not include the number of people who lost their homes to foreclosures or those who do not have health care. It also does not include the people who have gone to bankruptcy or those who have defaulted on their card payments. True, the increase in the price of gas is very important but does it really matter if a person does not have a house to heat or a vehicle to drive?

Hence, after consulting experts and studying economic trends a more realistic Misery Index has been created by HuffPost. It is a total of the more precise unemployment figure and the inflation ratio of three essentials like medical costs, gas and food and beverages. To this is added the percentage increase in the number of credit card defaults, food stamp contribution, home prices and loan deficiencies in home equity.

Equal weightage has been given to unemployment figures and the other seven ratios. Subsequently, the current recession has been compared to the previous periods including 1990-1991 and the 2000-2001 when the economy had collapsed due to the dotcom bust. The original Misery Index had however reached a peak in 1980.

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