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Misery Index Hits 17-Year High

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"Misery Index Hits 17-Year High"

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Our guest blogger is James Kvaal, a Senior Fellow at the Center for American Progress Action Fund.

After eight years of economic mistakes, unemployment and inflation are both rising and American families are hurting. By one measure – the “Misery Index” made famous by Jimmy Carter – the economy is in its worst shape since mid-1991.

The Misery Index is simply the combination of the unemployment rate and the inflation rate. It reached 11.3 percent in July. While still well below its heights in the 1970s and early 1980s, the Misery Index is now at its highest level since the first George Bush was president according to data from www.miseryindex.us.

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The Misery Index was designed by Carter advisor Arthur Okun, who noted that inflation and unemployment figures often point in opposite directions and therefore neither gives a broad picture of the economy. The index climbs during periods of stagflation, which combine stagnant economic growth, high unemployment, and high inflation.

Stagflation puts Fed policymakers in a box. Cutting interest rates to spark the economy could make inflation even worse, while raising rates to fight inflation could worsen the downturn. Meanwhile, families are feeling the bite of hard times.

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