The Misery Index consists of adding the unemployment rate to the rate of inflation, or the percentage of those out of work plus the percetage by which prices are rising.
Historically, the misery index has been
- Truman Administration (1948 - 1952) Average 7.88 (High 13.63, Low 3.45)
- Eisenhower Administration (1953 - 1960) Average 6.26 (High 10.98, Low 2.97)
- Kennedy Administration (1961 - 1962) Average 7.14 (High 8.38, Low 6.40)
- Johnson Administration (1963 -1968) Average 6.77 (High 8.19, Low 5.70)
- Nixon Administration (1969 - 1973) Average 10.57 (High 13.61, Low 7.80)
- Ford Administration (1974 - 1976) Average 14.93 (High 19.90, Low 12.66)
- Carter Administration (1977 - 1980) Average 20.27 (High 21.98, Low 12.60)
- Reagan Administration (1981 - 1988) Average 11.19 (High 19.33, Low 7.70)
- Bush I Administration (1989 - 1992) Average 9.68 (High 12.47, Low 9.64)
- Clinton Administration (1993 - 2000) Average 8.80 (High 10.56, Low 5.74)
- Bush II Administration (2001 - 2008) Average 8.10 (High 11.47, Low 5.71)
The time weighted average Misery Index since 1948 is 9.64. The current Misery Index is 9.8: Unemployment is 9.5, and Inflation is .3. To put this into perspective, we are now 1.6% higher than the average since 1948.
Unemployment RateSome economic theorists have used the unemployment rate to justify their opinion that
- The stimulus package isn't working
- There should be another stimulus package, i.e., the stimulus package wasn't sufficient
Let's take a look at that hypothesis.
Of the $787 billion dollar stimulus package, approximately $75 billion, or about 10%, has been paid out. The Obama administration estimates that the stimulus package will have helped create (or save) 500,000 jobs in the two hundred day period from signing the bill February 17 to early August. 10% of the stimulus package will therefore have improved the number jobs lost by 20%. In other words, without the stimulus package, the jobs lost in the two hundred days since the stimulus package was in effect would have been 2.5 million instead of 2 million.
The Obama administration believes the government will ultimately meet its spending targets, increasing spending toward the end of the year as states fund their projects. Ultimately, the measurement of success is whether the economy improves, and, as shown below, it may be too early to make that judgment.
To use consistent time measurements, since 1948 there have been eleven recessions. Let's look at each, and the accompanying rate of unemployment.
Nov. 1948 - October, 1949 (11 months) - Average unemployment rate 10.69%
July 1953 - May, 1954 (10 months) - Average unemployment rate 4.43%
Aug., 1957 - April, 1958 (8 months) - Average unemployment rate 5.69%
April, 1960 - Feb., 1961 (10 months) - Average unemployment rate 5.94%
Dec. 1969 - Nov.,1970 (11 months) - Average unemployment rate 4.88%
Nov. 1973 - Mar. 1975 (16 months) - Average unemployment rate 6.09%
Jan. 1980 - July 1980 (6 months) - Average unemployment rate 7.07%
Jul.,1981 - Nov. 1982 (16 months) - Average unemployment rate 9.09%
Jul, 1990 - Mar. 1991 (8 months) - Average unemployment rate 6.225%
Mar. 2001 - Nov. 2001 (8 months) - Average unemployment rate 4.813%
Dec. 2007 - Jun. 2009 (18 months) Average unemployment rate 6.76%
(Note: Data are not available for July. Most economists opine that the the third quarter 2009 will be flat, and fourth quarter will show a slight increase in GDP)
For comparison purposes, the two most severe recessions in the period under review were Nov. 1973 - Mar. 1975 and the current one. The last five months of those recessions averaged an unemployment rate of 7.72 and 8.88, respectively. The last five months of this recession was 15% worse than the 1973 - 1975 recession.
Further, the average unemployment rate in the last five months of the recession ended Nov, 1982 was 10.18%, and it averaged 9.8% for the year after that recession was over.
Our current numbers are well within historical precedents, and to assert that the stimulus program is ineffective at this point is not supported by data, obtained from the U.S. Bureau of Labor Statistics.
In our next discussion, we'll talk about the deficit to see whether the alarm expressed by some over its size is warranted.