Misery Index; Ranking– Country’s Gloom, Doom… Well-Being: Most Miserable Places for Business– Les Miserables…

Misery Index is a measure of economic ‘gloom, doom… well-being’ in a country’s economy. It’s computed by adding the sum of ‘unemployment rate’ and ‘inflation rate’ in a country for a given period. An increasing misery index means a worsening economic climate and decreasing index means an improving economic climate for the economy…

According to James E. McWhinney; when an economy takes a downturn, economic prognosticators turn to the numbers, comparing the downturn to past recessions. The decline of major stock market indexes, such as; Dow Jones Industrial Average (DJIA), Standard and Poor’s 500, Nasdaq… are closely tracked. Also, major economic indicators, such as; the unemployment rate, gross domestic product (GDP)… are monitored and opined upon.

While these indicators certainly provide insight the ‘misery index’ reflects the country’s economic health through the lens of two items that matter most to those of us on Main Street: inflation and employment… Government statistics provide both numbers; with the yearly change in the Consumer Price Index (CPI) serving as half of the equation and the national unemployment rate is the other half…

The main assumption in the misery index is that an increasing unemployment rate and high inflation will have a negative impact on economic growth… However, national statistics are somewhat misleading; while they can provide an average for the country, but they don’t reflect reality at the more granular level; worsening or improving economics conditions at– states, cities… levels. 

The misery index formulation is represented as: Misery Index = Unemployment Rate + Inflation Rate.

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In an ideal economic environment (i.e., low unemployment rate coupled with low rate of inflation); the misery index would be valued at around 7-8… However, some analysts criticize the misery index as an inaccurate portrayal of the economy. This has led to creation of alternate indexes, including the ‘Real Misery Index’, ‘Ultimate Misery Index’, ‘Household Misery Index’…

And still other criticisms suggest that unemployment more heavily influences unhappiness than does the inflation rate. The misery index is far from perfect and surely not a 100% accurate indicator of consumer sentiment, for example;  what would happen if inflation was negative and unemployment was 10%? That’s the definition of ‘stagflation’, an economic catastrophe, but the misery index would be looking just fine…

Or, how about the many people (yes people) on food stamps, those buried by medical bills or other hardship… But the reality is that for those lucky enough to have a steady job, good health, money to invest… well, things aren’t all that bad…

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In the article Misery Index by Tim McMahonon writes: The misery index is an economic indicator designed to help determine how the average citizen is doing economically. It’s a quick and dirty way to gauge how the average person is doing, since high unemployment and high inflation are major factors that affect the average wage earner: As inflation rises the cost of living increases and as unemployment rises more people cross the economic line into poverty…

The misery index as of December 2013 (based on government data) is at 8.24 down from a peak of 12.87 in both October and November 2011 which was pretty miserable… Since inflation is at historically low levels the major component of the misery index is just unemployment…

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In the article U.S. Misery Index Falls To Four-Year Low by John Whitefoot writes: If you think you can judge a book by its cover, then you must believe the U.S. economy is doing really, really well. After all, consumer confidence is up and misery is down. However, looking past the cover, the pages of the underlying economic indicators suggest average person should be a little concerned… But first the good news: U.S. Misery Index is at four-year low… Also according to the ‘Thomas Reuters/University of Michigan Preliminary December Consumer Confidence Index’; consumer confidence rose to 82.5—the strongest reading since July… Why the increased optimism?

Stronger-than-expected consumer confidence readings are good news for business… However, a robust consumer confidence reading might be a little premature… While unemployment numbers came in better than expected, the unemployment rate is still at seven percent, job openings are scarce, and wages are stagnant… and, despite improving consumer confidence, 25% of Americans expect to miss a credit card payment in the near future, and even more say they need to cut back on credit card spending. That might be tough with 19% saying they’re being forced to use credit cards more often as a result of the bad economy… 

Then, why is there increased consumer confidence? If it’s not because of Main Street, it must be due to Wall Street; after all, the S&P 500 is up 26% in 2013 and the Dow Jones Industrial Average is up more than 21%. If you take a look at the stock market, everything looks amazing! Unfortunately, corporate profits aren’t really benefiting too many people… Since the start of the 21st century, it’s fair to say there has been an increasing discrepancy between labor income and corporate profits…

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In the article How Miserable Are You? by Michael Sivy writes: Some people are lot more miserable than others… Like wind chill factor, misery index takes unpleasant conditions and tries to gauge just how bad they make people feel. But the two factors that go into the misery index– unemployment and inflation– affect various groups of people within the population quite differently…

The misery index isn’t a scientific measurement; it’s a short-hand way of describing the human impact from economic problems. Just as the wind chill factor combines temperature and wind speed to gauge how cold a person feels standing outside; misery index combines unemployment and inflation to get an idea of how a people, family… might feel when the economy is lousy.

The trouble with such benchmarks is that they assume everyone is in the same boat. When in reality, though, people may all be sailing the same waters, but their boats are not equally seaworthy. Each of the different strata in the population really should have its own misery index… For starters, consider the fact that unemployment levels vary enormously by race, sex, age…

Men are suffering more than women, blacks more than whites, and the young more than the old. Male black teenagers – who lose on all three counts – have unemployment rate above 40%, compared with 7.1% for the most favored group, adult white women… Education counts for a lot, too. For people with graduate degrees, unemployment is 4% or less, lower if the degree is in a subject that’s actually useful. For those with no more than a high-school degree, it’s 10% to 14%…

Trying to determine the impact of inflation on people at different income levels is a lot harder, and you might think workers with inflation-adjusted wages and benefits would be better shielded, than people with a lot of savings that would be devalued by inflation… However, as it turns out– the affluent can find ways to protect financial assets, and also more likely to have job skills that enable them to survive better in tough times.

Bottom-line: Although the national misery index is 8.24 now, your personal misery index could be much different– anywhere from 5 to 50…

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Most Miserable Countries Index: According to Filippo Gaddo; the misery index in the ‘Organization for Economic Co-operation and Development’ (OECD) countries has significantly deteriorated… and European countries are primary culprit for the increase: Out of 34 OECD countries, 14 experienced an increase larger than 1 point, and 12 of them were European countries (i.e., Austria, Belgium, Czech Republic, Finland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Slovenia, and Spain) plus Israel and Chile. The worst performers were Slovenia, Finland, Norway, Spain and Austria…

The key factors behind the European bad numbers are the fall in GDP growth in most EU countries and the continued rise in the public debt figure… However, the top performers (i.e., lowest index) over past months are; Mexico, Poland, Hungary, UK, Turkey. But overall; Greece, Spain, Portugal are the countries with highest misery index level in Europe.

According to the Business Insider; the misery index for 197 countries and territories– from Afghanistan to Zimbabwe– based on CIA World Factbook shows countries with highest misery index are: Zimbabwe:  misery index: 103.3, CPI inflation: 8.3%, unemployment: 95%;  Liberia: misery index: 90.5, CPI inflation: 5.5%, unemployment: 85%; Burkina Faso: misery index: 81.5, CPI inflation: 4.5%, unemployment: 77%; Belarus: misery index: 71, CPI inflation: 70%, unemployment: 1%; Turkmenistan: misery index: 70.5, CPI inflation: 10.5%, unemployment: 60%; complete list of the misery index for the 197 countries can be found in the CIA World Factbook…

The Federal Reserve (Fed) unlike other central banks has a double mandate; create low inflation coupled with low unemployment… According to Ted Jenkin; Fed is supposed be independent from the political process, but clearly in today’s day and age that my not be possible… The misery index is a very simple concept; but in the new era of low inflation the index has really become mostly trivial: Inflation is low most everywhere and so it’s unemployment that is the main determinant. Thus, there are suggestions that the misery index should be changed; broadened to incorporate a wider set of factors…

The misery index assumes that inflation and unemployment are direct substitutes, so regardless of the level of each a 1% reduction in one can be offset by a 1% increase in the other… Further, in an era of low inflation the possibility of deflation becomes a more significant possibility, which is not necessarily a good thing… According to Guy Fawkes; unemployment overall is slight down, inflation is down, national growth is slight up; and, so I guess we are less miserable than we’ve been...