While the somewhat dramatically named Misery Index has long been favoured by both the media and political campaigners, its value as a measure of economic reality remains to be questioned.
This note aims to delve beneath the sensational exterior of the Misery Index with an overview of the index, an exploration of what it actually tells us about the state of the economy and a discussion of where we may see it move in the future.
What is the Misery Index?
In its simplest form, the Misery Index is the sum of inflation and unemployment rates. When the score on the index is high it means that the economy is experiencing both high inflation and high unemployment at the same time. Prices are rising, causing the real value of income and savings to be eroded, while at the same time people are jobless (and those with jobs possibly fearful that they may become jobless in the future) and are suffering from downward pressure on their wages. It is therefore unsurprising that the level of the Misery Index is often viewed as an expression of the financial well-being of a population.