The simple sum of the unemployment rate and the (y/y) inflation rate:

Figure 1: “Misery index” as sum of inflation and unemployment rate, in % (blue, left scale), and University of Michigan Consumer Sentiment index (brown, right scale). NBER defined recession dates shaded gray. Source: BLS via FRED, Cleveland Fed, U.Mich., NBER, and author’s calculations.

There’s no particular reason to give equal weight to inflation and unemployment; rather Arthur Okun suggested this particular composite (which he called a “discomfort index”) as a way of conveying an idea in a simple way (see Cohen, et al. 2014 for history). Jimmy Carter subsequently cited this measure as an index of “economic misery”.

How is this related to measures of how people actually describe their discomfort? One popular measure of economic satisfaction is the University of Michigan Index of Consumer Sentiment (shown as the brown line in Figure 1). This index is

Keep reading this article on Econbrowser Blog - James Hamilton & Menzie Chinn.

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