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If you judge the US economy according to the 1970s-created Misery Index, times are pretty good. Inflation is low (thanks in part to low gas prices), unemployment is down (the Not-So-Great Recovery continues), therefore the Misery Index suggests an economy brimming with joy and contentment. And some other measures confirm that take. As the WSJ’s Josh Zumbrun notes in his piece on the index: “Economists may have caveats about the Misery Index; but consumers have fewer hang-ups. The Conference Board’s measure of Consumer Confidence and the University of Michigan’s Consumer Sentiment index in January reached the highest since 2007 and 2004, respectively.”
A few points here:
First, among those caveats that Zumbrun mentions is that the official jobless rate may be giving a misleading picture of labor market health. While the 5.7% U-3 rate is just 1.3 percentage points above its pre-recession low, the broader U-6 unemployment-underemployment rate is 3.4 points above its pre-recession nadir. What’s more, the employment rate — the share of non-jailed, non-military adults with any job — is still way closer to its recession low than its pre-recession high. And while job creation is up, wage growth has been pretty stagnant.
Second, cheaper gasoline has brought down the inflation rate. Great. But prices weren’t rising very fast even before the oil price plunge, and that was probably a holdover of the Great Recession’s adverse shock to demand. Low inflation isn’t always a good thing.
Third, while consumer confidence numbers are up, the higher savings rate may suggest a lack of confidence in the recovery. More from the WSJ: “Americans are taking the money they are saving at the gas pump and socking it away, a sign of consumers’ persistent caution even when presented with an unexpected windfall.” That attitude seems more in line with this gloomy chart:
Fourth, so what might a new-and-improved Misery Index be and show? Well, how about combining the 11.3% U-6 rate with about a 3% college tuition inflation rate, of great concern to many American families. That would give us a 14.3% New Misery Index, comparable to what we saw in the 1970s. Yes, I know it’s not perfectly comparable, but that may give a better rough sense of modern American economic well being than that of the old Misery IndexPublished in