Misery Index By Year and By President

Why the Misery Index Is Not Always an Accurate Gauge of Economic Health

couple reviewing bills
Either high unemployment or inflation will make you miserable. Photo by Portra/Getty Images

The misery index is the combination of the unemployment rate and inflation. The unemployment rate measures the misery of people being laid off and having difficulty finding jobs. High unemployment prevents people from making a living wage. The seasonally adjusted unemployment rate is used to eliminate variations that occur because of the time of year.

Inflation is the rising price of goods and services over time.

 Inflation impacts your life by reducing your purchasing power. It's a measurement of misery because it increases the cost of living. Over time, it reduces your standard of living. That's why President Reagan said, "Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man." 

According to the phases of the business cycle, unemployment signals a contraction. Inflation signals that the expansion phase is creating bubble. The misery index should reveal when the economy is either running too slow or too fast.

The Misery Index in a Healthy Economy

A healthy economy will produce a misery index of between 6-7 percent. The ideal rate of growth is 2-3 percent. To achieve that, employers need to find good workers. They need to see a natural rate of unemployment from 4-5 percent. When the rate is lower than that, companies can't find enough good workers to maximize production.

As a result, growth will slow.

A healthy economy also requires some inflation. The Federal Reserve aims for a target inflation rate of 2 percent year-over-year. The Fed uses the core inflation rate that removes energy and food prices. Those prices are too volatile, thanks to daily trading by commodities brokers.

A misery index between 6-7 percent signals the Goldilocks economy, with healthy levels of inflation and unemployment.

Misery Index History by Year

Economist Arthur Okun created the misery index in the 1970s. He wanted to describe the combined effect of high unemployment and inflation prevalent at that time. Okun also created Okun's Law. It says that for every percentage point that unemployment falls, real gross national product rises by 3 percent. It described the economy between World War II and 1960.

The misery index exceeded 20 percent during the Great Depression because the unemployment rate was so high. In 1944, the misery index exceeded 20 percent because inflation was so high. It almost reached 20 percent in 1979 and 1980 as a result of stagflation.

Since 1981, the index has not exceeded 15 percent. That's because the Fed has become so good at controlling inflation. Elected officials implement expansive fiscal policy to keep unemployment under control. Unfortunately, they've created massive budget deficits to do so. The largest deficits by president have been since 1980. 

YearMisery IndexUnemploymentInflation 
19293.8%3.2%0.6%
19302.3%8.7%-6.4%
19316.6%15.9%-9.3%
193213.3%23.6%-10.3%
193325.7%24.9%0.8%
193423.2%21.7%1.5%
193523.1%20.1%3.0%
193618.3%16.9%1.4%
193717.2%14.3%2.9%
193816.2%19.0%-2.8%
193917.2%17.2%0.0%
194015.3%14.6%0.7%
194119.8%9.9%9.9%
194213.7%4.7%9.0%
19434.9%1.9%3.0%
19443.5%1.2%2.3%
19454.1%1.9%2.2%
194622.0%3.9%18.1%
194712.7%3.9%8.8%
19487.0%4.0%3.0%
19494.5%6.6%-2.1%
195010.2%4.3%5.9%
19519.1%3.1%6.0%
19523.5%2.7%0.8%
19535.2%4.5%0.7%
19544.3%5.0%-0.7%
19554.6%4.2%0.4%
19567.2%4.2%3.0%
19578.1%5.2%2.9%
19588.0%6.2%1.8%
19597.0%5.3%1.7%
19608.0%6.6%1.4%
19616.7%6.0%0.7%
19626.8%5.5%1.3%
19637.1%5.5%1.6%
19646.0%5.0%1.0%
19655.9%4.0%1.9%
19667.3%3.8%3.5%
19676.8%3.8%3.0%
19688.1%3.4%4.7%
19699.7%3.5%6.2%
197011.7%6.1%5.6%
19719.3%6.0%3.3%
19728.6%5.2%3.4%
197313.6%4.9%8.7%
197419.5%7.2%12.3%
197515.1%8.2%6.9%
197612.7%7.8%4.9%
197713.1%6.4%6.7%
197815.0%6.0%9.0%
197919.3%6.0%13.3%
198019.7%7.2%12.5%
198117.4%8.5%8.9%
198214.6%10.8%3.8%
198312.1%8.3%3.8%
198411.2%7.3%3.9%
198510.8%7.0%3.8%
19867.7%6.6%1.1%
198710.1%5.7%4.4%
19889.7%5.3%4.4%
198910.0%5.4%4.6%
199012.4%6.3%6.1%
199110.4%7.3%3.1%
199210.3%7.4%2.9%
19939.2%6.5%2.7%
19948.2%5.5%2.7%
19958.1%5.6%2.5%
19968.7%5.4%3.3%
19976.4%4.7%1.7%
19986.0%4.4%1.6%
19996.7%4.0%2.7%
20007.3%3.9%3.4%
20017.3%5.7%1.6%
20028.4%6.0%2.4%
20037.6%5.7%1.9%
20048.7%5.4%3.3%
20058.3%4.9%3.4%
20066.9%4.4%2.5%
20079.1%5.0%4.1%
20087.4%7.3%0.1%
200912.6%9.9%2.7%
201010.8%9.3%1.5%
201111.5%8.5%3.0%
20129.6%7.9%1.7%
20138.2%6.7%1.5%
20146.4%5.6%0.8%
20155.7% 5.0%0.7%
20166.8%4.7%2.1%
20176.2%4.1%2.1%

Note: All statistics are as of December in that year. The inflation rate is the year-over-year Consumer Price Index for December. Data is from Inflation Rate History and Unemployment Rate by Year.

Misery Index by President

President Hoover had the worst performance according to the misery index. President Roosevelt had the best performance. Both struggled with the Great Depression. Democratic presidents do better at reducing unemployment, while Republican presidents focus more on whipping inflation.

Herbert Hoover (1929-1933) The misery index rose from 3.8 percent to 13.35 due to the 1929 market crash, the implementation of the Smoot-Hawley tariffs, and the Dust Bowl droughts. Hoover didn't help things by raising taxes. 

Franklin D. Roosevelt (1933-1945) The misery index fell from 25.7 percent to 3.5 percent.

 FDR's New Deal, the end of the Dust Bowl, and the start of World War II ended the depression. In 1944, the Bretton Woods agreement was signed. It replaced the gold standard with the U.S. dollar. influence on inflation

Harry Truman (1945-1953). The misery index began at 4.1 percent, rose to 22 percent after the end of World War II brought in a recession. Truman knocked it down to 4.5 percent with the Employment Act and the Fair Deal. By sending aid to Europe, the Marshall Plan created demand for U.S. goods. In 1950, the Korean War create inflation, raising the misery index to 10.2 percent. By the end of Truman's term, the misery index had fallen to 3.5 percent.

Dwight Eisenhower (1953-1962). A recession following the end of the Korean War sent the misery index to 5.2 percent during Eisenhower's first year. It rose to 8.1 percent when another recession hit. That high level of misery helped John F. Kennedy win over the incumbent party's vice-president, Richard Nixon.

John F. Kennedy (1961-1963). Kennedy ended the recession, but unemployment remained high by the time he was assassinated in 1963. The misery index remained around 8.0 percent.

Lyndon B. Johnson (1963-1969). Johnson reduced the index to 5.9 percent in 1965 with spending on the Great Society and the Vietnam War. But it rose to 8.1 percent by the end of his final full year in office.

Richard Nixon (1969-1974). The index rose to 11.7 percent by the end of 1970. Nixon created the Emergency Employment Act and wage-price controls to reduce unemployment and inflation. Instead, it created stagflation by slowing growth. Inflation rose as the Federal Reserve alternately raised interest rates to control inflation, then lowered them to spur growth. That confused businesses, who kept price high. By 1973, the misery index had risen to 13.6 percent. Nixon ended the gold standard, which made inflation even worse as the dollar's value plummeted. He ended the Vietnam War, but resigned because of the Watergate investigation. 

Gerald Ford (1974-1977). The index rose to 19.5 percent during Ford's first year thanks to worsening stagflation. The index fell in to 12.7 percent in 1976 once the recession ended.

Jimmy Carter (1977-1981). The index rose to 19.7 percent in 1980. The Fed raised interest rates to end inflation once and for all. It created a recession.

Ronald Reagan (1981-1988). In 1982, Reagan signed the Jobs Act and the Garn-St.Germain Act to reduce regulations on savings and loans. He increased military spending. In 1986, he cut taxes. The expansion reduced the misery index to 7.7 percent. In 1987, Black Monday increased the index to 10.1 percent.

George H.W. Bush (1988-1993). The S&L Crisis sent the misery index to 12.4 percent in 1990. Bush launched Desert Storm, bringing the index down to 10.3 percent.

Bill Clinton (1993-2001). NAFTA boosted growth, Clinton also signed the Balanced Budget Act, the School to Work Act, and welfare reform. All of these actions boosted economic growth, sending the misery index down to 6.0 percent by 1998. Inflation began rising, increasing the index to 7.3 percent by the end of Clinton's last full year in office.

George W. Bush (2001-2009). The year before Bush took office, the NASDAQ hit record highs. When the bubble burst, Bush inherited a recession. He responded with the Bush tax cuts. He responded to the 9/11 attacks with the War on Terror. The attacks worsened the recession, which he addressed with the 2003 JGTRRA tax cuts and the 2005 Bankruptcy Act. But Hurricane Katrina slowed growth. In 2008, the financial crisis hit. But the index remained at 7.6 percent by the end of Bush's last full year in office because unemployment had not started escalating yet. 

Barack Obama (2009-2017). The misery index shot up to 12.6 percent at the end of 2009, despite ARRA and the extension of unemployment benefits. The economy slowly healed, so that by 2015 the index had fallen to 5.7 percent. Despite the strong numbers, voters threw out the incumbent party in the 2016 presidential race.

The Misery Index Is Not Always an Accurate Measure of Economic Health

The misery index is not a good indicator of economic health since unemployment is a lagging indicator. Unemployment will push the index higher even after the recession is over. 

During the first three years of the Depression, the index was between 3.8-6.6 percent. The economy had contracted by 8.5 percent and 6.4 percent. But the index didn't reflect that even though unemployment was 15.8 percent by 1931. That's because it was offset by deflation. Prices fell as world trade collapsed.

Similarly, the index remained above 10 percent until 1942, the years after the Depression ended. Unemployment remained high while prices began rising in response to war-time rationing. But the economy was booming, growing at double-digit rates.

The history of recessions reveals that the misery index remained high after several recession ended. They include the recessions of 1945, 1949, 1957, 1990-1991, 2001 and the 2008 financial crisis. The index remained in the double digits through most of the recessions of 1970, 1973-1975, and 1980-1981. It was driven by a type of inflation called galloping inflation

YearMisery IndexGDP GrowthRecession
19293.8%NADepression
19302.3%-8.5% 
19316.6%-6.4% 
193213.3%-12.9% 
193325.7%-1.3% 
193423.2%10.8% 
193523.1%8.9% 
193618.3%12.9% 
193717.2%5.1% 
193816.2%-3.3% 
193917.2%8.0%Depression
194015.3%8.8% 
194119.8%17.7% 
194213.7%18.9% 
19434.9%17.0% 
19443.5%8.0% 
19454.1%-1.0%Recession
194622.0%-11.6% 
194712.7%-1.1% 
19487.0%4.1% 
19494.5%-0.5%Recession
195010.2%8.7% 
19519.1%8.1% 
19523.5%4.1% 
19535.2%4.7%Recession
19544.3%-0.6% 
19554.6%7.1% 
19567.2%2.1% 
19578.1%2.1%Recession
19588.0%-0.7% 
19597.0%6.9% 
19608.0%2.6%Recession
19616.7%2.6% 
19626.8%6.1% 
19637.1%4.4% 
19646.0%5.8% 
19655.9%6.5% 
19667.3%6.6% 
19676.8%2.7% 
19688.1%4.9% 
19699.7%3.1% 
197011.7%0.2%Recession
19719.3%3.3% 
19728.6%5.2% 
197313.6%5.6%Recession
197419.5%-0.5%Recession
197515.1%-0.2%Recession
197612.7%5.4% 
197713.1%4.6% 
197815.0%5.6% 
197919.3%3.2% 
198019.7%-0.2%Recession
198117.4%2.6%Recession
198214.6%-1.9%Recession
198312.1%4.6% 
198411.2%7.3% 
198510.8%4.2% 
19867.7%3.5% 
198710.1%3.5% 
19889.7%4.2% 
198910.0%3.7% 
199012.4%1.9%Recession
199110.4%-0.1%Recession
199210.3%3.6% 
19939.2%2.7% 
19948.2%4.0% 
19958.1%2.7% 
19968.7%3.8% 
19976.4%4.5% 
19986.0%4.5% 
19996.7%4.7% 
20007.3%4.1% 
20017.3%1.0%Recession
20028.4%1.8% 
20037.6%2.8% 
20048.7%3.8% 
20058.3%3.3% 
20066.9%2.7% 
20079.1%1.8% 
20087.4%-0.3%Recession
200912.6%-2.8%Recession
201010.8%2.5% 
201111.5%1.6% 
20129.6%2.2% 
20138.2%1.7% 
20146.4%2.6% 
20155.7%2.9% 
20166.8%1.5% 
20176.2%n.a.