Definition
The misery index is a quick measure of the economic discomfort felt by ordinary households. It is calculated by simply adding the unemployment rate to the inflation rate. A higher number signals harder times; a lower number signals a more comfortable economy.
The index rests on a basic intuition: the two everyday economic threats most people face are losing a job and watching prices outrun wages. By summing the two, the index captures both in a single, easy-to-communicate figure.
Why it matters
How it works
In a healthy expansion, both components stay low and the index is small. During a recession, unemployment climbs and the index rises. During stagflation, inflation and unemployment rise together and the index spikes sharply, which is what made the measure popular in the 1970s.
The index is deliberately crude. It weights both rates equally and ignores who bears the burden or how income is distributed. Economists treat it as a communication shortcut rather than a precise welfare measure.