Numerous pundits have taken to claiming that the Misery Index — a combination of Inflation measures and Unemployment — is still relatively low when compared with the 1970s.
They are full of shit. I have to call shenanigans on that foolishness. The way Inflation and Unemployment are measured today versus 30 years prior makes this an apples & oranges comparison. Merely showing 2008 versus 1973 is nonsense (see the chart of the misery index, below via the WSJ).
Why? If we were measuring Inflation & Unemployment the way we did in the 1970s, we would see unemployment much closer to U6 Unemployment levels of 9.7% (versus the popularized headline inflation level, U3 now at 5.5%); the inflation measures would see an greater differential — CPI might be closer to 10+.
That would put the Misery Index somewhere between 17 and 21 — pretty close to the 1970s highs.
(If any of you chart wizards can figure out how to create a more accurate Misery Index, please tag me. I figure we can use U6 for Unemployment, but I am not sure where to get more accurate data history for CPI)
Chart courtesy of WSJ
Compare the above chart above with the two below:
courtesy of Harpers
Recession Fears Reignited
KELLY EVANS and KRIS MAHER
WSJ, June 7, 2008; Page A1