How to Calculate the Misery Index
The misery index equals the inflation rate plus the unemployment rate, both written as percentages, with no weighting between them.
The Misery Index formula
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Add the inflation rate to the unemployment rate to get the misery index, then see which half is doing the damage.
Percentage change in a price index such as CPI over the past year.
Unemployed divided by the labor force, times 100.
Inflation of 4.2% plus unemployment of 5.8% gives 10 points, which only means something beside another period or country.
- Bigger source of misery
- Unemployment
- Inflation share of the index
- 42%
The two rates sit 1.6 points apart, and the index hides that split by weighting them equally.
Most economists think a point of unemployment costs households far more than a point of inflation.
How to calculate Misery Index, step by step
- 1Find the inflation rate. The percentage change in a price index such as CPI over the past year.
- 2Find the unemployment rate. Unemployed divided by the labor force, times 100.
- 3Add the two percentages. Misery index = inflation rate + unemployment rate, measured in percentage points rather than as a percent of anything.
- 4Compare it to something. The index only means something beside another period or another country, because there is no natural benchmark value.
Worked example: Misery Index
Inflation is 4.2% and the unemployment rate is 5.8%, so the misery index = 4.2 + 5.8 = 10.0. If inflation later falls to 2.1% while unemployment climbs to 7.4%, the index = 2.1 + 7.4 = 9.5, a slightly lower reading even though more people are out of work.
Misery Index questions
What counts as a high misery index?
There is no official threshold. The reading rises when a recession pushes unemployment up or a supply shock pushes inflation up, so it is judged against a country's own history.
Why do economists criticize the misery index?
It treats one point of inflation as exactly as painful as one point of unemployment, and most economists think joblessness costs households far more.
How does the misery index relate to the Phillips curve?
Movements along a short-run Phillips curve trade inflation for unemployment, so the sum stays fairly flat. The index jumps mainly when the curve itself shifts, as it does after a supply shock.
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