October 12, 2020

U.S. Election Chart of the Week – Misery Index

by Tajinder Dhillon.

The Misery Index is defined as a combination of the unemployment rate plus inflation rate for a country.  Rising prices combined with a large unemployment rate is undesirable but one that the U.S. partially faces today given the impact of COVID-19.  The U.S. Misery Index peaked at 15.0% in April 2020, a level not seen since 1982.

Exhibit 1 provides a global picture of the Misery Index.  The U.S. saw the largest spike in the index out of the countries selected below during COVID-19.  Canada saw the second largest spike during 2020.  Japan has been able to maintain its low unemployment rate as it has the lowest number of total COVID-19 cases out of the selected countries in Exhibit 1.  To date, Japan has 85,586 total cases in comparison to 7,359,089 total cases in the U.S.

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Exhibit 1: Global Misery Index

Global inflation rates remain well below long-term averages.  The U.S. has a current inflation rate of 1.31%, which is below the 70-year long-term average of 3.5%.  U.S. inflation peaked at 14.8% in March 1980.

This means that the Misery Index for the U.S. is currently being driven primarily by high unemployment. The U.S. unemployment rate hit an all-time high of 14.7% in April 2020.  It has since improved to 7.9% in September 2020 given a combination of government stimulus and a gradual re-opening of the economy.

In August 2008, the opposite occurred when the U.S. Misery Index was also at a high level at 11.5%.  During this time, the U.S. unemployment rate was approximately 6.1%, but the inflation rate was 5.4%.  The rise in inflation was primarily due to a spike in oil prices as Brent oil reached a peak of $145.61 a barrel in July 2008.

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