Misery Index
The misery index adds a country's inflation rate and unemployment rate into one number. Created by economist Arthur Okun, it gives a rough gauge of economic hardship: the higher the index, the worse ordinary people tend to feel.
Inflation erodes what people can buy; unemployment takes away income altogether. The misery index combines both into one simple score. It is crude, but it captures something real about how an economy feels, and it often features in political debates. This entry explains how it is calculated, how to read it and its limits.
- Category
- Fundamentals and Macroeconomics
- Reading time
- 3 min
- Also called
- Okun misery index, Economic discomfort index
- Updated
The misery index in plain words
The misery index is a single figure that combines a country's unemployment and inflation.1
Arthur Okun created it in the early 1970s as a "discomfort index", using the simple sum of inflation and unemployment.1
Its two inputs are the same ones in the Phillips curve, which describes a short-run trade-off between them.2
How to calculate it, step by step
Take the inflation rate
Usually annual CPI change. See Consumer Price Index.
Take the unemployment rate
The headline rate. See Nonfarm Payrolls.
Add them
Misery index = inflation + unemployment.
Compare over time
Rising means worsening conditions.
Compare countries
Rough cross-country comparisons.
Check the mix
Which component drives it matters.
Worked examples
Example 1 — A calm year
Low miseryInflation 2%, unemployment 4%.
| Misery index | 2 + 4 = 6 |
The index is the simple sum of the inflation and unemployment rates.1
Example 2 — Stagflation
Very high miseryInflation 11%, unemployment 8%.
| Misery index | 11 + 8 = 19 |
High inflation and high unemployment together send the index soaring. See Stagflation.
Example 3 — Same score, different pain
Same numberCountry A: inflation 7%, unemployment 3%. Country B: inflation 2%, unemployment 8%.
| Both | Misery index 10 |
| Difference | Price pain vs job pain |
Critics note the index may not fully capture the discontent that unemployment causes.1
Misery index vs GDP growth
| Aspect | Misery index | GDP growth |
|---|---|---|
| Measures | Household hardship | Output growth |
| Inputs | Inflation + unemployment | Value of production |
| Higher is | Worse | Better |
| See also | Phillips curve | Gross Domestic Product |
How the misery index is used
Political debate
Judging economic conditions under governments.
Macro context
A quick read of hardship. See Macroeconomics.
Comparing eras
1970s vs today.
Sentiment
Hardship often hurts consumer spending. See Market Sentiment.
Advantages and disadvantages
Advantages
- Very simple to calculate.
- Easy to explain.
- Captures two key pressures on households.
Disadvantages
- Weights inflation and unemployment equally.
- Ignores growth, wages and inequality.
- Unemployment is a lagging indicator.
Going deeper
Read as far as you need. Each level builds on the one before it.
A presidential tool
Beginner
Okun used it to give President Lyndon B. Johnson a quick reading of the nation's economic welfare.1
Lagging input
Intermediate
Because unemployment lags, the index understates hardship early in a recession and overstates it long after.1
Refined versions
Advanced
Some economists add interest rates or subtract GDP growth to build broader hardship measures. See Gross Domestic Product.
Common mistakes
Treating it as precise
It is a rough gauge.
Ignoring composition
Inflation and job losses hurt differently.
Using different inflation measures
Be consistent.
Trading on it
It is context, not a signal.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Misery index = inflation + unemployment.
- Created by Arthur Okun in the early 1970s.
- Higher numbers mean more economic hardship.
- It is simple but crude.
- Unemployment lags, distorting timing.
Frequently asked questions
What is a high misery index?
Is it an official statistic?
Does it predict markets?
Further learning
- Phillips Curve
How the two inputs interact.
- Stagflation
When both are high.
- Consumer Price Index
The usual inflation input.
- Recession
When unemployment rises.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Corporate Finance Institute. Misery Index (opens in a new tab) Checked .
- Corporate Finance Institute. Phillips Curve (opens in a new tab) Checked .
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