Americans haven’t felt this bad in almost three decades.
The CHART OF THE DAY shows the correlation between the U.S. Misery Index, or the sum of the unemployment and inflation rates, and measures of consumer confidence.
The Misery Index stands at 12.8, the highest in 28 years. Consumer sentiment slumped in July to the lowest level in more than two years, a report from Thomson Reuters/University of Michigan showed last week. The Bloomberg Consumer Comfort Index is lower than it was at the start of the year.
“Misery does seem to have a pretty close relationship with measures of consumer confidence, and confidence has a fairly good relationship with actual consumption growth,” said Paul Dales, senior U.S. economist at Capital Economics Ltd. in Toronto. It shows “how bad things are as it’s something everyone can relate to quite easily,” he said.
The Misery Index is the highest since May 1983 when unemployment was 10.1 percent, inflation was 3.5 percent and the economy was recovering from the 1981-82 recession.
Joblessness climbed to 9.2 percent in June, the third straight increase, and consumer prices were up 3.6 percent last month from a year ago, according to Labor Department figures.
The Misery Index was conceived by Arthur Okun, an economist at Yale University and the Brookings Institution who served as an adviser to Presidents John F. Kennedy and Lyndon Johnson.