Accelerating inflation and historically high unemployment are magnifying the economic effects of income inequality, according to Sean Darby, a global equity strategist at Jefferies & Co.
The CHART OF THE DAY shows the U.S. misery index, which increased in September to its highest level since May 1983. The indicator is calculated by adding the 12-month percentage change in the consumer price index to the jobless rate, as compiled by the Labor Department.
Darby cited the gauge and its U.K. version in a report yesterday. In September, the U.K.’s index rose to its highest reading since March 1992 after more than doubling in the last two years.
“Income disparity alongside rising misery indices may prove to be a powerful cocktail,” Darby wrote. Companies may have the most to lose, the Hong Kong-based strategist wrote, as leaders of both countries address the income gap through tax increases.
Household incomes for the richest 1 percent of Americans rose more than 15 times as fast between 1979 and 2007 as they did for those in the bottom 20 percent, according to a report last week by the nonpartisan Congressional Budget Office.
The U.K.’s top 1 percent had 5.6 times as much income as the average person last year, according to a report released in May by the Institute for Fiscal Studies, a research group based in London. The multiple rose from 3 times in 1979.