Lessons of the Misery index

Unemployment plus interest rates are typically dubbed the "Misery Index." I believe that this was concocted with the best of intentions, however, has become abused over the years to give the prima facie appearance that the economy is not as bad as it really is.

The unemployment calculation is formulated based on the desire of the individual to continue looking for work. If the person loses their job and is not actively seeking work they are not considered unemployed. This also excludes people that quit their jobs also.

Inflation takes a basket of goods from the economy and measures its price over a given period of time. BUT, the inflation calculation leaves out the prices of food and energy which, I argue, should be included in the calculation since it is a snapshot of the consumer realities in the marketplace. At the present time, food and energy are considered too volatile of commodities to include in the index.

So what happens when you hire a couple hundred thousand temporary census workers? What happens when you exclude the prices of food and energy? A distorted misery index that does not accurately reflect the true realities of the consumer. It's a simple accounting trick which emboldens those to seek to spend more money on temporary programs that have no economic return but reflect good on their politicking.

The census workers are taken off the "unemployment" roles and are returned to the "employed" roles reflecting a greater strength in the employment rate (which also does not make the distinction between government and private sector jobs) than is actual reality.

In the case of the interest rates, if they are held artificially low, this again gives an appearance that inflation has not been settling in the economy and further paralyzes the private sector from making any form of investment because they are too scared that if they throw their money in Treasury bills, they will surely not make any return on their investment.

The misery index would work properly if the proper data were used to make the calculation. The current calculation is simply Draconian in its present form. Mainly because this index is consulted by Nation leaders to help determine the health of the state.




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