The Misery Index

The Misery Index was quite a big deal in the 1970s.  It's a pretty basic concept really, you just add the inflation rate to the unemployment rate.  Barro produced a more complex version but the basic one produced by Arthur Okun will do for now.  A high Misery Index score suggests stagflation and serious economic pain for families.

Britain will normally do quite well on this measure compared to continental Europe.  The continentals accept high structural unemployment as a price for labour market regulation which gives those with jobs relative employment security.  We don't make the same trade, so normally beat them handily with significantly lower unemployment.

But as I mentioned last week, Britain is currently suffering from an anaemic recovery and high inflation.  Using Eurostat figures, we can produce a month by month Misery Index for the Eurozone and Britain.  One proviso is that Britain's unemployment figures only run up to November, but there hasn't been any significant change since then.  Another is that the Index would be even higher if we counted RPI inflation (see this blog from Wat Tyler), but Eurostat's Harmonised Indices of Consumer Prices measure allows for a fairer comparison.

The figures suggest that Britain has now overtaken the eurozone with a Misery Index of 11.3 against their 10.9:

Misery Index

Another sign that Britain is having a lousy recovery.  We need cuts in spending to restore confidence and get investment moving again, we'll set out how in the upcoming book How to cut public spending and win an election.

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