Who knew all the market needed was a sharp increase in unemployment to get going. The Dow Jones and S&P 500 indexes both ended the day in positive territory despite the unexpected jump in the unemployment rate to 6.1% from 5.7%.
But all is not rosy. The liberal advocacy group Campaign for America’s Future put out a release Friday noting that “the misery index” has risen to 11.7%, it highest level since 1991. You may recall that the index came into vogue during the 1970s and 1980s political campaigns. The index is a composite of the unemployment rate and inflation using the annual Consumer Price Index.
The press release got us thinking. We have chronicled in this space recently how the various methodologies to calculate economic reports by the Federal government have been altered to produce more positive numbers. In the July issue of Futures, we interviewed economist John Williams who keeps up the government’s economic statistics using the original methodology at his firm Shadow Government Statistics (SGS).
We wondered what would those numbers be using the old methodologies. The methodologies, by the way, that were being used back in the 1970s and 1980s. We went to the SGS site and pulled down the alternate numbers and calculated the misery index. Because we were not sure when certain unemployment reports were altered, we provide a range. According to the SGS numbers the misery index is anywhere between 24.06% and 28.06%.
That is higher than any calculation of the index going back to 1948 and considerably higher than the highest point in June 1980 of 21.98%. And it is a more accurate comparison given the changes in the methodologies for how inflation and unemployment is measured.
To put it bluntly we are at our most miserable point ever. Williams points out that the only reason we are not in the technical definition of a recession is the funny numbers. Ironically it was the Clinton administration who was one of the worst offenders (though both parties and several adminstrations have played with the numbers)and whose alterations to the way the CPI is calculated has allowed the current administration to skirt the technical definition (two consecutive quarters of negative GDP growth) of recession.