Measuring misery
Apart from rising bills, the unemployment rate is another indicator worth watching, measuring — in simple terms — how many people want jobs, but can’t find work. The rate stood at just 3.6% as of June, one of the lowest figures on record.
Adding the inflation and unemployment rates together creates the Misery Index — a crude measure of how much economic pain is being felt.
With both falling recently, it’s no surprise then that the Misery Index isn’t looking too miserable, at 6.7%, lower than the average of 9.5% from 1980-2023.
If the worst of inflation is indeed behind us, the question will be whether the US economy can avoid two things:
Deflation — where prices persistently fall.
A “hard landing” — where the slowdown in the economy turns into a full blown recession.
Deflation is arguably a scarier word to economists than its sibling. Prices falling sounds good, but what it tends to lead to is a deflationary spiral, as people continuously wait for prices to keep dropping before making their purchases… sending prices lower… and tightening the feedback loop. For now, at least, deflation seems unlikely.
