The Augmented Misery Index

Abstract

The original misery index, a combination of the inflation rate andthe unemployment rate, was created by Arthur Okun just after thefirst oil crisis of the 1970s and was popularized by Jimmy Carterduring his presidential campaign in 1976. As Okun's label suggests,when the misery index is larger, people feel worse off. In June 2008,Carsten Hoegh at Credit Suisse added the annual change in house pricesto the original misery index to create, in his terminology, an ``enhancedmiseryindex.'' It seems obvious that when house prices fall, most peoplefeel worse. Falling prices often presage a weak economy, and olderAmericans especially look to home and retirement-account values asthe bedrock of their personal economic security.