Misery Loves Company: A Look at the Economic Misery Index

John DVWhile misery loves company, there’s not a lot of it going around these days – supposedly. An economic indicator called the “Misery Index” suggests things are the best in decades.

The Misery Index measures the unemployment rate and inflation. With unemployment and inflation running at very low levels, the Misery Index is at the lowest level since 1956. So, everything should be great! They’re not.

Jobs – and in particular, good paying jobs – are what help drive an economy. But fewer and fewer jobs available are for 40-hour workweeks. Fewer hours means lower income and benefits. And fewer overall workers put a crimp on saving, investing, and the all-important spending.

How’s that supposed to work when over 70% of the U.S. economy is driven by consumption?

Then there’s the Labor Force Participation Rate – the share of Americans who are at least 16 years old and actively working or looking for work – which is just under 63%.

That’s the lowest rate in nearly 40 years!

Several other numbers point toward a lot of economic pain the average American feels:

  • Nine million people are on disability benefits and the trend has been surging over the last 15 years.
  • Nearly 11.5% of student loan debt is over 90 days delinquent.
  • 46 million people are on food stamps, which is 11 million more than when the crisis ended in 2009.
  • And real household incomes have fallen over 6.5% this century.

The saying goes that we’re only as strong as our weakest link. So never mind the stock market enjoying all-time highs. Eventually the weak condition of the typical American has to filter through to corporate profits.

Companies have already cut costs to the bone by outsourcing to foreign countries, cutting benefits, and reducing the workforce domestically. The very people they count on to buy their products and services are in worse shape than when the crisis ended over six years ago!

While some of the slack can be made up from demand in other countries, places like China are a house of cards, and Europe has its own demographic and growth challenges.

The risks remain high. And U.S. consumers aren’t going to be in a position to bail companies out when they need them most.

Sounds pretty miserable to me.

John Signature

John Del Vecchio
Editor, Forensic Investor

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Categories: Unemployment

About Author

In 2007, John Del Vecchio managed a short only portfolio for Ranger Alternatives, L.P. which was later converted into the AdvisorShares Ranger Equity Bear ETF in 2011. Mr. Del Vecchio also launched an earnings quality index used for the Forensic Accounting ETF. He is the co-author of What's Behind the Numbers? A Guide to Exposing Financial Chicanery and Avoiding Huge Losses in Your Portfolio. Previously, he worked for renowned forensic accountant Dr. Howard Schilit, as well as short seller David Tice.