THE MISERY INDEX

Weekly Market Commentary

By John Canally Chief Economic Strategist, LPL Financial

THE MISERY INDEX: JUNE 1980
In June 1980, the U.S. economy was just exiting the first of two back-to-back recessions. The June 2, 1980, cover of TIME magazine was “The Big Blowup,” referring not to the awful state of the U.S. economy, but to the recent eruption of Mount St. Helens in Washington state. The Business and Economy section of the magazine that month, however, was full of stories about just how bad the U.S. economy was:

  • ƒƒJune 9, 1980, “Consumers Feel the Pinch”: “With the economy in a downward spiral of still uncertain depth, many consumers have decided to cut their losses. …More Americans are unemployed, many others are doing without overtime pay, and inflation has eroded earnings.”
  • ƒƒJune 16, 1980, “The Bad News Gets Worse”: “…not only has the next recession begun, but it is already shaping up to be one of the worst slumps since the Great Depression of the 1930s.”
  • ƒƒJune 30, 1980, “Harder Times in the U.S.”: “While the Europeans generally hope to suffer only a mild slowing of economic growth, U.S. business continues to reel downward.”

The unemployment rate hit 7.6% in June 1980 and the inflation rate (as measured by the year-over-year percent change in the consumer price index [CPI]) soared to an incredible 14.4%, pushing the Misery Index (year-over-year percent change in CPI plus the unemployment rate) to 22.0% [Figure 1]. In retrospect, the 14.4% reading on the CPI in June 1980 marked the high point for inflation in the late 1970s/early 1980s. Unfortunately, for the U.S. economy, the next recession (the one that would begin in mid-1981 and last through the end of 1982) would ultimately drive the unemployment rate to 10.8%. The economy in the early 1980s was truly miserable, matching the nation’s mood.

Read Full Report Here: Economic Commentary 03022015

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