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US Economy Bounces Back: The Falling Misery Index Decoded

July 6, 2023

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US Economy Bounces Back: The Falling Misery Index Decoded

In a world brimming with economic uncertainty, signs of steady recovery can feel like a welcome respite. Noted economist and Nobel laureate, Paul Krugman, recently underlined such positive indicators in the US economy, lauding President Joe Biden’s impact in a New York Times Op-Ed piece.

Three women laughing and smiling in a sunflower field Misery Index
The misery index is falling. Photo by Antonino Visalli on Unsplash

The ‘Misery Index’—a handy tool that combines both inflation and unemployment rates to give an overall sense of how much people are struggling—shows a promising downturn, signifying a robust economy.

Misery Index in Decline

The Misery Index, not to be confused with the American heavy metal band, was originally formulated by Arthur Okun during Lyndon B. Johnson’s era, and acts as an economic pulse checker. The intriguing twist is that this index dips when the economy is thriving.

Key ‘Misery Index’ findings reveal:

  • A fall in misery back to levels observed at the very start of Biden’s term
  • The findings reflect the absence of a much-feared recession
  • A boost of four million jobs in the past year
  • A 50-year low unemployment rate
  • Dousing the inflation flame

An essential piece of the economic recovery puzzle is inflation control. The Misery Index’s decline is largely due to a swift inflation slowdown. From mid-2022’s high of over 9%, inflation tumbled to 4% in May – an impressive U-turn.

Labor Market: Resilience Amid Change

The labor market’s fortitude has been commendable, weathering the storm of the Federal Reserve’s aggressive interest-rate hikes. With 339,000 jobs added in May and an unemployment rate maintained at 3.7%, the labor market is displaying resilience.

A vintage sign showing a notice of jobs available. Misery Index
Unemployment rates are down and the labor market is strong. Photo by Jen Theodore on Unsplash

A Promising Outlook

According to Krugman, “By most measures, the economy is doing quite well.” His optimism extends to his recession forecast—or rather, the lack of it—even when America’s GDP growth slowed to 1.1% last quarter.

In Summary

President Biden’s economic stewardship receives high marks from Krugman. By successfully bringing inflation under control faster than other Western countries, the administration has set the US economy on a promising path. The falling ‘Misery Index’ and resilient labor market are testaments to this economic revitalization.

Considering the resilient economic conditions and the tapering inflation, it’s an opportune time for you to diversify your portfolio and consider long-term investment strategies to build wealth over the long term. The steady job growth and declining inflation rates suggest a stable environment for exploring a mix of traditional and alternative assets, to achieve both growth and risk mitigation.

You can start with MCA investing here.

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