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View Full Version : The New Misery Index




DamianTV
08-25-2014, 06:47 PM
http://www.zerohedge.com/news/2014-08-25/new-misery-index


The Status Quo is desperate to mask the declining fortunes of those who earn income from work, and the Misery Index 2.0 strips away the phony facade of bogus unemployment and inflation numbers.

The classic Misery Index is the sum of unemployment and inflation, though later variations have added interest rates and the relative shortfall or surplus of GDP growth.

Since the Status Quo figured out how to game unemployment and inflation to the point that these metrics are meaningless except as a meta-measure of centralized perception management, the Misery Index has lost its meaning as well.


I propose a Misery Index 2.0 of four less easily manipulated (and therefore more meaningful) metrics:
1. The participation rate: the percentage of the working-age population with a job

2. Real (adjusted for inflation) median household income: an imperfect but still useful measure of purchasing power

3. Labor share of the non-farm economy: how much of the national income is going to wage-earners

4. Money velocity: a basic measure of economic vitality

The foundation of Misery Index 2.0 is jobs, earned income and the purchasing power of earnings.Inflation is easily gamed by underweighting big-ticket expenses and offsetting increasing costs with hedonic adjustments, and unemployment is easily gamed by shifting people from the work-force to not in the workforce. This category of zombies--not counted in measures of unemployment--has skyrocketed:

http://www.oftwominds.com/photos2014/not-in-labor-force1-14.png

The participation rate is the more telling metric: if fewer people of working age have jobs, the claim that the Main Street economy is "doing better" rings false.

http://www.oftwominds.com/photos2014/participation-rate1-14.png

Even though the rate of inflation is heavily gamed, real median household income is the best available gauge of purchasing power. Purchasing power simply means how many goods and services will your income buy?

For example: if your daily salary buys 20 gallons of gasoline, and a year from now you get a raise but your daily pay only buys 15 gallons of gasoline, the purchasing power of your earnings fell despite the higher nominal salary.

Real median household income has declined, meaning the purchasing power of earnings fell.

http://www.oftwominds.com/photos2014/labor-median-income7-14.png

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