The Real Misery Index April 2010: Underemployment Woes Lead To Two-Tier Economy

This story has been updated

The unemployment crisis continues to stymie a full economic recovery, with ripple effects from credit card delinquencies and rising food stamp participation indicating new hardships for millions of Americans, according to the latest update of Huffington Post's Real Misery Index.

The index for March/April 2010 was 33.1, a slight increase from 33.0 in February, representing another new high in the 26 years going back to 1984 analyzed by HuffPost. Though there have been some encouraging signs, from higher housing prices (which have an inverse relationship to the index) to declining home equity delinquencies, the jobless numbers continue to increase the misery. In addition, nearly 40 million Americans were enrolled for food stamps in February, which has been described by anti-hunger groups as the highest share of the population ever in the assistance program.

Though the Real Misery Index has increased 16% from March 2009 to April 2010, the stock market has increased 56% during that period, reflecting an alarming discrepancy between the two metrics.

Lynn Reaser, the incoming president of the National Association of Business Economists, calls it a two-tier economy, with those who are employed doing better amid rising consumer confidence while the unemployed suffer.

Stock prices, meanwhile, are driven by the behavior of investors, who make up a small portion of the population -- not those who are underemployed, says Karen Dynan, the vice president of economic studies at the Brookings Institution.

She notes that employment tends to be a lagging indicator, meaning that it is one of the last numbers to turn around during a recovery, and that the stock market has a forward-looking predictive element to it. The hope is that a rising stock market will "stimulate spending and that will eventually create more jobs," she says.

To formulate our index, which provides a better snapshot of the economy than the often-criticized misery index (inflation added to unemployment), we used a more accurate unemployment statistic (the U6 formulation), with the inflation rate for three essentials (food and beverages, gas, medical costs), and year-over-year percent changes in credit card delinquencies, housing prices, food stamp participation, and home equity loan deficiencies. We gave equal weight to the broad unemployment numbers and the combination of the other seven metrics (with housing prices having an inverse relationship to the index). Thus, we added the broad unemployment U6 statistic (note: the current U6 was first introduced in 1994 so we used a similar number -- the U7 -- for the years 1985-1993) to the average of the seven other statistics.

Comments

[Zachary Uram]

10:52 AM on 06/13/2010

This is a shame. The wealth gap in the US has been increasing for a long time and now it is accelerating just as in China! Free trade has robbed the US alone of nearly 13-20 million jobs. Both parties seem equally greedy - whether George Soros or Warren Buffet. This culture of hyper-greed is pervasive in Wall Street and it's glorified in popular media.

Here are some interesting papers:
http://www.brookings.edu/~/media/Files/rc/papers/2009/0615_economic_crisis_baily_elliott/0615_economic_crisis_baily_elliott.pdf
http://www.economics.pomona.edu/colloquium/gourinchas.pdf
http://opim.wharton.upenn.edu/risk/downloads/WEF_Global-Risks_2010.pdf
http://www.svsu.edu/emplibrary/Whelton%20article.pdf
http://www.u.arizona.edu/~lkenwor/challenge2010.pdf

[hi Im back]

05:58 PM on 05/13/2010

In 1932-33, socialist leader Josef Stalin planned and implemented the genocide by famine of 5-8 million Ukrainians. He isolated them, took away their jobs, their houses, possessions, money, and left them to starve to death in the streets. Men, women, and their children. Though there were stockpiles of grain to feed them, Stalin exported the grain at a large profit to finance his regime. Most are not aware of this horribly evil event in history. It became known from the eyewitness accounts of the Russian soldiers who went to collect the bodies, because the media did not report on it!! The leaders and congress of America seem to be ignoring the millions of STILL unemployed workers who have exhausted ALL weeks of benefits currently available to them, with the number of people exhausting all benefits- multiplying with each passing week. With no more unemployment checks, no jobs, we are losing our houses and possessions, with no way to feed ourselves or our children. And strangely, the media does not report on this!! And like that stockpile of grain, the government spends many hundreds of BILLIONS of dollars funding TWO wars, Wall Street, large banks and corporations ( who give out bonuses with the money, instead of hiring the unemployed ). Will they leave us to starve to death in the streets? No, that would be too difficult to keep secret. Maybe they will round us up for the FEMA camps! And again, the media would remain silent. .

[Joseph Joyal]

05:23 PM on 05/13/2010

Welcome to the third world economy. until we end BS trade agreements we will continue to get poorer.
Soon it will be the very rich and the very poor.

[land2341]

02:52 PM on 05/13/2010

Kuzent's Curve when used by sociologists proves quite nicely that the larger the income gap between the top and the bottom the more unstable both the society and its economy become. In 2008 we beat out the disparity that was hit in 1929. I thought the crash of 08 was going to bring it back a little, but I was wrong! It has actually gotten wider! We're well off the cliff now.

[abelenkpe]

12:03 PM on 05/13/2010

No? Really? Please tell me you are just noticing this?

[EcoHustler]

08:43 AM on 05/13/2010

10 reasons that green people are happier: http://ecohustler.co.uk/green-happy/

[TULLY1940]

03:58 AM on 05/13/2010

Yes, this is a Two-Tiered Economy -- and yes this is a depression i.e.-big unemployment - failing economy - rich get richer-poor get poorer -- but what is it that keeps the rich going? -- you people continuing to spend for petrolem prod. and Chinese sh_t you can do without -- i keep saying this: Buy only food new; 2nd hand for all else-- barter all you can -- cancel bank accounts and credit cards -- drive only absolutely vital miles-- stay home and really get to know your friends and family --make xmas presents-- will this crash the system-the system is crashed -- but this will hit the blood-suckers where they live -- in the pocketbook -- if we did this as a nation, it would scare the corps. and the gov. sh_tless -- they would come to us begging -- it's the only kind of revolution they can't put you in jail for -- you have no money to put where your mouth is- so what have you got to lose -- i hear all the time--" if you want change--make a sacrifice" --step up to the plate!

[david5000]

12:01 AM on 05/13/2010

The so-called recovery is a made up ploy by wall street to fleece what's left from the middle class who is buying into a new bubble.

J.P. Morgan said yesterday, people who can afford their mortgage are walking away from their homes because they owe more than the house is worth and by a lot.

10% of the work force is unemployed and most companies are reporting from 5% to 10% increase in sales from almost zero sales, that's hardly a recovery.

[RandVictims]

10:19 PM on 05/12/2010

The peasants certainly don't owe the plutocrats order and obedience. Americans are idiots for taking the oppression they take from these crony-socialists.

The fall of the Soviet Union was the worst thing that happened to America in 200 years. With competition wiped-out, Capitalists have no incentive to behave.

Let's get this peasant's revolt started, people.

[Bayard Waterbury]

08:18 PM on 05/12/2010

Hate to say it, but in this economy, both national and global, the stock market indices are virtually without meaning. The only invividual investors are a very few of the middle class who actually have a little money to try to recover some of their massive losses which occurred in the slide from the highs in late 2008. Otherwise, the markets are substantially comprised of the banks (gee, go figure the margin of a broad based index investment vs. the FED lending facility cost) and institutions (e.g. mutual funds, pension plans, universities, insurance companies, and large funds). The ordinary citizen is actually losing ground as the tiny amount they may hold in the few investment vehicles that they may (I mean may) still own rises slightly and their many other (hard to pay) debts gather around them. So, the markets are now essentially unattainable myths to you and me. They get the gains, we get the misery. And, making things much gloomier, while unemployment (theoretically) eased in April, the Federal deficit grew nearly three times more than anticipated (note that the announcement did not cause the market averages to even pause). So, any small growth in the GDP was substantially (or entirely) offset by deficit growth. We are still treading water in the middle of a huge ocean of pending catastrophes without a life raft in sight.

[Mensch99]

07:54 PM on 05/12/2010

Let’s forget about the distribution of wealth for a moment and talk about the article.

What we need is a distribution of WORK!

Productivity constantly increases- meaning more machines and fewer people.

We should demand fewer hours of work for more pay!

Too long have the corporations and stockholders reaped all the benefits of increased productivity while the ranks of the reserve army of labor grow.

Wake up America!

[Debbie McPherson]

07:51 PM on 05/12/2010

Greenspan was credited with saying that high unemployment is good for business - and of course, it is

with our government working in lockstep the big corporations have created a nirvana here

unlimited corporate welfare and corporate bailouts

no meaningful regulation of our banks or Wall St.

when the whistle blows - anything goes - the most devious schemes to defraud and scam the public wins big

the revolving door between lobbyists and Congress keeps assuring that laws are made one bribe at a time - always in favor of Big Corporations

Anytime a bill floats in the house to help out Main St with something like unemplyment benefits extensions the Republicans go beserk - they cream unfunded spending, socialism - ARMAGEDDON! and then these very same Senators turn right around and load up every bill with pork and earmarks for all their buddies..all unfunded
Disgusting & Hopeless - America is doomed if it continues to operate business as usual in Washington.

[peaceandfreedom]

07:31 PM on 05/12/2010

What I find funny is how Obama is willing to recycle a Wall Street hack like Volcker (using the same Ideas that have still no brought Japan out of its 18 year long recession), and keep one of the few far seeing and ethical people in DC--who saw this coming as long ago as 1997!--completely out of the loop: Brooksley Born!

What's up with that?

[Debbie McPherson]

08:04 PM on 05/12/2010

It's as if Obama doesn't know what he is doing.

Or, does he?

Volcker. Summers, Geithner, Bernanke.

It all is enough to a make real liberal know we've got no friend in the White House.

[grouseless54]

09:43 PM on 05/12/2010

Dear peaceandfreedom:
In another comment, on another article, there was a reference to Ms. Born's retiring from public life and so far remaining silent about the current crisis. I will try to find that link - it's an ABA Journal article - Carolab had it.
Considering how she (Born) was treated, I cannot say I blame her for her reluctance. But I, too, think she is sorely needed.
Janet Tavakoli wouldn't be a bad pick either.

[peaceandfreedom]

10:28 PM on 05/12/2010

grouseless, thanks for the footwork. Put up whatever you find, as I'd heard something along those lines as well. She was treated shabbily by clinton and his cadre of free market deregulators--too many of whom are working for this President.

[land2341]

02:50 PM on 05/13/2010

We need Elizabeth Warren!

[zx880]

06:35 PM on 05/12/2010

Republicans love redistribution of wealth - so long as it's from the bottom-up.

[Citizen54]

06:15 PM on 05/12/2010

Note to my fellow millionaires and soon-to-be billionaires:
We're winning!