The US Misery Index
By John S Hopkins Jr
The U.S. Misery Index recently hit a 28 year high, going back to 1983. The misery index is the sum of inflation and the unemployment rates and it hit 13 last month. So, it got me to thinking, where did things stand in 1983 and what did the next few years look like?
First, according to the Bureau of Labor Statistics, the unemployment rate in 1982 was 9.7% and then in 1983 it was 9.6%. This compares to an unemployment rate of 9.3% in 2009, 9.6% in 2010 and currently at 9.1% as we near year-end. So, we are now three years into the 9%+ range, with no one predicting a drop by years end.
Just like 2012 will be, 1984 was an election year, and right on cue, the unemployment rate fell to 7.5%. As a result, then president Ronald Reagan got re-elected.
So, what happened to the stock market during and after the early 80′s? If you go back to April, 1984, you will see that the market began a steady rise in a stealth bull market that lasted 16 years.
One of the big differences I see between back then and now is that the elevated unemployment rate has lasted longer this time around. Where there were two 9+ unemployment rate years in the 80′s, we're deep into our third year now. And, one thing that concerns me is that many of the people who have lost their jobs are now lacking the skills necessary to re-enter the workforce. Add to this the push to streamline and maximize productivity from the current workforce through innovation and increased technology and it starts to look like the unemployment rate could remain elevated for some time.
I do wish that history would consider repeating itself here; that is, let the misery index mark a turning point in both the unemployment rate and stock market performance. The unemployment rate began a descent in 1984 that lasted for 6 years and the S&P doubled.
While we cannot predict where things will stand at this time next year, I do know that politicians have an uncanny way of turning things to their advantage in election years, and as we saw when the misery index hit 13 twenty-eight years ago, it sparked some changes that began a substantial turnaround. Maybe the miserable state we're in right now will get even more miserable, but don't be shocked if things look a lot different by this time next year.
First, according to the Bureau of Labor Statistics, the unemployment rate in 1982 was 9.7% and then in 1983 it was 9.6%. This compares to an unemployment rate of 9.3% in 2009, 9.6% in 2010 and currently at 9.1% as we near year-end. So, we are now three years into the 9%+ range, with no one predicting a drop by years end.
Just like 2012 will be, 1984 was an election year, and right on cue, the unemployment rate fell to 7.5%. As a result, then president Ronald Reagan got re-elected.
So, what happened to the stock market during and after the early 80′s? If you go back to April, 1984, you will see that the market began a steady rise in a stealth bull market that lasted 16 years.
One of the big differences I see between back then and now is that the elevated unemployment rate has lasted longer this time around. Where there were two 9+ unemployment rate years in the 80′s, we're deep into our third year now. And, one thing that concerns me is that many of the people who have lost their jobs are now lacking the skills necessary to re-enter the workforce. Add to this the push to streamline and maximize productivity from the current workforce through innovation and increased technology and it starts to look like the unemployment rate could remain elevated for some time.
I do wish that history would consider repeating itself here; that is, let the misery index mark a turning point in both the unemployment rate and stock market performance. The unemployment rate began a descent in 1984 that lasted for 6 years and the S&P doubled.
While we cannot predict where things will stand at this time next year, I do know that politicians have an uncanny way of turning things to their advantage in election years, and as we saw when the misery index hit 13 twenty-eight years ago, it sparked some changes that began a substantial turnaround. Maybe the miserable state we're in right now will get even more miserable, but don't be shocked if things look a lot different by this time next year.
John S. Hopkins Jr is one of the co-founders of Invested Central. John founded the company in 2004 after spending almost thirty years in the financial services sector. John started out by producing and providing educational training programs for financial institutions and their employees. Hundreds of companies and thousands of employees have used his training materials and John has taken this successful experience and now provides educational training to stock market investors.
You can learn more about John and Invested Central, and sign up for our free stock market newsletter, at http://www.investedcentral.com
Article Source: http://EzineArticles.com/?expert=John_S_Hopkins_Jr You can learn more about John and Invested Central, and sign up for our free stock market newsletter, at http://www.investedcentral.com
