FEE’s Distress Index

The Foundation for Economic Education (a great organization — publishers of The Freeman — which you should know about if you don’t already) lists on its website a regularly updated “Distress Index.”  As the foundation explains, the index is based on a simple collection of statistics and is important for two reasons:

First, it gives us a tool to help interpret what the media and government are telling us about the economy. Second, we hope it will give voice to the taxpayer and the frustrating conditions he or she is enduring these days. We hope the index will keep pressure on policy makers and opinion leaders to make decisions that improve the economy rather than distressing it further.

The included statistics are: Unemployment, the Consumer Price Index, Gross Domestic Product, Total Capacity Utilization, and Household Financial Obligations as a percent of Disposable Personal Income (visit FEE’s page on the index for an explanation of each of those figures).

The current Distress Index is 53.4, significantly higher than 43.8, the historical average (this appears to be an average starting in the late 60s).  To put those figures in greater context:

Historical Perspective:

Historical High: 63.9 in March of 1975
Historical Low: 29.5 in February of 1973
High during the current Recession: 61.7 in June 2009
1970s Average: 44.47
1980s Average: 46.72
1990s Average: 40.07
2000s Average: 46.58

Index By President:

Jimmy Carter: 46.5
Ronald Reagan: 46.3
George H.W. Bush: 44.0
Bill Clinton: 38.0
George W. Bush: 46.4
Barack Obama: 59.8

As FEE acknowledges, “It is important to emphasize that no statistic will ever fully articulate what is happening in the real economy. The real economy is made up of living, breathing, planning, acting individuals. Statistics are simply an abstraction and, as such, imperfect.”  Nonetheless, this is an interesting calculation, and probably one I’ll keep an eye on.

Cross-posted on my own blog here.

Published in

Post a comment