Wednesday, May 18, 2011

Economic Distress Index--Is the Economy Worsening?

On the right side of this page, you will see the Economic Distress Index that I have created.  It was suggested by my friends at FEE to create an updated version of the famous Misery Index of the late 1970s.  I update it as the data comes in. 

As I have been tracking it, I have noticed that the economy tends to be in distress whenever the index is above 46.  This has not been scientifically determined.  If anyone would like to work on this data set, I am willing to work with you.  Just e-mail me at:

The point of this post is that the index has been falling from its high of 62.8 in June 2009 to the recent low of 48.0 in December 2010.  Since the new year, the Distress Index has been climbing.  We are now at 49.6.  While this may be an aberration, it may also be the start of the next trend.

Is the economy headed toward another recession?  Is the economy worsening?

My training tells me that before an economy can make a solid recovery, we need to liquidate the malinvestments that have been built up in our economy.  So far I see little evidence that we have cleaned out much malinvestment.  In fact, I think that we have quite a bit more that needs to be liquidated.

While I tend to be optimistic, I don't see the evidence of anything more than a lumbering economy that is burdened down by these malinvestments.  The translation is that we cannot have healthy growth until we clear these out.  With stimulus bills and government programs designed to prop them up, I think that this anemic growth will be around for a few more years.


P F Cwik said...

With the latest Unemployment numbers, the index has climed higher to 49.70.

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