More Misery (Index)

The current Misery Index (the unemployment and inflation rates combined) is 8.34 and rising. The unemployment rate alone was 8.1%. While history shows the unemployment rate can drop one point in three months once it comes off its peak, it also shows that it then takes six to nine months to drop every point thereafter.

Do the math; it hasn’t peaked yet. This alone, may assure yet more change in the 2010 election.

Of the 15 midterm elections held since 1950, 13 have been “change” elections in which the party that held the White House lost seats in the House and Senate; only two have been status-quo elections where the White House party gained seats. It would be easy to dismiss this as Americans having a structural push toward the party out of power, but a review of the economic data shows that the party out of power had A LOT OF help in their midterm wins.

The average Misery Index just prior to election day (October) for “change” elections was 10.1 while the average Index going into status-quo elections was 6.86. More striking is that the President’s party lost an average of 26 seats in these “change” midterms. In only three of twelve elections were there single-digit losses, the rest double-digit losses in the House, with a high of 52 seats in ‘94. misery-index-part-twoThe average party out-of-power loss with a double-digit Misery Index is 22 House seats.

The two status-quo midterms were ‘98 and ‘02 each with 5.99 and 7.73 Indexes respectively. While much has been blamed on GOP overreaching during the Clinton impeachment prior to the ‘98 midterms, the Democrats also had a rocking economy. The unemployment rate was a mere 4.5% (again, compare that to the 8.1% at the end of February) and America was enjoying only 1.49% inflation in October prior to election day.

Much of the impeachment’s impact on the ‘98 Democratic midterm success is the stuff of urban myth.

And while the 2002’s GOP success has been discounted as a post 9/11 “war rally,” the GOP also benefitted from favorable penmanship in their new districts coming out of the 2000 Census (election day netted the GOP six house and two senate seats). While the economic environment as measured by the Misery Index was no walk in the park, neither was it toxic.

This isn’t a done deal though, Ike lost seats in 54 with a 4.96 Index and Bush lost seats in ‘06 with a 5.71 Index. Bush lost seats on the back of an unpopular war; Ike’s Misery Index was “padded” by deflation when the Democrats picked up 48 seats in ‘56.

As of March, America is rising to the sweet-spot of a “change” cycle. A double-digit Misery Index in October ‘10 will virtually insure double-digit Democratic losses in the House.