Economic Discomfort and Consumer Sentiment

This paper finds that the Economic Discomfort Index (aka "Misery Index"), defined by Arthur Okun as the sum of the unemployment rate plus the annual rate of inflation, provides a rough and read explanation of economic malaise as measured by the University of Michigan Index of Consumer Sentiment. A more precise explanation of Consumer Sentiment includes the rate of change in unemployment, the rate of change in the SP but dummies indicating Presidents insignificant. Studying the determinants of Consumer Sentiments helps validate the procedure invoked by Okun for constructing his Economic Discomfort Index.