When you add Unemployment and inflation together you arrive at the so-called “Misery Index.” The official numbers from April 2008 produce a Misery Index of 8.9 – inflation is 3.9% and unemployment is 5%.

It sure feels like Americans are experiencing a lot more economic pain than the government’s official statistics would lead you to believe, though. There is mounting suspicion that the figures for unemployment and inflation are being understated by the government.

The historic high point of the Misery Index was reached in June of 1980 when it topped off at 21.98%. Some now fear the economy may be approaching this level again.

If you examine Consumer Price Index (CPI) estimates and unemployment stats, the numbers seem to point to a more realistic Misery Index in the teens.

There are several reasons the Misery Index may not be accurate:

1. The government’s most recent CPI put consumer prices up 3.9%. This is likely not a true representation of the pinch Americans are feeling in their household budgets because food and gas prices are eliminated from core CPI. If you include food and gas into that equation, food rose 5.1% over the last 12 months (1 whole percent in the month of April alone) and gas rose 21% over the last 12 months.

2. The CPI showed an 11% rise in home ownership costs from 2002 through 2006. During this same time, the National Association of Realtors reported that existing home prices rose 34%. The reason for the low CPI result is that the CPI measures equivalent rents instead of home prices. Thus, inflation was understated during this period.

Now that the housing bubble has burst the CPI appears to not be detecting the declines in home prices either. The CPI is currently estimating that the cost of owning a home posted a 12-month increase of 2.6% in April. The housing component of CPI is showing a lower inflation reading than what is accurate.

3. Reductions in estimated prices for items like electronics and cars that are thought to have improved in quality year-after-year have lowered the overall CPI. Also, changes in the way certain products (such as food) are tracked by the government have contributed to lower readings than should be realistically expected.

4. The unemployment rate the government is utilizing is also not accurate. The government reported a relatively low 5% in April. The actual rate is more likely to be between 8% and 12%. The official unemployment number does not include the 4.8 million people who want to work but haven’t been able to find a job. If we simply add this sector into the equation, we get a rate of 7.8%. If you adjust it to include the people who are currently working in part time positions because they can’t find full time work, the rate jumps to 9.2%.

So, if we adjust both the unemployment rate and the inflation rate accordingly, we come to a Misery Index of 16.2…up considerably from the government’s official 8.9. Perhaps a bit high, but it certainly seems a more accurate depiction of what many Americans are now feeling.