Misery

Today's employment report confirms a modest slowdown in the economy, though there's nothing to panic about and there's no recession in sight.

Nonetheless, Fed chairman Ben Bernanke's slowdown forecast is confirmed by 113,000 new payroll jobs in July, about the same as the four-month average of 112,000. Household employment fell 34,000 in July, so its four-month average is stronger at 172,000. The unemployment rate advanced to 4.8 percent from 4.6 percent. Wages rose 3.8 percent over the past year and hours worked are 1.9 percent above the second-quarter average at an annual rate.

Clearly this four-month softer patch means that second-half growth will be closer to 3 percent than 4 percent. Still a pretty good pace. However, for those who are politically inclined, something called the misery index has been rising over the past four months and could be yet another bad omen for the GOP Congress in November.

The misery index combines CPI and the unemployment rate; its origins go back to the 1960s. You do not want to go into an election with a rising misery index.

Rising gasoline prices are the biggest driver of the index increase and now a slightly higher July unemployment rate adds to the misery. Despite a generally healthy economy, tighter money from the Fed over the past two years looks to be slowing the jobs story. And as I said, spiking gas prices at the pump are driving up inflation.

Low tax rates are still carrying business along on the investment front, but rising interest rates are hurting housing and both rate hikes and gas prices are slowing down the consumer. The GOP Congress is running about 12 percentage points down in the generic Congressional ballot and along with a deteriorating situation in Iraq, the rising misery index could be another nail in the GOP coffin.