Unusual Economic Indicators and How They Predict Recessions

Do Lipstick and Underwear Sales Really Hold the Answer to the Next Recession?

A person applies lipstick.

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Want to know whether a recession is coming? You could ask an economist. Or you could look at underwear sales.

It’s surprisingly difficult to assess whether we’re about to enter a period of negative economic growth using conventional data. Prominent economists polled by the Wall Street Journal in October put the probability of a recession in the next year at anywhere from 1% to 100%. With expert opinion so divided, could oddball recession indicators like lipstick sales and whether the Phillies won the World Series offer added insight?

Here’s a look at some of the unconventional economic indicators and what they currently say about whether a recession is on the way. 

Key Takeaways

  • Sales of men’s underwear, the length of skirts, the popularity of Spam, and Philly sports titles have all been used to gauge the wellbeing of the U.S. economy. 
  • Unconventional indicators offer an alternative to expert predictions of recession, which are often divided. 
  • Upon close scrutiny, oddball indicators are of little use when it comes to predicting a coming recession.

A Brief(s) Glance at the Economy

If men’s underwear sales are falling, the economy could also be going down the tubes—that’s the theory anyway.

When people are under financial pressure, they cut back on the least necessary items first. Supposedly, this means men will keep their existing underwear in service longer than they normally would.

The concept comes from longtime Federal Reserve chairman Alan Greenspan, who would reportedly take the economy’s temperature by looking for slight variations in men’s underwear sales. That’s according to former NPR economics reporter Robert Krulwich, who heard the theory from Greenspan and explained the reasoning behind it in a 2007 interview: 

“The garment that is the most private is the male underpant, because nobody sees it except people like, in the locker room, and who cares?” Krulwich said. “The last purchase that you don’t have to make is underpants.”

If that theory actually holds true, the global economy could be in trouble. In the third quarter of 2022, Hanes reported an 11% year-over-year drop in innerwear sales, which includes men’s and women’s underwear, socks, and shapewear. Hanes’ report said the drop in sales was partly due to “macroeconomic pressures that weighed on consumer spending.”

Paying Lip Service

When the going gets tough, the tough buy more lipstick—or so the “Lipstick Index” theory of recession prediction would suggest.

The lipstick idea likely goes back to the 2001 recession, when Leonard Lauder, CEO of makeup brand Estée Lauder, told the Wall Street Journal that lipstick sales tend to rise in times of hardship. Unlike dresses or jewelry, lipstick is an “affordable luxury” that people can indulge in when money is tight.

The Lipstick Index has shown some warning signs of a recession, but the data is different depending on what sources you go by.

Lipstick sales in the U.S. were up 8.1% by volume and 17.7% by dollar value over the year as of October, according to data from IRI, a Chicago-based market research firm. This is suggestive of an elevated Lipstick Index.

Earlier this year, the index was off the charts, flashing loud recession alarms, according to market research firm The NPD Group, which tracks lipstick sales. Sales were up 48% year-over-year in the first quarter. But as NPD noted, the lifting of mask mandates and social distancing rules at that time may have had something to do with the sudden popularity of makeup.

However, as of September, growth in lipstick sales had slowed down significantly over the previous three months, market research firm NielsenIQ said in a report. That casts doubt over the entire “Lipstick Index” theory, Nielsen said.

“As the threat of recession looms, lipstick sales have dropped,” Nielsen analysts wrote in a commentary. “It now appears that the ‘Lipstick Index’ theory may no longer apply to the Beauty and Personal Care industry.”

The report did not address another possible interpretation: Their version of the Lipstick Index is correctly showing a deep recession is unlikely, as some economists also believe. 

Spam, Spam, Spam, Spam

If you want to know whether the economy is headed for a prolonged dip, then the number of Spam cans in your pantry is a sign things are bad, according to the Spam theory.

With a 12-ounce can of the canned pork selling for just $3.58 at Walmart, Spam is a relatively affordable source of protein. So much so that during the 2008 recession, stock analysts noted that Hormel, the maker of Spam and other canned goods, saw stock returns and profitability increase beyond pre-recession levels.

During the depths of the Great Recession in 2008, Hormel employees were working overtime to supply the nation with Spam, according to a report from the New York Times. Spam was among a list of thrifty grocery items selling well in the downturn, the Times said, citing data from marketing firm Information Resources.

There’s just one problem: These days, Spam seems to sell well regardless of what the economy is doing. Spam sales broke records for seven years running as of 2021, according to Hormel—a period that covered years of strong economic growth, as well as a brief pandemic-induced recession in early 2020.

So much for the Spam index.

A Fashionable Indicator

In 1926, economist George Taylor suggested that the state of the economy influenced women’s fashion. In flourishing times, skirts got shorter because women wanted to show off the expensive silk stockings they could afford to buy. In downturns, hemlines got longer because women did not have the money for expensive stockings and they wanted to hide the lack thereof.

The rationale for the supposed correlation got shakier with the adoption of cheap nylon stockings in the 1940s. It diminished further still in the 1960s and beyond, when more women began ditching skirts and dresses for pants. Nevertheless, the so-called “Hemline Index” has stoked researchers’ curiosity over the years.

In 2010, a pair of Dutch researchers analyzed data from the National Bureau of Economic Research and measured hem lengths from a French fashion magazine. They concluded that hemlines did move with the economy as Taylor had suggested, but at a lag of three years.

In other words, it’s not so much that women’s fashion predicts the state of the economy, but that the state of the economy predicts women’s fashion. That was also the conclusion a duo of researchers at the University of Georgia and the University of South Korea reached in 2015 when they published a paper noting skirts and dresses, as shown in photos from Vogue Magazine, got longer when recessions hit. Consistent with their theory, their data showed hemlines getting shorter starting in 2010 as the economy recovered from the Great Recession.

The takeaway: The Hemline Index can’t tell you if a recession is coming, but a recession might tell you a lot about the future of skirt lengths—good information to have if you’re in the textile business.

“This statistical tool can be very useful to fashion companies who need to make design decisions regarding hemline lengths at least a year in advance of releasing a line,” the researchers wrote. 

Check Out This Indicator

One sign of a recession was noticed not by economists, but by librarians. The “librarian’s axiom” that people tend to check out more books during hard times goes back at least as far as 1880, according to research cited by the American Library Association (ALA) in a 2002 investigation of the phenomenon.

The ALA and number-crunchers from the National Library Center at the University of Illinois  looked at circulation data from 18 libraries and saw how it changed during the 2001 recession. Indeed, they found library use was above-trend starting when the recession began, lending credence to the theory though not proving it beyond a doubt.

A paper published in September in Public Library Quarterly looked at 541 libraries during the Great Recession and found that the axiom held true, with a typical library seeing 95 more visitors per day during that recession.

The ALA was unable to provide up-to-the-minute data on library circulation to look for signs of a future recession. However, if one does come, libraries are likely to once again provide an important safety net for people hit hard by the downturn. These days, libraries provide many more services than just lending books.

“During my own personal observations during the last recession as a library worker and new library school graduate, I saw libraries as an essential resource,” Lessa Kanani'opua Pelayo-Lozada, president of the ALA, said in an email. “Whether a patron needs access to technology to apply for a job, information on personal finance, or even checking out items like power tools or cookware, libraries are there for our communities no matter the economic state of our society.”

A Phishy Philly Connection

When the Philadelphia Phillies win the World Series, the economy loses. That’s the conclusion of the Phillies Index.

Philadelphia baseball teams have only ever won world championships during times of economic hardship: 2008 (the Great Recession), 1980 (recession), and 1929 and 1930 (the Great Depression).

The Astros beat the Phillies in the 2022 series. Don’t breathe easy quite yet, though, even if you believe in this superstitious indicator. Plenty of recessions over the past century have come and gone without a Philly baseball championship—most recently the 2020 COVID-19 recession and the 2001 recession.

Nov. 23, 2022: This article has been updated to add the section on libraries, as well as data on lipstick sales from IRI. The article was originally published on Nov. 22.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

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  1. National Public Radio. “Alan Greenspan's Underwear Drawer.”

  2. HanesBrands Inc. “HanesBrands Announces Third-Quarter 2022 Results.”

  3. The Wall Street Journal. “Rising Lipstick Sales May Mean Pouting Economy and Few Smiles.”

  4. The NPD Group. “The Evolution of the ‘Lipstick Index’

  5. NielsenIQ. “Is It Time to Reasses the ‘Lipstick Index’?

  6. Valens Research. “Can a Stock Really Be Recession-Proof? The Maker of SPAM Proves That It Can Come Out of a Financial Crisis With Even Stronger ROAs Than Before!

  7. Walmart. “SPAM Classic, 7g of Protein, 12 oz.”

  8. The New York Times. "Spam Turns Serious and Hormel Turns Out More."

  9. CNBC. “Spam Sales Hit Record High for Seventh Straight Year in 2021, Says Hormel Foods CEO,” Start at 10-second mark of video.

  10. Wayne R. Sholk Wealth Services, LLC. "In the 1920s, Hemlines Were Thought To Predict the Economy."

  11. Econometric Institute Erasmus School of Economics.”The Hemline and the Economy: Is There Any Match?” Page 1.

  12. International Textile and Apparel Association. “Proceedings: Impact of Macro-Economic Factors on the Hemline Cycles,” Page 1.

  13. International Textile and Apparel Association. “Proceedings: Impact of Macro-Economic Factors on the Hemline Cycles,” Page 2.

  14. American Library Association. “Economic Hard Times and Public Library Use Revisited.”

  15. Michael R. Mabe. “Impact of the Great Recession on Library Use: Does a Negative Economy Impact Library Use?Public Library Quarterly.

  16. National Bureau of Economic Research. “US Business Cycle Expansions and Contractions.”

  17. Major League Baseball. “Postseason History: World Series.”

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