The “lipstick index” is based on the thought process that women tend to spend money on small … [+]
There are several dry, specific metrics used by economists and Wall Street prognosticators to predict when a recession will happen. They center around economic activities, gross domestic production and yield curves.
However, for those who are not interested in or shy away from economic jargon and insider explanations predicting a recession, there are a number of amusing and quirky ways for the average American to gauge the odds of an upcoming recession.
There are consumer-based indicators that are not used in official United States government reports, but historically have been helpful predictive benchmarks in determining which way the economic winds are blowing.
Wacky Recession Indicators
Paying attention to what people do instead of what they say is a smart way to know what will happen next.
Men’s Underwear
Men are more likely to put off buying new undergarments in a fiscally restrictive environment. Men’s underwear sales fell during the Great Recession and in 2020 during the pandemic, as people cut back on non-essential purchases, according to Euromonitor data substantiated by David Swartz, a senior equity analyst in the consumer research group for Morningstar Research Services.
Champagne
Champagne sales also tend to decrease during a recession. Champagne is seen as a luxury purchase, and people tend to buy the high-end product when the economy is humming along nicely with a rosy outlook for future growth. Like underwear, in choppy economic waters, people won’t want to spend much money on champagne and other luxury items.
Lipstick
On the other end of the spectrum, women purchase more lipstick during a recessionary environment. The “lipstick index” is based on the thought process that women tend to spend money on small luxuries that make them feel good when they feel economically insecure.
When consumer spending dipped during the recessionary period following the Sept. 11 terrorist attacks, cosmetics company Estee Lauder distinctly saw an increase in lipstick sales. However, the lipstick index has failed to serve as a reliable indicator in recent recessions. Lipstick sales dropped during the financial crisis and throughout the pandemic, according to the Kline Cosmetics and Toiletries USA report.
Hemlines
The “hemline index” indicates that when the economy is doing well, hemlines go up to match the exuberant atmosphere. The dress lengths fall when things look dark, and it’s a more somber vibe.
“In the 1920s, hemlines rose with the stock market before falling during the Great Depression. They climbed back up in the mid-1930s and stayed knee-length during the supposed wartime boom of the 1940s. When Dior released long, voluminous skirts in 1947, the trend seemed to foreshadow the recession of 1949. Then, once the market righted itself, a slow and steady rise began, introducing us to the minis of the ‘60s, which stuck around through the ‘80s millionaire boom. Eventually, midi lengths popped up when the stock market crashed in 1987,” InStyle reported.
Hair Dye
Fewer people get their hair dyed when household budgeting is in cost-cutting mode. This is another example of people cutting back on non-essential expenses. When people are between jobs and every dollar counts, people will skip out on expensive hair salon color treatments.
Dining Out
For those who are back in the office, if you notice more packed lunches in the refrigerators or the free meals offered by the company have stopped, it’s a red flag that times are difficult. You’ll also see fewer people dining out, cooking more at home and buying bulk at Costco and other lower-priced discount stores.
Real Estate Development
There is a theory that when the economy is booming, developers have access to financing to commence large construction projects. Conversely, the projects are canceled or put on hold when the situation looks negative.
Why These Metrics Are Important
Monitoring these trends is essential, as they will likely affect your job. If the U.S. goes into recession, businesses will need to be more efficient and cut costs. This will include laying off workers, canceling contracts for gig and temporary workers, pausing hiring and rescinding job offers until there is more clarity.
You’ll miss out on the signs if you bury your head in the sand like an ostrich. You want to be ahead of the game. Some companies will be impacted more than others. Each company will have its own process for retaining or downsizing workers.
What You Should Do
Ensure you are one of the most valued go-to people within your organization. Forge close ties with your boss and key decision-makers at the firm, and exceed expectations to stand out amongst your peers.
If the company offers remote or hybrid work options, go into the office daily, even if you are not mandated to do so. Out of sight and out of mind is real when it comes to upward mobility. The ones at home may be overlooked compared to those in the office.
Since you are readily available, the career-enhancing tasks and responsibilities will be assigned to you, as it’s easier than tracking those who are working remotely. To hedge your bets, get in touch with headhunters, career coaches, résumé writers, mentors and people in your network to help find a new job, if your company’s financial outlook is bleak.
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