To Gen Z, Everything Is a Recession Indicator

Investors have long turned to offbeat economic gauges like underwear sales and the length of hemlines. Now, the TikTok generation is taking it to the next level.

By Hannah Erin Lang of The WSJ. Excerpts:

"At first, it was higher egg prices, declining demand for cardboard boxes and empty dance floors. Now, it’s low-rise jeans, flash mobs—even Lady Gaga’s return to pop music."

"To the extremely online, the portents of doom also include serif fonts, the popularity of press-on nails, messy buns, Lena Dunham’s latest public departure from New York and Gwyneth Paltrow’s decision to start eating cheese again. Responding to a seemingly innocuous social-media post with the phrase “recession indicator” has become a meme all its own."

"Investors big and small have parsed everything from credit-card delinquencies to shipping containers at the Port of Los Angeles. 

Former Federal Reserve Chairman Alan Greenspan famously followed sales of men’s underwear, which fall when times are tough because, well, who’s gonna know? The Lipstick Effect, meanwhile, posits that women splurge on smaller luxuries when household budgets are tight, making increased sales a sign of economic trouble."

"correlation doesn’t equal causation, as economic data wonks have often griped. One money manager once demonstrated that the production of butter in Bangladesh could technically “explain” much of the variation in the annual returns of the S&P 500."

"Some observers point to emptier bars and nightclubs as evidence that more consumers are cutting back. A skin-care company selling eggs could be a sign that essential goods are becoming luxuries, while the popularity of press-on nails might stem from customers cutting back on manicures. 

Others have observed that declining tips at strip clubs—subject of a viral tweet in 2022—could signal a decline in discretionary income."

"the renewed popularity of formal workwear. One theory is that people feel less secure in their jobs and therefore more pressure to present themselves professionally."

"Armchair economists have long cited the Hemline Index, which dates back to the early 20th century and hypothesizes that women’s skirts get longer when the economy is worse."

"Can cultural shifts—in fashion, film or music—actually predict where the economy is headed? Economists say it’s unlikely. But talk of recession has a habit of turning into a self-fulfilling prophecy" 

Related posts:

Are we going to have a recession soon? (2024)

The Fed is ‘playing with fire’ by not cutting rates, says creator of ‘Sahm Rule’ recession indicator (June 19, 2024)

What Causes Recessions? What Do Recessions Look Like? (2023)

The Sahm rule and recessions (2020) 

"It is named after economist Claudia Sahm, who served as a top economic advisor during the Obama administration and identified a historical indicator of coming recessions in 2019: every time since 1970 that the three-month moving average of the U.S. unemployment rate is more than half a percentage point above the lowest three-month moving average from the previous year, a recession has soon followed."

What ends expansions? (or what causes recessions according to Alan Blinder and Austan Goolsbee) (2019)

Are business cycles imbedded in longer cycles called financial cycles? (2019)

Monetary Policy and the Great Crash of 1929: A Bursting Bubble or Collapsing Fundamentals? (2018)

Some Bad News for Good News — Optimistic Forecasts Create Recessions (2018)