SAN ANTONIO – Federal Reserve Chairman Jerome Powell told national lawmakers on Capitol Hill Tuesday that the nation’s economic pulse is pumping well.
Powell said there is no current recession, but as prices rise and tariffs loom, some economists are keeping an eye out.
“It’s uncertain because we don’t know what’s going to happen with this trade war. A trade war can cause a recession like it did in the 1930s,” said Trinity University Economy Professor Dr. David Macpherson.
Macpherson’s main and most accurate way of predicting recessions or economic downturns is with the leading indicators.
“Which is composed of ten different items, things like new orders for goods, claims for unemployment and things like that. And that has had a track record of predicting every recession since 1959,” Macpherson said.
However, throughout history, economists have used some pretty quirky and bizarre indicators, too.
Lipstick Index
Born in the late 90’s, economists noticed that when the economy sank or recession loomed, lipstick sales went up.
“The idea is that when people are going through economic downturns, they spend more money on cheaper luxuries than more expensive luxuries,” Macpherson said.
Instead of buying pricey shoes, bags, or even cars, people will buy nice lipstick.
Men’s underwear sales
“That one is the idea that in recessions, men don’t buy new underwear as a way to save money,” Macpherson said.
Though it seems strange, economists have kept men’s underwear sales in mind.
Champagne or sparkling wine sales
“In recessions, people spend less on luxury items like champagne,” Macpherson said.
Sparkling wine, usually used for celebrations, seems like a luxury item. Historically, people buy less of it when the economy is down.
Workplace refrigerators filling up
Taking a look at how full the fridge is at work is something economists have considered.
“They try to eat less meals out and more in their offices,” Macpherson said.
Hemline Index
The length of hemlines correlating to the economy was suggested decades ago and confirmed in a non-peer-reviewed study in 2010.
“The idea is in economic booms, hemlines go up. And then in recessions, they tend to go down,” Macpherson said.
Though the reasoning hasn’t been set in stone, many believe it goes along with the overall mood of the economy.
While it’s been around the longest of all the quirky indicators, Macpherson said it’s not considered much anymore with the breadth of fashion trends.