Is a recession coming? Alan Greenspan says the answer is in men’s underwear

By Nicole Goodkind, CNN Business

Former Federal Reserve head Alan Greenspan has a keen interest in men’s underwear.

Not because he’s preoccupied with the evolving fashions of nether garments — rather, he sees underwear sales as a key economic predictor.

Sounds weird, right? But it’s just one of the many strange ways experts try to predict booms and busts.

“He once told me that … the garment that is most private is male underpants, because nobody sees it except people in the locker room, and who cares?” longtime NPR correspondent Robert Krulwich said of Greenspan years ago. Those sales are usually stable, “so on those few occasions where it dips, that means that men are so pinched that they are deciding not to replace underpants.”

The men’s underwear index (yes, it exists) backs up Greenspan’s theory: US sales of men’s underwear fell significantly from 2007 to 2009, during the Great Recession, but gained steam again in 2010 as the economy recovered.

Analysts are always searching for signs that might predict a downturn. Just as a stampede of animals fleeing to higher ground can be an early sign of a tsunami, the same rules can be applied to the state of the economy.

It’s why there’s been so much chatter lately about inverted yield curves, or the phenomenon of short-term bond rates going higher than long-term yields. It’s thought to be a sign that recession is looming, and for good reason: It’s happened before each economic recession since the 1970s.

But there are a number of less technical — and more fun — measures of economic downturn, and they don’t all revolve around boxers and briefs. Here are a few strange but semi-accurate ways economists track the health of the US economy.

Skyscrapers soar

Andrew Lawrence, a director and former real estate analyst with Barclays Capital, created the “Skyscraper Index” in 1999. His theory was that an increase in very tall buildings happens as we’re approaching a bust — and when a building that breaks the record for world’s tallest is completed, a recession or economic crisis is imminent.

“We took the index as far back as the late 1800s and found that even going back that distance we could still find correlations between economic crises and completion of the world’s tallest building,” he said in an interview.

The Empire State Building was finished in 1930, just in time for the Great Depression, while the Sears Tower (now Willis Tower) and the World Trade Center’s Twin Towers opened in the early 1970s as the US sunk into stagflation. In October 2009, construction company Emaar completed the exterior of Dubai’s Burj Khalifa, and two months later, the Dubai government nearly defaulted.

Lawrence links these lofty ambitions to cheap credit, over-investment, and rampant speculation — typically signs of an economic top.

Today, most projects to build the highest tower are on hold. But in another way, billionaires are still spending their money to soar to the sky: Jeff Bezos, Elon Musk, and Richard Branson are all competing in the space race.

Lipstick pick-me-ups

Estee Lauder chairman Leonard Lauder created the lipstick index during the economic downturn following September 11th, 2001. He noticed that the purchase of cosmetics, lipsticks in particular, tend to be inversely related to the economy because women replace more expensive purchases with small pick-me-ups. In fall 2001, US lipstick sales increased by 11%. And back during the Great Depression, cosmetics sales overall increased by 25%.

But the theory doesn’t always hold up. Research group Kline & Company found that while lipstick sales increase during times of economic distress, they also gain during boom times.

Related hypotheses abound, however. In 2020, at the height of the Covid economic downturn, Estee Lauder’s CEO Fabrizio Freda said that the lipstick index had been replaced by a skincare item as customers donned masks and worked from home.

“The lipstick index has been substituted with the moisturizing index,” said Freda. “But the concept of the index is still there.”

Happy swiping

What’s worse than losing money? Losing money and being lonely.

Dating sites like Match enjoy a boost during busts. The company reported its strongest fourth quarter earnings in seven years during 2009’s Great Recession. In 2020 as Covid raged, the stock price surged 141% between March of 2020 and March of 2021.

It makes sense. Unemployed people have plenty of time to swipe around. Online dating is (relatively) inexpensive and misery, as we all know, loves company.

If the indicator is correct for the current times, analysts should be worried. Match competitor Bumble reported stronger-than-expected fourth quarter earnings this month and received an analyst upgrade, leading shares to surge by 22%.

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