People love to cite the lipstick effect. Named in 2001 by former Estée Lauder CEO Leonard Lauder, the lipstick effect just says that during hard times women enjoy more inexpensive luxuries like lipstick.
But looking at this graph from The Economist, you can see that the lipstick effect does not consistently correlate to good and bad times.
Still though, Mr. Lauder says the effect is really about less expensive luxuries that buoy people during hard times. For recession year 2008, with sales skyrocketing, perhaps nail polish is the new lipstick.
In addition to lipstick and nail polish, for the following 2008 recession indicators, I have don’t have sufficient data, but don’t they make sense?
- diaper rash cream sales up
- disposable diaper sales down
- divorce rates down
- more adult children moving in with parents
- rising food truck sales
- architects billing less
- men’s underwear sales down (MUI)
Our Bottom Line: Like a rubber band, our spending can be somewhat elastic. During prosperity, for certain goods and services, our spending stretches a lot. Then though, for those same items, when recession hits, we buy much less. Called the income elasticity of demand, when we have noticeable changes in the quantity that we demand because our income drops, our buying behavior creates a recession indicator.
Sources and Resources: For lipstick effect and source of graph, here; diaper rash data, here; architecture, here; boomerang generation, here; less divorce, here; food truck sales, here; men’s underwear index, here.
Posted by: adminEcon
Tags: Alan Greenspan, diaper rash, diapers, economic indicators, Estée Lauder, income elasticity of demand, Leonard Lauder, lipstick effect, men's underwear index, MUI, nail polish effect, recession
Fewer people are going to baseball games. Even with a new stadium and a winning season, the Yankees are luring fewer fans. According to Forbes, as of the end of June, stadium revenue was sinking for the Chicago Cubs, St Louis Cardinals and Atlanta Braves, and attendance at LA Dodgers games has plunged.
Responding, owners maintained higher ticket prices but then gave discounts. For a month, the Baltimore Orioles sold $1 tickets for games against all teams except the Yankees and Red Sox. Still, attendance remained low.
On the other hand, some teams are okay. 12 of 30 MLB teams have not seen their attendance sag. The San Francisco Giants and the Texas Rangers are in good shape. And, Forbes tells us that the Cincinnati Reds are enjoying “a bump.”
Trying to explain how the economics of baseball is shifting, sports economists John Siegfried and Tim Peterson concluded that more affluent households went to games during the 1980s and 90s but now, not as much. Meanwhile, online resellers like Stubhub have facilitated bargain hunting. People seem to be waiting for a cheap deal before committing.
The bottom line? It is tougher for teams to earn revenue by filling up a stadium. The Great Recession may be a cause but not the only one.
To see more about sports economics, you can look here at a previous post on unaffordable stadiums.
The Economic Lesson
The Great Recession affected many households’ willingness to spend on discretionary items like baseball tickets. Called the income elasticity of demand, when our income drops by a certain percent, purchases fall even more for certain types of items.
An Economic Question: When income falls and home values decline, on which items will consumers initially cut back?