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Unusual Economic Indicators

Mar 18, 2012 • Behavioral Economics, Economic History, Households, Labor, Macroeconomic Measurement, Uncategorized • 204 Views    No Comments

If you see women in long skirts at “sit-down” restaurants, then the economy is probably expanding.

Since 1926 when the hemline index was first expressed, economists have assumed that hemlines fall if the economy contracts and rise during prosperity. However, when economists at Erasmus University looked at fashion magazines and business cycle data from the NBER between 1921 and 2009, their conclusions were not exactly what everyone expected.

They identified a delayed connection between skirt length and the economy. 3 to 4 years after the GDP rises, then hemlines go up. And, if the economy slumps, it takes 3 to 4 years for skirt lengths to drop. Reminding us that the recent recession ended in 2009, one CNBC reporter says we should not worry about longer dresses at 2012 Fashion Week.

Financial journalist Floyd Norris was also upbeat. Because his “Where You Eat Index” for 1994-2012 shows that GDP and “sit down” restaurant attendance rise together, the January 2011 to January 2012 increase in “full service” restaurant business was good news.

Our bottom line? To assess the economy, you can look at we wear and where we eat.

Here, econlife looks at other uncommon economic indicators.

The Economic Lesson

Economic indicators can be categorized as leading, coincidental or lagging. Stock markets, reflecting investors’ perception of future profits, are leading indicators, the GDP, telling the current state of the economy, is coincidental, and the unemployment rate is a lagging indicator.

An Economic Question: Thinking of the recession that lasted from December, 2007 to June, 2009, which daily life economic indicators have you observed?

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