Captain Underpants to the Rescue
Dartmouth Business Journal
Given the daily flood of economic data and analyst opinions, it is difficult to discern the actual health of our economy. But perhaps we are overlooking obvious signs, indicators that both deserve our attention and are more intuitive than the statistics in the Wall Street Journal. In fact, understanding the nation’s economic well being may be as straightforward as looking in your underwear drawer.
If you are a man and recently purchased some new pairs of underwear, your shopping spree may predict better days ahead for all of us. This unconventional marker of financial strength sounds silly at first, but behavioral economists provide rational reasoning for why underpants sales are sound economic indicators. In fact, even former Federal Reserve Chairman Alan Greenspan subscribed to this theory. He argued that since men’s private garments are hidden from the public, they are the first clothing item men stop buying when the economy sags. So during tough times, even men who spring for chic Armani suits on the outside might be covering up holey underpants underneath.
Recent reports by marketing research firm NPD Group show that men’s underwear sales in August 2011 were 7.9 percent above the previous year’s August sales numbers. If this forecast model holds water, the U.S. economy seems to be recovering. On the other hand, it could just be that guys cannot put off buying new boxers any longer, given their lack of undergarment investment in previous years.
A similar but more lamentable economic warning is the Diaper Rash Indicator (DRI). Procter & Gamble estimates that American parents spend on average $1,500 on diapering a baby each year, changing diapers 6.3 times in a day. However, disposable diapers are one of the expenditures new parents try to slash from their budgets in a recession. Sadly, their frugality leads to other expenses – the cutback on diapers shows up in the form of rising sales of diaper-rash creams. Even as Americans are having fewer children and the infant population is declining, diaper rashes have become a growing phenomenon in recent years. According to Deutsche Bank’s 2011 consumer data, unit sales of disposable diapers fell 9 percent in the 52 weeks that ended in August, three times as fast as the population of infants. Meanwhile, unit sales of diaper rash creams rose 2.8 percent. So unless people have found creative new uses for the creams, it appears that baby butts are suffering from the economic downturn.
Not all indicators of hard times, however, show increased thrift. Many women, for example, seem to spend more on little pick-me-ups when they have less pocket change. Leonard Lauder, chairman of cosmetics brand Estee Lauder, coined the “Lipstick Index” in 2001 to describe the increase in sales of small indulgences during financial slumps. The basic idea is that consumers like to buy products like lipstick because they want to shop, but do not feel confident enough about their future wealth to purchase more expensive goods. Nowadays, nail polish has replaced lipstick as the popular splurge item. The shift, Lauder argued in Time Magazine, is due to the additional cheery effect associated with putting on bright colors. Nail polish simply offers customers more vibrant choices than lip-gloss does. Truth or nonsense, at least his theory is consistent with sales numbers – purchases of nail-color products have gone up 65 percent since the first half of 2008, according to NPD Group.
Finally, for the extremely math-averse, there is one indicator you can look at that does not require combing through any statistics. The Hot Waitress Index relies solely on your qualitative judgment. The reasoning goes that the more attractive the waitress, the weaker the economy. In good times, attractive women have more job opportunities to earn a living via modeling, acting and other careers where nice appearances can deliver a hefty sum. In a bleak economy, those prospects dry up. Restaurant employers will also hire more pretty women in hopes of attracting more diners. So if the U.S. economy is on the rebound based on men’s underwear sales, you might want to get your fill of eye-candy before the hot waitress at the local joint gets that better job.