What is the lipstick indicator?

Can lipstick predict economic trends and consumer confidence? The lipstick indicator says it can. Find out if fashion and beauty really affect economic trends in this podcast from HowStuffWorks.com.

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Episode Transcript

Speaker 1 (00:03):
Welcome to stuff Mom never told you from housetop works
dot com. Hey there, and welcome to the podcast. I'm
Kristen and I'm Molly. Molly got some bad news for
you today and stay that we are recording. According to
the New York Times and probably every other major newspaper

(00:25):
out there, February, unemployment rates are out and it has
reached another high eight point one percent. And that is
not growth that we like. Things are looking grim out there,
So I gotta ask you, has your spending change to
reflect this recession? You know, people are trying to pinch
pennies ride the wave. What are you doing well? I

(00:48):
have to admit I haven't been in in a shopping
mall since Christmas. Um probably no more Starbucks once my
gift card runs out that I got for Christmas. Um
less seating out altogether. Yeah, me too. I've been cooking
a lot more rice. Best Christmas present I got this year,
Rice cooker. It has saved my life. Christen dorses rice cookers, Ding.

(01:13):
Maybe you'll get a freedom. But Christine, we're not the
only ones cutting back. I saw in the Washington Times
last week, uh that the big winner in the recession
be surprising to you Granny underwear really yes, apparently, um,
like myself, many women are not going to the mall.
And Victoria's Secret stock is way down when we're scrimping
on nice bras, nice panties and Haynes stock, which you

(01:37):
know makes you know, I don't want to point fingers
at Haynes, but not as classy maybe as Victoria's Secret
is rising a little more cotton. There's nothing wrong with cotton.
That's a discussion for another podcast, indeed, But all over
the market you see trends where department stores, boutique stores
there their earnings are way down, and stores like Ross,

(01:59):
t J, Mac Martials their stock is rising. Yeah, and
even on the higher end. Um. We had New York
Fashion Week last week, and um, I think Paris Milan
Fashion Week. I obviously am not the biggest fashionista, but
a few stories caught my eye about you know, people
were trying to see if there are any signs of
this the recession on the runway, and there was definitely

(02:21):
a lot more black and exaggerated lines, sort of this
whole power silhouette of big shoulders, balloons, sleeves, um and
not much risk taking, right, I think with Slate who
said that clearly designers think that if we dress with ferocity,
will beat the recession with shoulder pads. Well, we'll see,

(02:44):
we'll see if that happens. But um, it seems kind
of silly though, to be even thinking about fashion when
there's so much economic trouble, like it, really, I don't know,
it seems kind of silly, right, But um, fashion and
granny panties and all of that is kind of does
reflect the economy because it's all part of consumer spending.
It's discretionary spending, things that we don't necessarily have to have,

(03:06):
like we have to make mortgage payments and have to
pay for our car insurance and all of that. But these, um,
these smaller items also reflect the economists also pay attention
to how we're treating these smaller items. And well, have
you ever heard of the hemline Index? I have because
I read your fascinating article what is the lipstick indicator?

(03:28):
But you start off with this thing called the hemline index,
which really shows how fashion and the economy are inextricably linked.
In uh round. Right before the Great Depression kicked off,
an economist named George Taylor noticed that women's fashions had changed.
It seemed like once the stock market crash in twenty nine,

(03:51):
women's headlines fell because if you remember, in the roaring twenties,
women were being a little more daring, showing a little
more skin with your shore skirts. Flapper is don't mean
to love them. Um. And so Taylor devised this thing
called the hemline index, and he theorized that when the
market rose, so did hemlines, and when they dropped, skirts

(04:13):
fell to the floor. And it pretty much held out
for a few decades. What you noticed, right, and then, um,
you point out that in the eighties, looking and a
woman's hemline might have seemed a little sexist and a
little bit little unnecessary. It probably stopped holding up. So
economists needed something else to point to, but it was
still fashion. They started looking at men's ties, neckties. If

(04:34):
a man was wearing a skinny tie, it meant that market.
It was bowl market. Things are good wide ones declining
bear market. Right, But this is all still tied to
fashion turance, because you know, skinny ties a little a
little more hip in the UH in the eighties, so
you know, but this isn't the only thing that economists
have tossed around like trying to look for correlations between

(04:58):
everyday habits and the economy. Some have used the amount
of snowfall on Christmas Day in Boston to predict the
market for the coming year. UM, images of bears or
bulls on major magazines like Time. Um, even the Super
Bowl outcome has been used. I mean, these guys aren't
really completely depending on it. They're not staking all of

(05:20):
their all of their claims on you know, snowfall and
super Bowl. But they're out there. But one interesting thing
that maybe ladies should be particularly interested in is um
this idea that we can predict female consumer confidence by
a very simple thing, and that's whether we're buying lipstick. Yeah, Molly,

(05:41):
I myself am not a lipstick purchaser, nor am I
I think I have one too, but I've had since college. Right,
But I will say, my mom isn't. I don't think
I've ever seen my mom without lipstick. Oh no, yeah,
I mean there were you know, sometimes money was tight
growing up, but anytime she left the house, she always
pull out and reapply, get some lipstick out. Oh yeah,

(06:04):
And you know, maybe I'm not a lipstick ware but
there are times when you know, things might be tough.
I can't buy all that i'd like to buy it Target,
but a little tube of vanilla chapstick might make me
feel better. Yeah. So once again it sees little discretionary items,
little litill pick me ups along the way, and consumer
spending all goes into this thing called the Consumer Confidence Index.

(06:27):
And this is something more than you know, super Bowl
and snowballs, snowfalls, excuse me, that economists really do pay
attention to. And the Consumer Confidence Index, which is compiled
by the nonprofit Conference Board, measures how confident we are
we as in you and me, average Joe in the market.

(06:47):
Because if we don't think the market is going to
rebound much, we're going to be more compelled to say
we're not going to put much more money into the market.
So if confidence is low, economists are going to take
that as a cue that it's going to take a
little longer for the market to rebound because there's not
going to be as much um money coming into it,
and vice versa. So I guess one way they contract

(07:09):
this is look at our discretionary spending. Things we don't
need but we buy anyway. Right, Like, when the economy sours,
people are going to buy more non perishable foods Like me.
I've been buying lots of brown rice and canned vegetables,
lots of beans on my table now. But when we're
back in the black, it's time for fresh meat, fresh vegetables,

(07:31):
baked goods, little you know, a little better, better fair restaurants,
Lord Willing someday. But this all comes back um too.
You know, we were talking earlier about the hemline index,
but one thing that sort of escaped those depression era
economists was that at the same time that hem lines

(07:52):
were rising and falling uh in the depression, lipstick sales
cosmetic sales were rising. Yeah, and there are also spikes
during one, right, mollyh With the two thousand one dip
following the September eleven the tax, the chairman of Essay
Lauer Companies, man named Leonard Lauder, picked up on a

(08:17):
spike in lipstick sales. He found that in the fall
of two thousand one, lipstick sales jumped eleven percent. So
he got to thinking, well, maybe you know, women don't
have enough money right now to splurge on a new wardrobe,
so they're coming to the estate ladder counter and they're
buying up more lipsticks to give a little little touch

(08:38):
of color to those old, drab clothes that they're still
having to wear. So he coined the term lipstick indicator.
So basically, what you're saying is if I'm at the
mall and I can't afford a new purse, that just
the little tube of lipstick is going to make me
feel better two purse, thirty dollars tube of lipstick or
for me more like five dollars. That still seems for

(09:01):
But another reason why you know, little things like lipstick
and cosmetics might go up in in down economies is
that you get an instant gratification from it. You have
to reapply your lipstick. You get to dig through your
purse and find that shiny new you know, Chanel ruby red,
whatever color it is, and you know, open it up,
put it on, and then kind of get a refreshing

(09:21):
every now and then. Right, it lasts longer as opposed
to splurging on like a latte, which I might do
every down, then that's gone. But lipstick, it's your friend,
stays with you for as long as that colors and style.
That is, if you if you wear lipstick unlike me
or Molly. So we might not be experts on this,
but we may not need to be because in this
recent recession, lipstick is down, Like the lipstick indicator is

(09:44):
not holding up as being the sign of you know,
how the markets doing. Yeah, the economists charted out the
gross domistic product and lipstick sales from to two thousand
one and pretty much, uh put a smack down on
the lipstick indicator. They were like, there is no parallel
between the two. I mean, it's one of those things

(10:07):
like the skinny ties we're talking about. It's probably just
all it's all fashioned because you know, you've got lip glosses,
it might be more popular or whatever, right, which is
actually why, um, some experts are saying that maybe there
might be an index which one day is a little
bit more applicable to Kristen and me because they're saying
we should actually just track all beauty products and not

(10:28):
just lipstick because, as you said, lipstick is very tied
to what's in style. Um, you know there have been
years where I was doing well even though you know,
the economy was doing well, it wasn't a very good
indicator anymore. Right, It's not very reliable and in as
an example of why an overall beauty index might be
a little more reliable. Um. In two thousand and eight,

(10:50):
Laureale posted a year of a year year sales growth
of five point three percent. And that's pretty good. I mean,
I don't know many companies right now that are enjoying
such robust growth, right And if you need a new job,
the number of new Avon representatives rose five percent, as
did their revenue in the same time periods that you
were talking about with Floreale. So perhaps the new index

(11:11):
will be something like the blush index, the eyeliner index,
or just the makeup index. Yeah, I mean, and you know,
economist they're gonna be looking for that because they they've
got to have their cute statistics. But molly, um side note,
guess what's come back to along with the lipstick indicator
from two thousand and one. But there's a new necktie index.

(11:31):
What is it? Well, um, this is from London. Some
economists think that more men are buying neckties and sort
of like neckties or the men's lipstick, they're buying more
neckties to make themselves feel a little a little better
in the office and uh, look more professional, to keep
their jobs, But Molly, sadly enough, it is yet another

(11:52):
indicator that times are tough. Times are tough. More rice
is ahead in your future. At least I've got my
rice cooker because I have no patience for waiting for
water to boil. Well, if there any sponsors out there,
I don't have a rice cooker, I'd love one. I'll
bring you rice, Molly. But if you want to learn
more about both rice cookers and recessions, you can go
to how stuff works dot com. And if you'd like

(12:14):
to email Kristen or me with any suggestions, ideas, or comments,
you can email us at mom stuff at how stuff
works dot com for moralness and thousands of other topics
doesn't how stuff works dot com