What do a Labubu toy and the U.S. Treasury yield curve have in common?
For some members of Gen Z, everything from the popularity of Labubus to listening to emo music to lipstick sales are a possible indicator of a recession.
TikTok is packed with what users call recession indicators. Some tout the hemline index, a theory that longer hemlines indicate a recession is coming, and the lipstick index, a theory fueled by Google Search trends that shows spikes in searches for lipstick or lipstick purchases ahead of previous recessions.
Tara Sinclair, chair of George Washington University’s Economics Department and an economic forecasting researcher, said while looking for recession indicators may seem strange, some have an underlying validity.
“There would be reasons to think that culturally we could come up with a theoretical argument, for example, for the lipstick index, this idea that when you feel like you can’t buy a whole new outfit, but maybe you can just buy yourself a new shade of lipstick, that that might somewhat be indicative of people’s sense of personal finances,” she said.
What Sinclair said she’s more interested in is that people are posting about recession fears in the first place.
“I think what’s more important is tracking that people are talking about it more. And in general, if people are talking about concerns about the economy, then the next step is for them to pull back on their spending. and if they pull back on their spending, then that can create a self-created recession,” she said.
‘Real, genuine concern’
To Mary Esposito, the 22-year-old college student behind Money With Mary, an Instagram account on money and careers among young women, the recession indicators social media trend speaks to larger trends among young people.
“I’d say there’s a real sense of anxiety and dread about the future,” she said. “This is something I’ve seen all across the board, not just specific within the context of personal finance accounts, but I feel like with the way our world is going right now, and economy – even people who aren’t necessarily interested in the economy are feeling this blowback.”
If people are feeling more concerned about the economy or their own financial status, Sinclair advised being more cautious on spending, keeping a “rainy day fund” and staying focused on improving skills or finding job opportunities.
For Esposito, that means building an emergency fund in case of difficult financial situations to come. She said maintaining a safety net is of utmost importance in a time when she doesn’t trust the economic system around her.
“I’m noticing a lot of people, especially on social media, are venting about it, but there’s a lot of dark humor, right? So there’s a lot of memes about not affording rent, living with roommates for forever, moving back in with your parents, et cetera, card declining. It’s a way to cope with the stress. And I think that that’s a uniquely Gen-Z way, to deal with a lot of stuff going on is kind of a meme-ify it in a way,” she said. “But I don’t think that that should detract from the fact that there is a lot of real, genuine concern.”
Wait, but what’s a real recession indicator?
As for the usual metrics that economists use to predict recessions, such as the unemployment rate, now at 4.1%, and weekly unemployment insurance claims, Sinclair said the numbers are not setting off alarms.
What’s more concerning is consumer sentiment, she said, which researchers gauge through surveys. There’s also currently an inverted yield curve, when short-term government bonds have a higher yield than long-term bonds, which is historically considered one of the most reliable indicators of a recession, but that’s not a perfect indicator either.
Predicting a recession is difficult, Sinclair said. Economists usually watch for a number of metrics to all move in the same direction together, culminating in a recession. That means economists only really know a recession is happening when it’s happening.
There’s a chance that signs that a recession is happening could include a spike in lipstick purchases, but Sinclair said it’s more likely that the consumer behavior that signifies a recession will be something completely different.
“We really want to watch the current trend setters, because it’s probably not going to be lipstick. It’s probably not going to be hemlines. It’s going to be something different this time, that when we look back after this recession, because there will be a recession at some point. We’ll probably look back and be like, ‘Oh yeah, that was the time when everybody started doing X right before it,’ and we’ll be able to come up with some story,” she said.
So, does that mean Labubus are actually recession indicators? Maybe.
“I mean, it could be that we all get ourselves a little Labubu and if that’s all we’re getting everybody for Christmas this year, that’s probably a signal that we’ve cut back a lot on our spending by Christmas,” Sinclair said. “Unless, of course, you’re getting one of those collectible ones that cost thousands of dollars.”
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
