Garbage is an unlikely economic indicator that actually has an 82% correlation to US economic growth, according to economists Michael McDonough and Carl Riccadonna. It is very intuitive because in times of economic well being, consumers buy more and as a result throw more away. If you buy a new TV you will throw out an old one, or if you go out to dinner you will throw away food you have at home and leftovers from your meal out. The more excess money people have, the more they buy, and are more careless about what they throw away.

Waste comes in many different forms. Michael McDonough states, “That’s what’s great about this indicator. It’s holistic because it’s not isolated to a single part of the economy. It’s people throwing things out, it’s buildings being demolished — it’s everything.” Almost half of the trash indicator is steel and iron waste, and the next biggest component is demolition and municipal waste.

In good economic times there is also an increase in waste from commercial and residential construction. With a lot of construction, there is also a lot of material added to waste. The data comes from the American Association of Railroads on a weekly basis, which means that it is very up to date. Garbage is therefore not a leading indicator, but can likely be classified as a coincident indicator or a slightly lagging indicator. In order to collect the data people must have already bought things and thrown them away.

The holidays are a time when we can especially see the correlation between garbage and the economy. In times of economic well-being, people will buy a lot- gifts, food, decorations, etc. This all turns into trash after the holidays and the trash bins will be overflowing. In a time of recession, people are much more conservative about what they are purchasing, especially around the holidays. Fewer gifts, less extravagance, and therefore less trash.

Garbage may seem very commonplace, yet it is a very relevant indicator that shouldn’t be overlooked. In the chart below we can see the very close correlation between GDP and AAR Waste Carloads from 1994 to 2012.

 

Sources:

http://www.recyclereminders.com/blog/trash-economic-prosperity/

http://www.marketplace.org/2012/08/16/economy/tracking-economy-and-gdp-through-trash

http://www.businessinsider.com/chart-of-the-day-the-us-garbage-indicator-economy-2012-7

For many people in the United States, the unemployment numbers that are used to measure the strength of the economy are imperative to their confidence in the economy.

But really, how strong is the US economy right now?

While most people in the United States today believe that the economy is growing just from popular knowledge and news in the media, there are many people, including market analysts and economists, who use certain economic indicators, like the jobless claims indicator to measure the true strength and current climate of the current economy.

This economic indicator, known as Jobless Claims, reports the number of individuals in the United States that newly filed for unemployment insurance that month.  This can help investors, and every day citizens shape a perspective and determine how they perceive the current state of the United States economy.

This data is also seasonally adjusted, in order to account for seasonal hirings and firings during certain times of the year, like before the holiday season in November.

Most economists believe that the four-week moving average is a more accurate number to gauge the economy, as the week-to-week number is volatile due to immediate changes in the economy or country.

According to the report published on August 25 by the United States Department of Labor, the level of jobless claims is at a historically low level, as there are currently low levels of layoffs and many people are not filing for unemployment insurance.

As released in the last report, 261,000 people filed in the past week lowering the level by about 1,000 claims overall.

Economic analysts believe that the jobless claims numbers will continue to remain similar throughout the next few months, as the economy continues to grow and the labor market improves.

While many citizens believe that the current economy has improved since the economic downturn a few years ago, the jobless claims indicator proves that the economy has drastically improved.

The number of people who have newly filed for unemployment insurance, known as the jobless claims, has remained under 300,000 per week for over 77 weeks.  This record is the longest streak in the US labor market since 1970.

While things seem to be looking up for the economy, it is important to understand that people are still filing for unemployment insurance.  As the unemployment rate is not currently at zero percent, there are still people who are looking for jobs and unable to find them, and therefore there are people who need the assistance from the unemployment insurance.

The number of jobless claims is at a historical low, yet there are still many people who have distrust and lack confidence in the state of our economy.  While the jobless claims indicator paints a pretty and strong picture of the economy, it is very important to look and identify other indicators that allow a much more inclusive and authentic picture of the current state of our economy.

Want to predict if we are entering a recession without consulting the usual economic indicators like gross national product (GDP) or the unemployment rate? Enter the lipstick index. It basically shows that in times of turmoil, American women turn to purchasing makeup and lipstick. Leonard Lauder, the chairman of Estée Lauder, coined this term in 2001 because he found that in times of hardship, women consistently turned to his makeup company and their sales soared.

So why does this link to a recession in the economy? While the desire to own products such as electronics declines, primal cues increase women’s desire to attract mates through the use of beauty products. Psychologists analyzed this phenomenon further only to realize that when the going gets tough, women buy makeup, perfume and stilettos to increase their sexual appeal. The end game? To find a mate that can provide financial security in the future. Although some may believe that women should think adversely about finding a suitable mate during a time of economic strife, we are primed to believe this—especially during a financial crisis. When you think about it, a financial crisis separates the fiscally strong men from the pack and women see this. Charles Darwin and evolutionary biology suggested that only the fittest of a species will survive. So therefore in a recession, a woman needs to find a mate that can provide resources and can help achieve reproductive success like biology tells her. I know what you are thinking, that’s crazy but it’s true. Even during the Depression, cosmetic sales increased by 25 percent.

As a woman, I find this hard to believe, but are we kidding ourselves? It doesn’t seem like it. However, I would rather buy two lipsticks, eyeshadow, a tube of mascara and a bottle of perfume for $180 from Sephora over a blouse for the same price of Nordstroms and that has nothing to do with biology. We can all get more bang for our buck when it comes to makeup during a recession. If you really think about it, a blouse or expensive purse is more of an investment than a couple of beauty items that can boost your confidence to the same level.

The lipstick index may be something that is cognitively hardwired in women but it also happens to be an excellent economic indicator. In fact in 2008, L’Oreal saw their sales increase by 5.3 percent while other companies like Ford saw a decrease of 18 percent that same year. Although beauty brands may not suffer during a recession, clearly almost everyone else did. This shows that power of the consumer during economic decline and how their behavior can make or break an industry, whether they realize it or not. Primal needs take over in times of crisis from finding a suitable mate to making hard fiscal decisions in order to survive the next month. If anything, this shows that economics can be regarded as a study of behavior and women rather you’re your usual dollars and cents.

Conventional economic wisdom suggests that during recessionary times, most industries will suffer. During recessions, the real estate, retail and other major markets tend to make less money than usual as people are hesitant to make unnecessary or major purchases when times are tough. However, historical patterns suggest that one nonessential commodity does surprisingly well during recessions: movies.

According to the National Association of Theater Owners, box office ticket sales increased in the five recession years before 2008 (Kiplinger). Despite being one of the worst years of the Great Recession, the number of movie tickets sold in the first quarter of 2009 increased more than 9 percent from 2008 (Washington Post). This phenomenon is not a new development. Movies have been performing well during economic turbulence since the Great Depression, when Gone With The Wind (the highest-grossing movie of all time when adjusted for inflation) and King Kong broke box office attendance records despite staggering unemployment rates. Meanwhile, 2005 was a rough year for Hollywood while the economy in general, powered by the housing bubble, performed very well.

At first glance, it is not logical for movies to perform well during recessions because they are not necessary for survival and are an easy expense to cut. The reason behind this cannot be explained by simple supply and demand graphs, but makes sense with a bit of behavioral economics. During tough times, people need to be entertained more than usual to distract themselves. The economic worry and unemployment caused by a recession creates more people needing distraction than usual. Movies are a great opportunity to escape from reality for a few hours at a relatively low cost.

The type of movies that perform well during difficult economic periods lend credence to the the idea that the box office is counter cyclical to the economy at large. According to the president of Box Office Mojo, Brandon Gray, “Comedies and epics tend to do really well at the box office during economic downturns.” (Fortune) This is because these genres fit into the escapism category that people seek out during economic difficulty. In the box office summer following the terrorist attacks of 9/11, Spider-Man brought in $403.7 domestically (Fortune). In the midst of the Great Recession, The Dark Knight broke the record for an opening weekend and ultimately made over $1 billion (Fortune). It is no coincidence that both of these movies feature likable heroes and themes of overcoming adversity. Additionally, the light-hearted comedies Step Brothers, Pineapple Express and Tropic Thunder were major hits during the summer of 2008. Despite ticket prices hitting an all-time high in 2015, the average ticket price of $8.61 still offers a relatively cheap entertainment alternative to dinners, bars or concerts (Slashfilm).

Unfortunately for economists, box office revenue is a trailing indicator. It does not help predict economic developments because increased ticket sales are people reacting to a recession when it has already taken effect. Still, the correlation between box office sales and the economy demonstrates that economic decisions are largely dependent on human psychology. It may not make sense for people to spend valuable income on something as superfluous as a movie during a recession, but the desire for entertainment can overcome logical decision making.

Sources:

http://archive.fortune.com/2008/08/21/news/companies/Movies.fortune/index.htm

http://www.kiplinger.com/article/business/T019-C000-S001-10-quirky-economic-indicators.html

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/11/AR2009071100677.html

http://www.slashfilm.com/average-us-movie-ticket-price/