Thursday, March 18, 2010

The Economics of Underwear

In December I listed men’s underwear sales as an unusual economic indicator. This indicator was first developed by former Fed head Alan Greenspan in the 1970’s. My initial thought was that the men’s underwear market is much more complex now and so I questioned if this was still a valid indicator.

I couldn’t find an update on men’s underwear sales, so I started thinking about my own underwear purchases over the last three years:

2008 – The economy was still strong and I had plenty of disposable income. I purchased six pair of underwear. It was the most expensive underwear I have ever purchased in my life. It was underwear that is sold on individual hangers, not in packages. It was colorful, it was flashy, and it was totally unnecessary. My wife is not going to be impressed by my choice of underwear after nearly 30 years of marriage. I don’t have a hot, young, girlfriend. And the underwear looks “slightly” out of place on my aging, baby-boomer, body.

So why did I buy it? Because I could. My underwear selection is representative of the wild conspicuous consumption, over- the- top spending, that characterized the years prior to the Great Recession.

2009 – The Great Recession was in full gear. My disposable income was gone due to job loss. I bought no underwear, even though the pair I was wearing when they told me I was downsized had to be destroyed.

2010 – The recession has ended and a subdued recovery has begun. My disposable income is still low; however underwear is still a necessity even in these times. I do not recommend “going commando” to save money and it is certainly not acceptable attire for job interviews. I agree with Kramer on this one, “my boys need a house”.

However after a year of no underwear purchases, some existing inventory is wearing thin. So I recently have made my first underwear purchase in almost two years. But did I buy the fancy, high-priced, stuff on the hangers? Of course not, but I was able to purchase very good underwear at a close-out store. This underwear cost 70% less than the ones I bought in 2008. Why was it sold at close-out? Because the maker of this formally expensive underwear went out of business when the recession hit. His sales were dependent on people having significant disposable income to spend on “high-end” (not tight end) underwear.

And that’s why this recovery will be subdued. People are not going back to their previous uninhibited buying habits either by necessity or choice. This recovery is being led by cheap underwear!

Unusual Economic Indicator Check-Up

It’s time to check to see what some of the unusual economic indicators that were identified in December are telling us now.

Baltic Dry Index (measures international shipping) – A slow, uneven, climb upward.

Scrap Metal Prices – Very positive increases across the board.

Coal Futures – Very positive. Prices expected to be 17% higher a year from now.

Men’s Ties – The big trend now is subdued pastels. This would be consistent with the start of a subdued recovery. Maybe this indicator has more credibility than you think.

The Hot Waitress Index – I have not seen any hot waitresses lately, so maybe they have all found better jobs. So this would be a positive indicator.

Some Other Indicators

Woman’s clothing – Sales are down. This is a negative because women control the disposable income in most households. If women are not spending money on clothing, they probably aren’t spending much money on other things either. Men’s clothing by the way (which includes underwear) was up 5.7% in the last report.

Beer Sales – Were down 2.2% for all of 2009, but increased 1% in Q4. This is great news. If only there was some appropriate way to celebrate this occasion.

Coca-Cola Sales – Expected to be flat in 2010. Don’t you just hate it when Coke goes flat?

Mc Donald’s Sales – Up 1% in December after two months of decline. Mc Hopeful.

Charitable Giving – Initial indications are that donations are lower than last year, a negative.

Short Skirting the Issue

Several readers pointed out to me that I did not include the “hemline” index in my December analysis. This states that women’s hemlines rise in good economic times and fall when things get tough. This index actually was first developed in the 1920’s and was very logical. Women raised their hemlines to show off their silk stockings which were a both a status symbol and an attention getter. When bad economic times hit, women could no longer afford the silk stockings and lowered their hemlines to hide the fact they weren’t wearing any. When things improved, hemlines went up to reveal the new stocking purchases.

This indicator is still cited, but the original logic behind it is no longer valid. Regardless, short skirts are a very hot fashion item for this spring.

What It Means: short skirts are back in fashion just as all the hot waitresses are going back to other jobs. I absolutely hate this economy!


  1. Very good post, thank you for not including pictures.

  2. Thanks, I did consider it --- for about 2 seconds!