A new trend has started on TikTok: De-influencing. Some say this is a harbinger of recession. Is it indeed possible to predict business cycles via popular culture? In light of this question, Philip Hans Franses, Professor of Applied Econometrics at Erasmus School of Economics, is asked about his research on the hemline index and the economy in an interview by De Morgen (1 March 2023).
One of the most famous examples of predicting business cycles via popular culture is by looking at the hemline index. This index claims that the length of women’s skirts negatively correlates with the stock market. Rumour has it that the first person to mention a correlation between skirt length and economic circumstances, was economist George Taylor. This was as early as 1926.
In order to test whether there is some validity to this theory, Franses and his then-student Marjolein Baardwijk performed a study using empirical tests after the French fashion magazine L’Officiel digitalized their archives from 1921 on. The researchers coded all the fashion reports and compared it with economic cyclical data from the National Bureau of Economic Research (NBER). Their research showed them that the hemline index is an urban legend: a good story with no real-world value.
Still, the Professor notes you can tentatively conclude from the study that fashion follows the economy with about a three-year gap - that after a couple of years of economic prosperity, skirts got shorter, although even that effect was small. In that respect, you could possibly argue that the long skirts we see now are the result of the dip we experienced during the covid pandemic, but not that those skirt lengths predict a recession.
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For the full item from De Morgen, 1 March 2023, click here.