What Canned Meat Sales Tell Us About the State of the Economy

Covid broke the Lipstick Index and a lot of other economic indicators. Here’s what should replace them.

Illustration: Rose Wong

For years, economists have relied on traditional economic indicators like consumer spending, wages, inflation, and the yield curve to predict an upcoming recession — and economic recovery. They’ve also plumbed all sorts of other weird economic indicators like lipstick sales. Estee Lauder coined the term “the lipstick effect” during the 2000 recession, when sales climbed following the dot-com bust. The reasoning goes that when times get tight, women will ditch big-ticket purchases and opt for small indulgences like a tube of bright lipstick.

But along came a pandemic, turning most economic norms — and many of these indicators — upside down. Now, we don masks at virtually all public outings — why would a woman wear lipstick when no one can see her mouth? U.S. sales of lipstick in March dropped 44% year over year, according to Nielsen. (In fact, all makeup sales are down globally by 30%.)

Today’s coronavirus recession is unlike anything economists have witnessed in the past. Most every other recession has been triggered by a bubble bursting — aka housing and dot-coms — rising interest rates or a supply shock (an unexpected event that leads to a sudden change in the supply of a commodity and, ultimately, pricing — think the 1973 oil embargo). Those recessions were typically followed by slowdowns in investments; companies stopped purchasing new equipment, plants, machinery, and trucks. And consumers typically cut back on their purchases, particularly big ticket items like cars, RVs, and houses.

This time, nothing follows predictable lines. And the coronavirus is directly tied to this economy; there’s no way to separate them. Some layoffs have been temporary, although the jury is still out on whether that will remain the case, as the pandemic has delivered blows to virtually every business that involves personal interactions, whether it’s the arts or entertainment, travel, retail, services, or restaurants.

We’re also spending money in surprising ways — instead of airline tickets and beauty products, we’re buying e-books and backyard swimming pools…