The State of the Economy Is In Your Pants

In the 1970s former U.S. Federal Reserve Chairman Alan Greenspan shared a bizarre idea about how to gauge the state of the economy: the Men’s Underwear Index. Due to underwear’s position as a clothing staple, his theory went, men purchase freshies pretty regularly when money is flowing. Conversely, when money is tight, men are more likely to stretch their undie lifespan (natch, they are hidden), resulting in a dip in sales.

So if you’re interested in where the economy is headed, the argument goes, keep your eyes on your drawers, smelly or otherwise.

Cue a Liz Lemon-level eye roll? Possibly. Though if you squint hard enough the theory holds up, assuming you believe the two are actually linked. In 2003, the research firm Mintel began keeping records of men’s underwear sales, reporting consistent growth each year—until 2009. Subsequently a few years of flat and declining sales passed while people dealt with the recession by wearing old, dirty underwear and drinking. In the last quarter of 2010, when the economy began to pick up again, the GDP expanded by 2.8 percent — the fastest rate of growth since 2005. And guess what else grew? That’s right, underwear sales — jumping 12 percent that year.

So is it possible to become the next George Souros just by looking in your dresser? We’re not so sure, but it could be worth checking out: On average, men buy 3.4 pairs of underwear each year. If you’ve loaded up in the last 12 months with more than that then perhaps the future is looking snug — for both you and Uncle Sam.

The Men’s Underwear Index isn’t the only dubious economic index put forth over the years. Here are a few of the more memorable theories:

The Hemline Index: Developed by economist George Taylor in 1926, this index claims that as the economy improves, skirts get shorter — and vice versa.

The Divorce Index: Recessions push people to postpone divorce because of the high legal fees and an inability to sell their houses. So a rise in divorce rates means people are growing confident enough in the credit, real estate and job markets to finally ditch their hated spouses. (Tearful hi-five).

The Trash Index: Economist Michael McDonough made the insightful observation that as people buy more things, they also produce more garbage. This index correlates to GDP at a startlingly impressive rate — as high as 82%. And it is true that at a certain angle, Oscar the Grouch and Warren Buffett bear a striking resemblance.