What Is the Hemline Index and What Does It Mean?

Posted by Gale Freeman on November 10th, 2022

Most people have at least heard of the hemline index, but they may not know what it means. In this article, readers will learn how hemlines correlate with the health of the stock market and how economists predict when the country is headed for a recession.

What Do Hemlines Have to Do With the Stock Market?

In 1926, George Taylor, an economist, said that he could predict how well the economy is doing based on the length of hemlines. He stated when the economy was doing well, women's hemlines grew shorter. When the economy was doing poorly, the hemlines got longer. Although this sounds absurd, Taylor's theory was proven in 2010, but the opposite of his summation was observed.

The country has seen other oddities regarding women's fashion as it relates to the stock market, including the lipstick index and high heel index. Although many people still believe these indicators, it is impossible to gauge the success of the nation based on what women are wearing. Instead, there are other better indicators economists use to predict economic recessions. Those who want information should read more.

How Do Economists Predict Recessions?

Economists define a recession as an economic decline that spreads across the country rapidly and lasts for several months. The following are some of the variables economists monitor to predict if the country will head into a recession. With this page, readers will get a clear indication of what is used to measure the probability of a recession.

• Steady increases in job loss and unemployment filings
• Consumer spending decreases across the board
• Corporations reduce their spending
• Inflation continues rising

Ways to Protect Against Recessions

While recessions cannot always be prevented, individuals need to learn more about the ways they can combat a recession and protect their finances in the process. Consider the following tips.

• Create an emergency fund to prepare for unexpected financial turbulence.
• Seek a second income to provide greater money.
• Consumers should make sure they are living within their means.
• Invest for the long term with low-risk investments.
• Diversify investments to protect against catastrophic crashes.

Protect Your Investments

Recessions are inevitable. While they are tough to go through, the US always recovers, eventually. Taking the above steps is critical for protecting yourself against rising costs and recession concerns.

The best way to protect yourself against recession stress is to be prepared. Living within your means and putting money up for emergencies will go a long way toward giving you peace of mind.