11 Interesting Metrics to Gauge Economic Conditions During a Government Shutdown
The current government shutdown has reached its 14th day, and it doesn’t look like a resolution is imminent. Prediction markets suggest that the shutdown might last for 30 days or more, making it difficult to gauge how the economy is faring as we transition from a tighter monetary policy to something more relaxed.
Hundreds of thousands of federal employees have been furloughed, while others are working without pay. Agencies, like the Small Business Administration, have had to halt their loan guarantees, which is a critical funding source for small businesses. The absence of government data, particularly from the Bureau of Labor Statistics, is also a significant issue. They have suspended monthly employment reports and postponed the September Consumer Price Index until October 24, and even then, it could be a less comprehensive report.
This situation poses a serious challenge for investors and policymakers. Official data usually acts as a reliable gauge for assessing growth, prices, and employment. Without it, navigating the market gets complicated.
Alternatives exist, but they don’t fully replace the official data. Unless the Republican-led Senate manages to secure 60 votes today, passing a continuing resolution to fund the government might rely on these alternative metrics alone.
There’s a whole lot of chatter in the realm of alternative inflation rates. Many of these unofficial figures tend to indicate a higher inflation than the government’s reported numbers. Similarly, skeptics argue that the unemployment statistics are heartening, while the reality could be much bleaker. Even GDP figures face scrutiny, with some claiming a recession, regardless of the Bureau of Economic Analysis’s findings.
You don’t have to be an outlier to evaluate these alternative indicators. Alan Greenspan, the former Federal Reserve chair, even pointed to men’s underwear sales as a predictive metric for economic downturns and recoveries. A decline in underwear sales suggests tightened consumer budgets—people tend to delay buying these essentials until absolutely necessary, right?
Alternative metrics vary in nature. Some are straightforward, like tracking private payroll or consumer prices, while others might seem quirky, such as observing skirt lengths, lipstick sales, or even the activities in pawnshops. While official data may be fraught with gaps and occasional unreliability, these alternate indicators can serve as useful checks, particularly if they align with any forthcoming official figures.
This brings to light a significant complication: alternative data can be more beneficial with a solid standard for comparison, much of which is, unfortunately, currently missing due to government delays.
Ran Scholer, an associate professor of economics, mentions that one key advantage of official statistics is their ability to offer consistent data over time. Without historical context to assess these alternative figures against, it becomes tough to gauge their reliability as circumstances shift.
Joshua Blumenstock, co-director of the Global Opportunities Lab, illustrates that as systems change, established predictive relationships can falter. He cites the Google Flu Trends as an example, which began robustly tracking flu outbreaks through search data but eventually became unreliable as algorithms and media coverage evolved.
This just reinforces the idea that alternative metrics aren’t necessarily any more infallible than government statistics. So, with all that in mind, here’s a mix of both serious and some rather unusual measures to assess the economic landscape. Some folks may agree, while others may roll their eyes—just keep a sense of skepticism.
💵 ADP Salary Data
Alternative: Overview of Non-Agricultural Employment
The ADP monthly report covers private sector job growth and is released two days ahead of the BLS report, potentially indicating different trends. Supporters appreciate its basis in actual salary data, while critics point out its exclusion of government jobs and its susceptibility to monthly fluctuations. Nonetheless, it’s a useful indicator given the current suspension of official figures.
📈 Truflation US Headline Inflation Index
Alternative: Consumer Price Index
This blockchain-based project gathers real-time price data from different resources to estimate inflation. Proponents value its daily updates and independence, although skeptics concern themselves with its lack of transparency regarding data sources. It often reports higher inflation rates than the CPI and thus reflects more on input than the actual “truth” of the matter.
👗 Hemline Index
Alternative: Consumer Confidence and Retail Trends
The concept takes a look at skirt length—shorter skirts indicate economic prosperity, while longer ones suggest hardship. This theory isn’t backed by any official bureau but can be tracked through fashion publications and Google data trends. It’s an unconventional method but has lived on as a quirky take on consumer confidence.
🌃 Nighttime Lighting and Satellite Imagery
Alternative: Regional GDP, Industrial Production
Satellites can assess nighttime brightness levels, which often correlate with economic activity. This method is especially useful in nations with unreliable statistics. In the U.S., it could act as a supplementary check against regional economic data. AI is honing this technique further, revealing patterns tied to income and population that aren’t immediately obvious.
🏝️ Forbes’ Ultra-Luxury Cost of Living Index
Replacement for: Consumer Price Index (CPI)
Forbes has tracked the prices of ultra-luxury items, like Gucci loafers or private jets, since 1982. This “luxury CPI” rose by 4.7% in 2024, whereas the standard CPI grew by 2.9%. Such data can signal broader inflation trends, perhaps offering a comparative perspective on regular expenses.
🍔 Big Mac Index
Alternative: Consumer Price Index, Food Inflation
The Economist has monitored the Big Mac’s price since 1986 to compare purchasing power across countries. In the U.S., its price changes can provide a rough gauge of food inflation and overall pricing trends, and while it fluctuates, it’s easy to spot rising prices at the grocery store.
🛎️ Help Wanted Online Index
Alternative: Recruitment Turnover Rate Survey (JOLTS)
This online jobs metric has replaced older newspaper tracking methods. You can also turn to job listing platforms like Indeed and LinkedIn for insights. This data can align with official job statistics but comes from private channels, making it a fallback for those skeptical of government data.
💄 Lipstick Effect
Alternative: Retail Discretionary Sales
When economic times get tough, consumers often forego larger expenses but still indulge in small luxuries, like lipstick. The late Leonard Lauder noted rising lipstick sales during recessions, and this metric can be a useful proxy for discretionary spending, despite occasional noise in trends.
♟️ Pawn Shop Index
Alternative: Household Debt, Consumer Credit Reports
A surge in pawning items often indicates financial pressure. The National Pawnbrokers Association and major pawnbroker chains track industry data, which can serve as an indirect measure of household financial health, particularly for lower-income families.
☕ Coffee Shop Index
Alternative: Consumption Expenditures, Labor Participation Rate
Bustling coffee shops might signify increased shopping and commuting activity. This unofficial metric could reflect consumer spending trends, though it usually necessitates direct monitoring to glean insights. Again, it leans towards guidance rather than definitive proof.
🩳 Men’s Underwear Index
Alternative: Personal Consumption Expenditure
Greenspan posited that men delay underwear purchases when finances are tight. As economic conditions tighten, these sales drop, and they tend to rise again as financial situations improve. While not officially tracked, private retail sales data can provide a glimpse—but with ongoing market changes, tracking may become trickier.
