Hemlines: A Leading Economic Indicator?

Forget the Fed's Beige Book, fiscal commission(s), CBO reports, and the prophets of Wall Street.  Maybe we should have paid more attention to fashion trends last spring, when designers dropped the hemlines.  The Hemline Index is an economic theory developed by economist George Taylor in 1926.

Taylor says that that hemlines on women's dresses rise along with stock prices. In good economies, we get such results as miniskirts (as seen in the mid to late 1960s), or in poor economic times, as shown by the 1929 Wall Street Crash, hems can drop almost overnight.  In the early 1970s, hemlines did a 180, dropping almost to the ground.  The miniskirt set rebelled, but the designers were right--a major recession followed, with unemployment of over 9 percent.   Of course in today's volatile market anything goes, as long as it can be sold at Target! 

Read more about fashion and retail sales here.