The Daily Tar Heel

Serving the students and the University community since 1893

Saturday February 4th

Column: Kiss me, I'm (economically) insecure

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Nothing screams confidence like lipstick.

Think about it. Marilyn Monroe pouting a red lip in that white dress: iconic. Kylie Jenner racking up millions of likes and dollars with her Lip Kits: so slay. Me, last Saturday loitering in frat court in my NYX lipstick I got from Target: almost too confident. But that’s the point, confidence. 

Consumer confidence, to be exact. 

I will explain how your confidence affects economic growth and what lipstick has to do with it.

A large part of economic performance is dictated by how people feel. First, economic growth is measured by gross domestic product or GDP. This indicator measures the aggregates of net exports, investments, government spending and, most importantly for this article, consumer spending. When spending goes up, so does GDP.

Here's an example:

When you’re confident, you are more likely to spend a check and push paper at Tar Heel Station. When you push said P, Tar Heel Station will have more money to invest. Thus, heating up the market.

On the flip side, if you are worried about the future, you’re less likely to spend a check. If everyone is worried, then no one spends a check! On the aggregate level, if no one spends money, no one makes money either. Thus, the market suffers. 

It’s all about how you feel. Consumer spending can be measured with the University of Michigan’s Consumer Sentiment Index.

 As of June, Americans reported a confidence level of 50.2 percent. This is the lowest U.S. confidence level ever recorded through the Consumer Sentiment Index. Lower than stagflation in the 1970s, 9/11 terrorist attacks, and the 2008 recession. The second lowest recorded confidence was 51.7 percent in May 1980 after Paul Volcker, Chair of the Federal Reserve, induced a recession with 20 percent interest rates. 

We know the American public is insecure, so what do they do? Buy lipstick. 

In an interview with Forbes, Leonard Launder – chairman of Estee Lauder – said lipstick sales spiked after the 9/11 terrorist attacks. He then “doubled down” on the message, as sales rose again during the 2008 recession. 

This low confidence is reflected in the market. September marks the third consecutive quarter the DOW finished in the red. 

This hasn’t happened since 2009. 

Y’all remember the 2008 recession? When SpongeBob was at its peak, and your mom started buying Great Value “fruit leather” instead of Gushers and even though you didn’t understand what a mortgage was your parents were always talking about it… just me? Cool. 

Seriously. Lip product sales spiked 48 percent during the first quarter of 2022, according to the Washington Post. 

Research shows that people tend to buy affordable “luxury” items during economic decline. Lipstick is the embodiment of a product that makes people feel good in the short run. Alcohol is another recession-proof luxury. 

Texas Christian University professors Sarah Hill and Christopher Rodenheffer conducted a study titled “boosting beauty in an economic decline: mating, spending and the lipstick effect.” Hill and Rodenheffer observed four periods of economic decline and found a pattern: recessions see an influx of spending on affordable luxuries. Products that make the consumer “feel good” in the short term. This spending is exemplified through beauty products.

Unfortunately, the market is expected to continue to slow. Jerome Powell, chair of the Federal Reserve, basically guaranteed negative growth into 2023. So, if you're investing, kiss start-ups goodbye. Instead, cuddle up to over-the-counter makeup.

@noelleharff

opinion@dailytarheel.com

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