In 2023, many analysts were boldly predicting a 100% chance of a recession. Yet, here we are — recession-free, proving that even the experts don’t always get it right. While traditional indicators like job data and GDP growth are often used to signal an economic slowdown, many argue these metrics don’t paint the full picture. That’s why some are looking at unconventional indicators to stay ahead of the next recession.

Weird and wacky warnings: Quirky economic signals have a track record of hinting at economic downturns because they reveal how consumers behave in uncertain times. For example, when lipstick sales rise, it shows people are cutting back on bigger purchases and treating themselves to affordable luxuries — a phenomenon known as the “substitution effect.” Similarly, increased activity on dating apps and a surge in pawn shop inventory can indicate financial strain, while a drop in men’s underwear sales can mean tighter budgets on non-visible essentials. These trends have resurfaced this year, along with some new ones:

• According to the Dallas Federal Reserve, sausage purchases are climbing as shoppers switch to cheaper proteins like sausage over more expensive options like chicken or steak.
• Tipping is on the decline — strip clubs and restaurants alike are noticing fewer tips as consumers cut back on discretionary spending like entertainment, dining, and retail.

Caution: Don’t Believe Everything You See

While these unconventional indicators aren’t definitive signs of an impending recession, they do reflect changing consumer behaviors. Peter C. Earle of the American Institute for Economic Research tells Business Insider, “Few if any of these informal indicators are conclusive on their own, and some may simply signal changes in consumption patterns. The confluence of many at once, however, can be indicative of a souring macroeconomic trend.” Even conventional metrics are proving tricky to rely on due to the economic shifts brought on by the pandemic.

• The yield curve — which signals a potential recession when short-term yields exceed long-term ones — was inverted for a record two years but has normalized this week due to softer jobs data.
• The Sahm Rule — which flags a recession when the three-month average unemployment rate rises by 0.5% over 12 months — was triggered last month. But even its creator, Claudia Sahm, has expressed doubts about its relevance in today’s economy.

Flight of the analysts: Despite mixed signals, market experts — who have been wrong before, possibly several times — are adjusting their recession forecasts. UBS Wealth Management increased its recession odds from 20% to 25%, citing slower job growth and higher unemployment numbers as signs of a potential downturn. However, many analysts still believe the US economy could achieve a soft landing. Harvard’s Jason Furman backs this view, saying, “Other than the unemployment rate, almost every real economy indicator is growing, some of them going strongly.” He also warns against being too certain in recession predictions, stating, “Anyone who is confident that we’re going into recession is dramatically overstating how much we understand about the economy.”