From Law Schools to Lipstick: Unusual Signs That Could Signal Canada’s Next Recession

With trade wars escalating and interest rates rising, fears of a recession are again looming over Canada’s economy. But while economists rely on traditional indicators like GDP and employment figures, a growing number of quirky, unconventional signals are offering early warnings—some involving cardboard boxes, lipstick, and even men’s underwear.

What Is a Recession — And Are We Headed There?

By definition, a recession involves a “pronounced, persistent, and pervasive decline in economic activity,” according to the C.D. Howe Institute. Most often, it’s confirmed when GDP contracts for two consecutive quarters.

Right now, Canada’s trajectory is unclear. RBC’s latest outlook suggests slow growth through 2026, while TD Bank and Deloitte foresee back-to-back quarters of contraction, pointing to a potential recession ahead.

The Bank of Canada is also concerned. Governor Tiff Macklem noted in April that business investment and household spending are slowing, and exports may weaken further due to U.S. tariffs.

The Usual Suspects: Traditional Recession Indicators

GDP decline: Two quarters of negative growth is the most widely accepted technical trigger.
Unemployment: Layoffs tend to increase as companies tighten spending.
Consumer confidence: When households feel unsure about the economy, they reduce spending.
Stock market: Falling consumer demand can lead to declining corporate profits—and a drop in investor confidence.

But not all signs are as clear-cut or conventional.

Unexpected Recession Clues Hiding in Plain Sight

Here are some unusual but historically insightful indicators economists and strategists have watched:

1. The Lipstick Effect

When money’s tight, consumers forgo luxury splurges but still treat themselves to small indulgences like lipstick. A spike in cosmetics sales can actually signal looming financial strain.

2. The Men’s Underwear Index

Popularized by former U.S. Federal Reserve chair Alan Greenspan, this theory suggests that men delay buying underwear during hard times—an item not typically visible or urgent.

3. Law School Applications

A jump in LSAT registrations may hint that young professionals are opting to sit out a weak job market in favour of more “recession-proof” careers.

4. Cardboard Box Sales

Tracking global manufacturing activity, some analysts view box sales as an indicator. If cardboard demand falls, fewer goods are being shipped—possibly a sign of slowed production.

5. Skirt Length and “Hemline Theory”

This century-old theory claims that skirts rise in boom times and fall in downturns. While more symbolic than scientific, it reflects broader consumer sentiment.

6. Tallest Buildings and Economic Booms

Economist Andrew Lawrence’s “skyscraper index” links the completion of the world’s tallest buildings to economic bubbles, often followed by recession.

Consumer Confidence and Spending Habits Matter More Than You Think

Consumer psychology plays a major role. As University of Toronto professor Walid Hejazi notes, fear of a recession can actually create one.

If people expect tough times, they cut back on spending. That reduced spending slows business profits, causing layoffs—a cycle that feeds itself.

At the same time, as affordability worsens, spending shifts—not necessarily down, but differently. Essentials stay steady, while non-essentials like clothing or electronics get deferred.

How Long Could the Next Recession Last?

There’s no set timeline. Canada’s COVID-19 recession lasted five months, but the Great Recession spanned 18. Historically, most recessions last about a year.

How to Prepare for a Possible Recession

Financial advisors recommend:

Building a monthly budget
Pausing big-ticket purchases
Saving 3–6 months’ worth of expenses
Diversifying investments to minimize risk
Avoiding panic selling if the market dips

Economist Isabelle Salle says the current economic uncertainty is complex, more so than 2008. Unlike the last crisis, today’s slowdown is layered—with unknowns surrounding trade, inflation, and interest rates all at once.

Have you noticed any subtle signs of a recession in your everyday life—like fewer shopping trips, smaller purchases, or unexpected splurges? Share your thoughts below.

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What Is a Recession — And Are We Headed There?

The Usual Suspects: Traditional Recession Indicators