Forecasting Self-Taught

Economist W.S. Jevons astounded the British Association for the Advancement of Science in 1878 by postulating that ups and downs in the economy were caused by sunspot cycles, which he said governed agricultural cycles. Economic science has advanced notably since then, and forecasters now focus on more down-to-earth indicators--like housing starts, manufacturers' new orders and retail sales (which according to the most recent weekly report ran 11% ahead of a year ago). Yet countless Americans have their personal systems for handicapping the economy. Their idiosyncratic indicators are sometimes as reliable as the official measures.

Take Mickey Feldstein's Foolproof Pawnshop Index. Feldstein keeps a close watch on the percentage of pawned items that are eventually redeemed at his Lincoln Loan Bank & Jewelers in Chicago. In 1966, when the economy was throbbing, Feldstein's redemption rate was 90%. In December of 1970, the Commerce Department's average of twelve leading indicators was pointing up unmistakably, signaling a big rebound in business. Feldstein knew better; his redemption rate the month before was only 60%, and the Commerce Department rebound never came. Today Feldstein sees good times ahead. His redemption rate is a brisk 75% and still rising.

Help Wanted. A top San Francisco psychologist notes that when prosperity is right around the corner, patients come flocking to sign up for intensive--and expensive--analysis. Claude Rosenberg, a San Francisco capital-management adviser, has another economic gauge: whether or not brokerage houses are remodeling their offices. "Brokerage expansion is notoriously ill-timed," he explains. "So when I see them start expensive remodeling projects, I always know that a sharp downturn is on the way." Few brokerage houses are remodeling these days.

The Conference Board, a top business research group, keeps an eagle eye on employment ads in newspapers. The board's help-wanted index has risen from 75 in January 1971 to 85 last January, but is still far below 1967's base of 100. Claims for workmen's compensation are sensitive to swings in the economy, says Donald Seagraves, vice president of American Mutual Insurance Alliance. When a recession sets in, claims drop; inefficient plants--which tend to have high accident rates--are shut down, and employers are under less pressure to throw poorly trained workers on an assembly line just to keep it going. Another bellwether is auto-insurance claims for bodily injury. "During the recession," says Seagraves, "there is a reduction of travel, and accidents decline. Times must be getting better now, because auto claims are on the rise again."

Dresses Up. The retail business is sprinkled with sensitive economic barometers. Bernard Galitzki, owner of a Portland, Ore., fabric-store chain, watches women's dresses. "In a recession, women buy sportswear or no clothes at all," he says. "A healthy dress business means that women expect their husbands to take them out more." Women's secondhand dress shops provide another indicator. Last autumn the clothes on the racks of some shops were three years old; women were hanging on to their old fashions instead of buying more recent ones--a clear sign of hard times. Lately there has been a turnaround, as women rush to sell old outfits and buy new ones.

To Marvin Canin, president of a Los Angeles pet-supply firm, a leading indicator is the rhinestone-studded poodle collar. Sales of that superfluous item fell as the recession dawned. They are rising now. A Manhattan cigar dealer swears by the 500 cigar. When he notices increased demand for more expensive cigars, he knows the economy is in an upturn. A bad sign: lots of orders for cigarillos and pipes. The Cigar Manufacturers Association reports that orders for higher-priced cigars were up a puffy 12% in January over the same month last year.

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