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Shorter skirts, stronger recovery

February 27, 2012: 11:51 AM ET

An above-the-knee economy?

Forget consumer confidence figures. Women's skirts are getting shorter, and according to a quirky economic indicator, that's a good sign for the recovery.

In 1926, Wharton School economist George Taylor introduced a theory called the hemline index.

The theory speculates that higher hemlines correspond with higher stock prices or stronger gross domestic product, and vice versa.

Business Insider did its own analysis based on photos from New York fashion week this year and found that hemlines are in fact on the rise.

Don't get too excited though.

Other research shows the hemline index is more likely to be a lagging, rather than leading indicator -- meaning it says more about where the economy has been than where it's headed. According to Dutch economists Marjolein van Baardwijk and Philip Hans Franses, who have recently charted the numbers going back to 1920, there's often a three-year lag.

According to their argument, maxi dresses in 2010 and 2011, were likely a reflection of the 2007-2008 slump. Shorter skirts now could correlate with the recession's official end in 2009.

"When the recent recession ended in June 2009, we should see increasing hemlines now, meaning shorter skirts," Franses said. "Last year we saw maxi dresses, so, yes, that fitted our predictions indeed."

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About This Author
Annalyn Censky
Annalyn Kurtz
Writer, CNNMoney

Annalyn Kurtz is a senior writer at CNNMoney, where she covers America's jobs crisis, Federal Reserve policy and other economic news. Before joining the site in 2010, she served as a Rotary Ambassadorial Scholar in Prague and interned at Fortune Small Business magazine. @annalynkurtz

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