Google It!published Mar 6, 2014
But now the internet is also creating its own potentially useful data. "Google it!" Forecasting the US unemployment rate with a Gooble job search index explains how Google search statistics can improve forecasts of unemployment. The authors create a typical forecasting model based on past unemployment levels and data from the Survey of Professional Forecasters, a quarterly survey of experts carried out by the Philadelphia Fed. The authors then add a variable which captures the frequency of Google searches for "jobs." Including the Google search data reduces the model error by 30 to 40 percent.
It seems to me there is something really interesting in this idea. In economics, there are many behaviors we try to track: hiring, unemployment, consumption, investment, etc. I'm sure that is true of many fields. The problem is that there is a long lag between households' actions and when we get the data. Online activity gives us an alternative, real-time measure that may help us improve forecasts. [Note: I am less excited about what Google does with personally identifiable information. The data referred to here is aggregate activity that isn't linked to any particular person.]
If you are interested in looking into trends for search terms, go to www.google.com/insights/search/#.
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