Official statistics are usually seen as the most reliable source of economic health, however due to their comprehensive nature they are often published well after the situation they describe.
In contrast private and commercial studies are typically faster but taken from small and skewed samples and are therefore statistically dubious. Bridging the gap between the two with high volume, reduced bias and fast output, search data can act as a highly effective economic indicator.
This 2011 Bank of England paper on using search data as an economic indicator, uses well constructed examples to demonstrate the principle. It shows that UK searches for ‘estate agents‘ correlates with house price movements, with more searches (mainly by buyers) portending higher prices. It also illustrates searches for ‘jsa‘ (Job Seekers Allowance, i.e. unemployment benefit) correlate strongly with and can predict official unemployment data.
To demonstrate the principle even more robustly we can look at the much larger U.S. labor market. Here we can see clearly that the searches for ‘jobs’ within the U.S. are directly correlated with the US Bureau of Labor Statistics unemployment rate for 16+ US citizens.
This graph shows the proportion of Google searches from within the United States including the word ‘jobs’ versus the unadjusted unemployment rate.
We have excluded those searches including ‘steve‘ to remove the effect of the iconic technologist Steve Jobs from the overall ‘jobs’ figures. Something it appears the Bank of England forgot in it’s study, though it does warn “users with entirely different intentions could enter very similar search queries”.
It’s clear to see that as unemployment rises during the 2008 ‘credit crunch’ recession the proportion of people using the Internet for job seeking rises proportionately.
As the Bank Of England study points out there are numerous possibilities for measuring economic health using search data including the demand for durable goods, interest in travel etc. Measuring jobs is only one of them, albeit a compelling example.