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Forecasting Unemployment with Google Searches

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  • Tuhkuri, Joonas

Abstract

Data on Google searches help predict the unemployment rate in the U.S. But the predictive power of Google searches is limited to short-term predictions, the value of Google data for forecasting purposes is episodic, and the improvements in forecasting accuracy are only modest. The results, obtained by (pseudo) out-of-sample forecast comparison, are robust to a state-level fixed effects model and to different search terms. Joint analysis by cross-correlation function and Granger non-causality tests verifies that Google searches anticipate the unemployment rate. The results illustrate both the potentials and limitations of using big data to predict economic indicators.

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  • Tuhkuri, Joonas, 2016. "Forecasting Unemployment with Google Searches," ETLA Working Papers 35, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:wpaper:35
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    Cited by:

    1. Aaronson, Daniel & Brave, Scott A. & Butters, R. Andrew & Fogarty, Michael & Sacks, Daniel W. & Seo, Boyoung, 2022. "Forecasting unemployment insurance claims in realtime with Google Trends," International Journal of Forecasting, Elsevier, vol. 38(2), pages 567-581.
    2. Götz, Thomas B. & Knetsch, Thomas A., 2019. "Google data in bridge equation models for German GDP," International Journal of Forecasting, Elsevier, vol. 35(1), pages 45-66.
    3. Anttonen, Jetro, 2018. "Nowcasting the Unemployment Rate in the EU with Seasonal BVAR and Google Search Data," ETLA Working Papers 62, The Research Institute of the Finnish Economy.
    4. Daniel Aaronson & Scott A. Brave & R. Andrew Butters & Daniel Sacks & Boyoung Seo, 2020. "Using the Eye of the Storm to Predict the Wave of Covid-19 UI Claims," Working Paper Series WP-2020-10, Federal Reserve Bank of Chicago, revised 16 Apr 2020.
    5. Konstantinos N. Konstantakis & Despoina Paraskeuopoulou & Panayotis G. Michaelides & Efthymios G. Tsionas, 2021. "Bank deposits and Google searches in a crisis economy: Bayesian non‐linear evidence for Greece (2009–2015)," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5408-5424, October.
    6. D’Amuri, Francesco & Marcucci, Juri, 2017. "The predictive power of Google searches in forecasting US unemployment," International Journal of Forecasting, Elsevier, vol. 33(4), pages 801-816.
    7. Coupé, Tom, 2018. "Replicating "Predicting the present with Google trends" by Hyunyoung Choi and Hal Varian (The Economic Record, 2012)," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-8.
    8. Cristea, R. G., 2020. "Can Alternative Data Improve the Accuracy of Dynamic Factor Model Nowcasts?," Cambridge Working Papers in Economics 20108, Faculty of Economics, University of Cambridge.
    9. Tuhkuri, Joonas, 2016. "ETLAnow: A Model for Forecasting with Big Data – Forecasting Unemployment with Google Searches in Europe," ETLA Reports 54, The Research Institute of the Finnish Economy.
    10. Fornaro, Paolo, 2017. "Know the Present to Understand the Future: Nowcasting and Forecasting the Finnish Economy," ETLA Brief 59, The Research Institute of the Finnish Economy.

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    More about this item

    Keywords

    Big Data; Google; Internet; Nowcasting; Forecasting; Unemployment;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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