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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. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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.

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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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