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Today I want to look at an article that recently crossed my desk from the Quarterly Bulletin of the Bank of England (Q2 2011). Entitled Using internet search data as economic indicators it focuses in part on using online searches as an indicator of the health of the UK labour market.
The study highlights the increasing work in this field and provides a useful short bibliography of ten works. The pro’s and con’s of using internet search data are briefly discussed including the fact that internet users tend to come from specific age and income groups, which may skew your results
Google and more specifically Google Insights the authors believe is the most useful tool given sites 85% share of the UK internet search market. Insights are also available for France, Germany, Italy, the Netherlands, Poland, Spain, Sweden and Switzerland. However, the authors noted problems with the Google data itself, particularly the fact that it only provided percentage changes in the relative popularity of a given search term, but did not give the actual number of searches.
Citing the works of Choi and Varian, Zimmerman, D’Amuri and Suhoy. The team analysed the data for a range of terms against the Labour Force Survey. Searches for "unemployment" and "JSA" (jobseeker's allowance) rose markedly in line with the unemployment rate during the 2008-09 recession. Surprisingly, searches for the term "jobs" did not seem to vary much with changes in employment.
Although the results provided a good leading indicator of the jobs market, they were not significantly better than some existing indicators, such as the Jobcentre claimant count. However, the report highlights the sources use for analysing issues that arise unexpectedly such as the recent rise in VAT. Insights are also very useful (although this is not covered in the article) as it suggests related searches and indicates which searches are “rising” significantly in a given time period, with respect to the preceding period.
The future use of online searches as an indicator is best summed by the conclusion of the article
The Bank will continue to monitor these data as part of a range of different indicators it considers in forming its view about the outlook for the economy of the United Kingdom. As further developments are made in this area, and the backrun of the data increases, these data are likely to become an increasingly useful source of information about economic behaviour.