Could Google have helped policymakers predict the Great Recession? Apparently so, according to a study from the C.D. Howe Institute released September 4.
Greg Tkacz, the author of the study and chair of economics at St Francis Xavier University, looked at search term data using Google Trends and found that the use of search terms like “recession” and “jobs” could have predicted the recession of 2008-09 at least three months in advance.
According to his analysis, the use of the word “recession” in Google searches spiked a month prior to the start of the 2008-09 recession.
The report suggests that the use of more immediate web search data could provide far more timely information for policymakers who have had to contend with lagging economic indicators that ultimately led to conflicting policy statements. For example, Canada’s recession began in November 2008, but even by the middle of October, policymakers and economists only had access to GDP data for August and earlier. Prime Minister Stephen Harper had declared in October that Canada wouldn’t fall into recession, but had to change his tune six weeks later.
Tkacz suggested web search data could be used to measure other economic indicators, such as consumer confidence, and even expand the types of information analysts could use to gauge the direction of an economy.
Tkacz noted, however, that his findings were still preliminary and should be viewed as illustrative of the data’s potential rather than something definitive. The data used only went back to 2004 and covered a single recessionary period.
