Economists have written a lot of papers over the years about jobs being replaced by computers. Now, ironically, it looks like computers are beginning to replace economists.
Recent research suggests that Google does quite a good job at prediction recessions, faster and possibly better than expensively trained economists. According to research published by Greg Tkacz of the C.D. Howe Institute, Google searches for terms like “recession” and “jobs” could have predicted the 2008 recession months before economists did.
Tkacz points out that in October 2008 Prime Minister Stephen Harper told us, “This country will not go into recession next year.”
The recession began the following month.
How did Google get it right when the prime minister and his advisors got is so embarrassingly wrong? One part of it is that millions of Canadians use Google, which gives it far bigger sample sizes than any poll or business survey could hope to achieve. People also use Google for things they worry might happen, which means Google searches can provide tantalizing insights into the future.
Suppose a friend works at a struggling factory in Ontario and hears in the cafeteria that orders for next month are down. Worried about the future, he might search on Google for “jobs.” This might sound minor, but over millions of users it gives insight into the economy that can be both richer and timelier than backward-looking economic statistics. If the factory does end up cutting production, that might not filter into gross domestic product statistics for months.
When Harper made his prediction, he was presumably relying on government economists who were basing their forecasts on GDP figures that were already a few months out of date.
Meanwhile, even in the months before the recession hit, Tkacz’s paper shows an uncanny increase in searches for the word “jobs.”
Hedge fund managers have been using automated web searches and social media network data to make trading decisions for some time. Few traders will talk about their money-making strategies publicly, but according to reports in the industry some funds trade on social media reports on certain companies, Google Internet searches on specific topics and similar forms of “data mining.”
If, for example, the chat pages associated with a certain company are full of good news, that company might be a “buy.” Or the reverse. Any kind of information can give you an edge in the markets.
You might think that the Yukon was too small for this kind of big data strategy to work. But Yukoners are such avid Googlers that it can apply here too. If you look in Google data for Yukon searches for the word “jobs” over the last few years, you get an arresting chart. In early May this year, when the papers were filled with bad news from Yukon mining companies, there were four to five times more job Googles than back in 2007.
Even more troubling, the fastest growing related search terms were “Alberta jobs” and “BC jobs.”
Since May, Yukon Google searches for “jobs” have fallen about 20 per cent. This is either because Yukoners are a bit less worried about the economy, or they were enjoying the best summer in years rather than typing the word “jobs” into Google.
Some caution is in order about this exciting new world of big data. Even if Google has enough data to publish a chart, the Yukon sample sizes are still relatively small. Furthermore, strange anomalies can creep into a huge anthill of data like Google. The death of Steve Jobs, CEO of Apple, threw a temporary wrench into Tkacz’s study of the search term “jobs.”
Nonetheless, Google search data provides some interesting new insights into what Yukoners are worried about, and jobs appear to be on the list.
This will undoubtedly be on the agenda when the legislature resumes in the fall. The next question is whether our politicians can manipulate the small Yukon sample sizes. I predict the MLAs on the opposition benches will be typing “jobs” into Google as fast as they can, while cabinet ministers punch in “economic recovery.”
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Twitter @hallidaykeith