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10 Google Search Traffic Charts For The Fed To Consider

As the market anxiously await Janet Yellen's Humphrey-Hawkins testimony this morning, hanging on every word and intonation, ConvergEx's Nick Colas is reminded of Harry Truman’s famous request: “Give me a one-handed economist!”  The U.S. central bank clearly feels challenged by the cross currents of the global economy even as it reiterates confidence in domestic growth prospects. In an effort to help clear things up, Colas brings some 21st century data to the Fed’s distinctly old-school toolset and looks at the historical popularity of 10 Google search terms with a decidedly economic twist. Bottom line: the Google data is clear. The Fed needs to wait a while longer before raising interest rates.

 

Via ConvergEx,

As I read through the latest Federal Open Market Committee minutes on Wednesday, I kept thinking of the Hindu god Shiva. That’s the peril of a liberal arts education, I suppose, but there’s a good reason for the association. Shiva is often depicted with more than two arms, and the Fed’s analysis of the U.S. and global economy reminded me of President Harry Truman’s observation that he needed a one-handed economist.  All the ones he listened to kept saying “On the one hand”, followed by “but on the other hand”.  The minutes today read like an extended version of this common academic balancing act.  For every good point about U.S. economic growth there were 2-3 countervailing concerns.  Low inflation, a strong dollar, the need to communicate policy changes, the housing market, etc…  Only Shiva could challenge the Fed for multi-handed juggling.

Part of the problem is that the Federal Reserve is largely populated with economists.  Not that there’s anything wrong with that…  It’s just that academically trained economists like their data to have long histories so they can run lots of regressions against other equally rich datasets.  And that means the information they look at is generally about as modern as a really well built steam engine.  Consider that the U.S. Consumer Price Index dates to 1913.  Or that the U.S. Labor Department began its Establishment Survey – where we get our “Jobs Added” numbers every month – in 1915.  Cutting edge ideas then, to be sure, and the method for gathering the data has certainly improved with time and technology. At the same time, you could unplug the Internet tomorrow and the Fed could (and would) still use exactly the same information to make monetary policy decisions.

In an effort to add some 21st century flavor to the conversation, we went to Google Trends.  This data research tool allows you to see a time series and map for the popularity of a given search term.  Punch in “Mitt Romney” and you’ll see a timeline from 2005 to the present day that spikes in October 2012 and a geographic concentration in Utah.  Overlay the search term “Obama” and you’ll see two spikes of search traffic, one in 2008 and one in 2012, with the latter running 3x the volume of Romney searches.

Instead of politics, we went looking for searches that would reveal something about the “Real” economy that the traditional economic data misses.  Essentially we’re trying to give the Fed a helping hand here, as it struggles to tease out the true state of the labor market, inflation, consumer confidence and ultimately the sustainability of the current expansion.  We’ve included screen grabs for all these terms from the Google Trends page in the attachment, but here is our summary:

1. “Ask for a Raise” shows wage inflation is finally (almost) here.  Some Federal Reserve policymakers would like to see wage inflation heat up, since this should theoretically push overall inflation closer to the central bank’s 2% goal.  When you look at the pace at which Google users query “Ask for a raise”, you’ll find that should be here soon.  Workers interested in asking for more money are searching for this term at rates equal to the period before the Financial Crisis.  So if we don’t have much wage inflation yet, it may be because employees are still working out how to ask for more money.  Once they get their pitch down, look out…

 

2. “Get a Raise” gives wage inflation a Southern drawl.  As you work with Google Trends you grow to appreciate regional variations for the same term.  In Kentucky, the Carolinas, Kansas and the Deep South you Google “Get a raise”, not “ask for a raise”.  Same trends though – more people are searching for this term than in 2005-2009.

 

3. “Mortgage application” says the housing market is stuck in first gear.  Before you look to buy a new house, you probably Google this term to see what you’ll need to do to arrange financing.  As rates declined in 2009-2010, traffic for this search picked up.  Not back to 2005-2006 levels, but better than 2007-2008.  The bad news is that there has been no growth in Google searches for “Mortgage application” since 2011.  Rates may be lower (courtesy of the Fed’s bond buying), but that hasn’t been enough for Google users to start the process of searching out a new mortgage.

 

4. “Mortgage refinance” says that particular fruit is officially out of economic juice.  Searches for refis are down 33% from 2012, even though interest rates are lower now.

 

 

5. “Part time job” searches are hot in states where unemployment is already low.  Searches for part time work are slowly trending higher, a thorn in the side of the Federal Reserve which would like to see more social engagement for full time positions. The odd bit is that the states where interest in part time labor are relatively highest – North Carolina, South Carolina, Nebraska, New Jersey, and Texas – average unemployment rates of 5.2%, or well below the 5.7% national rate.

 

6. “Babysitting jobs” are still popular.  This ultimate part-time gig got very popular during the Financial Crisis and on a seasonal basis is still just as common a search term as in 2009.

 

7. “Cheap place to live” shows housing (and therefore core) inflation is purely regional.  If we are going to get any real inflation in the U.S. in 2015, it is going to have to come from the cost of residential real estate (owners’ equivalent rents, in CPI-speak).  The number of people searching for a cheap place to live (implying that their immediate options are too expensive) is rising, which you’d think would augur well for inflationary pressure.  The bad news is that the geographic interest for this Google search is concentrated in a handful of states: Florida, Michigan, Georgia, New York, Illinois and Texas along with 2-3 others. That’s not good news for the Fed, which would like to see higher inflation across the country.

 

8. “Save money” is still a consumer priority, and that’s actually bad news.  Interest in saving continues to rise according to our Google Trend analysis.  The Fed, of course, would prefer to see that shift to spending.  At least we have some sense about where all those savings from lower energy prices might be going…

 

 

9. “Economists” are only popular inside DC.  We’ll finish with two searches related to the “Dismal science” itself.  About the only place people Google “Economist” is in Washington D.C. – the next most popular place for this search is New York at about half the rate as DC.   And nationwide the total number of searches for the term are less than half what they were in 2004.

 

10. The “Federal Reserve” is so…  2004.   “Peak Fed”, according to Google Trends, happened back in June 2004.  That’s when the most people searched for information about the U.S. central bank.  Relative to that high water mark, online queries are down 70%.

Kidding aside, the Google Trends data seems pretty clear: the U.S. economy may, by the traditional numbers, be solidly on the mend but the actual foundations of this recovery are still shaky.  Inflation isn’t really catching.  Labor markets are spotty for all their “Jobs added” headline glitz.  Consumers are still bent on saving any windfall like lower oil prices. The housing market is stuck in first gear.  If there were a data scientist on the Federal Open Market Committee, he or she would certainly vote for keeping interest rates where they are.