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Forecasting unemployment insurance claims in realtime with Google Trends

Daniel Aaronson, Scott Brave (), R. Andrew Butters, Michael Fogarty, Daniel W. Sacks and Boyoung Seo

International Journal of Forecasting, 2022, vol. 38, issue 2, 567-581

Abstract: Leveraging the increasing availability of ”big data” to inform forecasts of labor market activity is an active, yet challenging, area of research. Often, the primary difficulty is finding credible ways with which to consistently identify key elasticities necessary for prediction. To illustrate, we utilize a state-level event-study focused on the costliest hurricanes to hit the U.S. mainland since 2004 in order to estimate the elasticity of initial unemployment insurance (UI) claims with respect to search intensity, as measured by Google Trends. We show that our hurricane-driven Google Trends elasticity leads to superior real-time forecasts of initial UI claims relative to other commonly used models. Our approach is also amenable to forecasting both at the state and national levels, and is shown to be well-calibrated in its assessment of the level of uncertainty for its out-of-sample predictions during the Covid-19 pandemic.

Keywords: Unemployment insurance; Google Trends; Hurricanes; Search; Unemployment (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.ijforecast.2021.04.001

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