Is Google Autofill a Useful Gauge of the Economy?

When it comes to measurement, we continue to face a challenge of our making: many of the metrics designed and employed over time no longer capture the global, technologically driven service economy in all its complexity and, frankly, weirdness.

Most of ways in which we ascertain economic growth and performance were developed in the industrial era when tangibles literally and figuratively outweighed intangibles in terms of economic impact. But in an economy defined more by software than hardware, more by algorithmic trading than stock certificates, more by intellectual capital than by pork bellies, there is reason to question - if not  necessarily doubt - the veracity of what is being reported as it reflects broader trends.

The problem is that there is no comprehensive, comparable and generally accepted set of alternatives. The accounting profession is incapable of making changes because their clients, depending on the industry, could be negatively or positively affected and no one believes they can afford to alienate any of them. The economics profession has developed sophisticated statistical tools to test assumptions, but the aggregates do not always capture the nuances required in an increasingly granular economy where consumer preferences can now be determined based on the purchase performance of an individual consumer.

Enterprises are increasingly turning to a mix of signals that may or may not reflect 'real' economic activity. Many are based on digital tracking. The question, however, is whether inquiries about sales of kidneys, for instance, reflect a decline in household financial status or simply a fascination with a ghoulish subject that feeds on its own (figuratively) viral impulses. There are also serious questions about how the programs that capture this data are designed, whose interests or biases they reflect and whether they can possibly be comprehensive enough.

Ultimately, a range of inputs are required for an accurate assessment of what is or is not happening economically. It makes sense to test assumptions and new data sources to determine whether those currently in use are still doing their job and whether any of the new ones are sufficiently accurate and broad-based to be useful. The only certainty is that refusing to consider new concepts will eventually lead to failure. JL

Conor Dougherty reports in the New York Times:

“The point is not so much to develop an alternative paradigm of economic analysis as it is to poke and prod at the consensus we all embrace. After all, can the U.S. economy be doing all that well if (I want to sell a) ‘Kidney’ is a common autofill?”

If you were looking for a national collective conscience, you could do worse than to check out Google’s autofill feature – when Google’s search engine tries to guess what you’re looking for by “autofilling” a few letters of a query into a fully formed question.

Take a recent search for “Who Is?” The autofill suggests that Americans are very interested in ISIS, the brutal group of Sunni militants in Iraq and Syria, as well as The Bachelor, the reality TV show in which  a group of women compete to marry some guy they don’t know.

With the third quarter now behind us, Nicholas Colas, chief market strategist at ConvergEx Group, a New York broker-dealer, used autofill and other “off the grid” indicators, including Google Trends, to see how Americans feel about the economy.

“Every quarter we take a break from all the standard economic indicators to look at a range of alternative data,” he wrote in a note to clients. “The purpose here is to pose the question: Does the consensus view of the economy square with what real people do in their daily lives?”

Some conclusions from autofill: Don’t be surprised if Dad comes home with a new drone and one kidney.

Mr. Colas has been tracking Google autofill data for a while, and for most of the last three years the top three positions for completing the query, “I want to buy…” have been won by “a house,” “a car” and “stock.”

The fourth spot tends to vary with the news cycle, and in past quarters has included things like “a gun,” “a dog” and “Facebook stock.”

“Gun” has jumped around and in the past had the top spot, but hasn’t reached the top four in a year. Last quarter, the top spot went to “a drone”; in the second quarter, it was “something.”

From Guns to Drones

Recurring autofill terms when Google users start a search.

I want to buy...

First Quarter, 2011	First Quarter, 2012	First Quarter, 2013	First Quarter, 2014	Second Quarter	Third Quarter
a house	you something	a gun	a house	a house	a house
a car	a car	a car	stock	stock	a car
stock	stock	stock	a dog	a car	stock
a gun	something	something	a car	something	a drone

Source: ConvergEx Group

Maybe that shouldn’t be surprising, given the number of drones in the news lately. Google announced a drone delivery effort dubbed Project Wing in the third quarter. The New York Times also reported on NASA’s efforts to create an air-traffic control system for drone aircraft.

And the prospect of drones landing in backyards and peering into bedroom windows has freaked a lot of people out. Speaking about drones in September, Supreme Court Justice Sonia Sotomayor told an Oklahoma City audience, “That type of technology has to stimulate us to think about what is it that we cherish in privacy and how far we want to protect it and from whom.”

One thing people do not seem to cherish are their kidneys; “kidney” was the third autofill option – after “car” and “house” – for the query “I want to sell my …” This could simply be morbid curiosity. In an interview, Mr. Colas said “hair” has also ranked high in past quarters.

I want to sell my...

First Quarter, 2011	First Quarter, 2012	First Quarter, 2013	First Quarter, 2014	Second Quarter	Third Quarter
a house	car	car	car	car	car
car	soul	house	kidney	kidney	house
ipad	furniture	kidney	hair	house	kidney

Source: ConvergEx Group

“The point is not so much to develop an alternative paradigm of economic analysis as it is to poke and prod at the consensus we all embrace,” Mr. Colas wrote. “After all, can the U.S. economy be doing all that well if (I want to sell a) ‘Kidney’ is a common autofill?”

Looking beyond autofill to Google Trends data, Mr. Colas found that interest in gold coins, which hit at a post-financial-crisis low, suggests people are feeling much better about the nation’s financial system. But many Americans are still worried about money and food, as interest in food stamps ticked higher from earlier in the year.

Mr. Colas’s analysis included other oddball economic indicators like an inflation measure called the Bacon Cheeseburger Index (up about 6%), which measures how much it would cost to make a bacon cheeseburger at home.

He also looked at government data of how often people are quitting their jobs. The quits rate has become something of a mainstream indicator in the wake of the Great Recession. Quits are a good thing, since people don’t usually leave their jobs unless they have another gig lined up or at least feel confident they can find something.

All in all, alternative indicators point to an economy that continues to mend, but has mended so slowly  that people still have severe anxieties about the future. That’s the same conclusion you would come to by looking at more traditional indicators like consumer confidence or the government’s monthly jobs report, which in September showed the unemployment rate falling below 6 percent for the first time since July 2008.

“But it feels like we got here by drone, with a different perspective of the same picture,” Mr. Colas concluded. “At least we didn’t have to sell our kidney to see it.”