In search of a job: Forecasting employment growth using Google Trends

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  • rp19_13

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We show that Google search activity on relevant terms is a strong out-of-sample predictor for future employment growth in the US over the period 2004-2018 at both short and long horizons. Using a subset of ten keywords associated with “jobs”, we construct a large panel of 173 variables using Google’s own algorithms to find related search queries. We find that the best Google Trends model achieves an out-of-sample R2 between 26% and 59% at horizons spanning from one month to a year ahead, strongly outperforming benchmarks based on a large set of macroeconomic and financial predictors. This strong predictability extends to US state-level employment growth, using state-level specific Google search activity. Encompassing tests indicate that when the Google Trends panel is exploited using a non-linear model it fully encompasses the macroeconomic forecasts and provides significant information in excess of those.
Original languageEnglish
Place of publicationAarhus
Number of pages49
Publication statusPublished - 22 Aug 2019
SeriesCREATES Research Papers

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