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If what Americans look for on Google is any indication, we're nowhere near a recession.
DataTrek Research examined domestic internet searches for words like "coupon" and "unemployment," which were leading indicators of the Great Recession, and found that search volumes are down significantly. They also looked at "TV" and other media sources like YouTube and Netflix, since workers who have their hours cut back often have more time to consume media.
"If the Federal Reserve looked at Google Trends they might not be so inclined to cut rates next week," said Nicholas Colas, co-founder of DataTrek Research.
Markets are widely anticipating that the central bank will cut its benchmark interest rate next week regardless of some strong consumer data recently and a record-breaking stock market. Job growth rebounded in June with the best gain since January, running contrary to worries that both the employment and overall growth picture were weakening. The unemployment rate edged up to 3.7%, according to the Labor Department.
While weekly initial claims data and the monthly jobs report shows employment trends after layoffs start, online searches for "unemployment" could be an even earlier indicator, according to Colas. People search for the term when they fear a layoff is imminent. Google searches for "unemployment" started increasing in 2005 by more than 5% year over year. Today, there's no change in Google searches and June 2019 was basically flat compared to last year. April and May were slightly lower.
The term "coupon" could be an early recession indicator since consumers often start to look for products with discounts as economic uncertainty increases, even before they defer, or stop buying things altogether, Colas said. Search volumes for the term rose by 45% in 2008, ahead of the Great Recession. Peak "coupon" searches were in 2011 — 200% above where searches were in 2005. The term has been on the decline for the past seven years, and in June 2019 search volumes were 7% lower than last summer.
The final term is a bit more surprising. Words like "TV" and other media sources like "Netflix" and "YouTube" might indicate that people have more time on their hands as a result of having their hours cut. Searches for those three terms are all either flat or declining, Colas said.
"While there are likely some secular reasons for this – most notably users engaged on mobile platforms with no need for a Google query bar – we still believe that once unemployment starts to increase media-related search volumes will follow suit," he said. "Veteran readers will recall this happened pre-Internet with cable television viewership."