Researchers suggest the use of an internet job-search indicator (Google Index, GI) as the best leading indicator to predict the US unemployment rate. Francesco D’Amuri and Juri Marcucci found that models augmented with the GI perform better than traditional ones.
In their paper they suggest the use of an internet job-search indicator (Google Index, GI) as the best leading indicator to predict the US unemployment rate. They have performed a deep out-of-sample comparison of many forecasting models. With respect to the previous literature they have concentrated on the monthly series extending the out-of-sample forecast comparison with models that adopt both our preferred leading indicator (GI), the more standard initial claims or combinations of both.
The results show that the GI indeed helps in predicting the US unemployment rate even after controlling for the effects of data snooping. Robustness checks show that models augmented with the GI perform better than traditional ones even in most state-level forecasts and in comparison with the Survey of Professional Forecasters’ federal level predictions.