Google Economist Sees Positive Signs in Search Term Trends

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By Cecilia Kang
Washington Post Staff Writer
Saturday, September 12, 2009

Google chief economist Hal Varian is pretty confident the national economy is recovering, and he's not just basing that on government data.

He says he can tell from Americans' search habits.

In March, the number of Google users searching for information about unemployment benefits or employment centers began to drop, Varian said. Overall unemployment has continued to climb, of course, but new jobless claims have declined since peaking earlier this year.

"As a contemporaneous predictor, predicting the present through search queries has been a pretty good predictor of initial (jobless) claims," said Varian, who was visiting Washington this week to make the case that government agencies should use Google tools to better draw current snapshots of consumer sentiment, corporate health and social interests.

There also has been an increase in searches for homes and real estate agents, he said, possibly foreshadowing new strength for the housing market. Google Trends, a tool that aggregates search terms, also showed an early spike in interest in the government's "Cash for Clunkers" auto purchase incentive program this summer. Perhaps the government could have avoided that whole kerfuffle over the program initially running out of cash, Varian said, if officials had been watching search trends.

A former economist and professor at the University of California at Berkeley, Varian has an optimistic take on the economy that befits someone from a company whose stock price has nearly doubled in the past year, even as much of Wall Street tanked. But Varian says government data back up the impressions he gets both from Google's search metrics and from the continued strength of the overall technology sector.

While companies are slow to rehire, they aren't laying off employees as aggressively as many economist thought they would at this point in the year, Varian said in an interview at Google's Washington offices.

"Firms are very cautious, though, but there is some optimism returning," Varian said, adding that gross domestic product, the main measure of economic output, will probably increase first as demand for services and products increases. He said temporary employment is ticking higher, a measure that Varian says typically precedes a rebound in full-time hiring.

But companies will be slow to begin hiring again until it is clear the economy is back on track. And it's too soon to tell when the economy will turn around in earnest, he said.

"Employment is going to take a longer time, unfortunately, to recover," he said.

Varian began working with Google seven years ago to help design its ad business, in which millions of auctions are conducted every minute for advertisers to market everything from dance classes and fruit juicers to local car dealerships near the results of search queries. That business made $21 billion for the Mountain View, Calif., company last year.

He said the government's economic stimulus plan has already shown signs of success, with more jobs in fields such as education because of federal funds. By spring, more jobs growth will come from infrastructure projects such as expansion of high-speed Internet service. The administration is scheduled to hand out over $4 billion in funds for broadband projects this November.

With more stability in the economy, Varian said more help for private companies, such as tax incentives, could help spur an earnest recovery.

"On the other hand, I would hesitate to say we need any more major initiatives at this point," he said. "The die is cast and things seem to be moving in the right direction. Let's stay the course."


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