New Ways to Read Economy
by Cari Tuna
Thursday, April 8, 2010
Thursday, April 8, 2010
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Experts Scour Oddball Data for Trends Ahead of Official Releases
When the city's top economist needs a rough prediction of sales tax revenues, he watches the number of subway passengers emerging from the Powell Street Station on Saturdays.
Ted Egan, chief economist in the San Francisco Controller's Office, said he could wait six months for California to release the detailed sales-tax data he needs for city revenue projections. But it's quicker to look at passenger tallies from the station closest to the Union Square shopping district, which generates roughly 10% of the city's sales-tax revenue. The Bay Area Rapid Transit District releases the data within three days, he said: "Why should I have to wait?"
Mr. Egan is among a growing number of economists and urban planners who scour for economic clues in unconventional urban data—oddball measures of how people are moving, spending and working.
Broadway ticket sales are a favorite indicator for the chief economist of the New York City Economic Development Corp., Francesco Brindisi. He says they are a good gauge of city tourism.
In Jacksonville, Fla., community planner Ben Warner keeps tabs on calls to the city's 2-1-1 hotline for social services. Since late 2008, he has seen spikes in calls for help with food, housing, utilities payments and suicide prevention. It is "direct, real-time monitoring of the economic and social situation," he said.
At an economic briefing at San Francisco City Hall last month for officials and industry experts, Mr. Egan flashed slides of traditional indicators, along with the number of customers at parking garages near Union Square and average rents for one-bedroom apartments advertised on Craigslist.
Mr. Egan's parking and rent indicators bottomed out last year and are beginning to trend upward, suggesting the local economy isn't getting much worse. "It's not an exact science," he said. But when it comes to data, he said, "more is almost always better than less."
The focus by economic prognosticators on urban data follows a history of seeking nontraditional signs of impending boom or bust. For instance, some economists consider cardboard-box production a leading indicator of economic activity.
But the newest offbeat indicators, made possible by improving systems for collecting and disseminating data, are painting even timelier and more geographically specific pictures of economic forces, economists say.
One rich repository of predictive data is Web searches, said Hal Varian, Google Inc.'s chief economist. Jumps in such queries as "unemployment office" and "jobs" can help predict increases in initial jobless claims, he said. Other search terms, he added, can anticipate traditional data on travel behavior and sales of cars and homes.
Some economists warn that urban data often are newer and more volatile than traditional indicators, making them harder to incorporate into analysis and forecasts. "I'll look at it, but I discount it very, very significantly," says Mark Zandi, chief economist at Moody's Analytics.
But sometimes, new indicators are more reliable than conventional ones, said Edward Leamer, an economist at the University of California, Los Angeles. He swears by diesel fuel sales, for example.
UCLA's Anderson School of Management recently teamed up with Ceridian Corp., a payments and payroll company, to collect data on diesel purchases by truckers nationwide. The data anticipate increases in U.S. industrial production and gross domestic product, said Mr. Leamer, director of the school's economic-forecasting group.
Mr. Leamer discovered that truckers' diesel purchases on Interstate Highway 5 from California to Oregon, a major timber-trucking route, are a leading indicator of construction employment in California. Diesel sales on Interstate Highway 80 from Sacramento to Salt Lake City, a trucking route for the San Francisco Bay area's manufactured goods, can help predict California's manufacturing employment, he said.
If only he had the diesel-fuel data in the first half of 2008, when major government-issued indicators failed to hint at the U.S. economy's impending downward spiral. At the time, Mr. Leamer said, UCLA forecasters chose not to announce a recession because GDP was still growing and the Bureau of Labor Statistics was reporting relatively mild job losses.
Bad call. The government later revised the GDP and jobs data downward, and the National Bureau of Economic Research concluded that the recession started in December 2007. The jobs data are unreliable because they are based on sample surveys and don't adequately capture company openings and closings, Mr. Leamer said in hindsight.
When the UCLA economists reviewed the fuel-purchases data late last year, they saw diesel buying had peaked in mid-2007, indicating that fewer goods were being made and moved across the country in the months after. "Had we been aware of that data in 2008," Mr. Leamer said, "we would have made a different call."
Experts Scour Oddball Data for Trends Ahead of Official Releases
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Ted Egan, chief economist in the San Francisco Controller's Office, said he could wait six months for California to release the detailed sales-tax data he needs for city revenue projections. But it's quicker to look at passenger tallies from the station closest to the Union Square shopping district, which generates roughly 10% of the city's sales-tax revenue. The Bay Area Rapid Transit District releases the data within three days, he said: "Why should I have to wait?"
Mr. Egan is among a growing number of economists and urban planners who scour for economic clues in unconventional urban data—oddball measures of how people are moving, spending and working.
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In Jacksonville, Fla., community planner Ben Warner keeps tabs on calls to the city's 2-1-1 hotline for social services. Since late 2008, he has seen spikes in calls for help with food, housing, utilities payments and suicide prevention. It is "direct, real-time monitoring of the economic and social situation," he said.
At an economic briefing at San Francisco City Hall last month for officials and industry experts, Mr. Egan flashed slides of traditional indicators, along with the number of customers at parking garages near Union Square and average rents for one-bedroom apartments advertised on Craigslist.
Mr. Egan's parking and rent indicators bottomed out last year and are beginning to trend upward, suggesting the local economy isn't getting much worse. "It's not an exact science," he said. But when it comes to data, he said, "more is almost always better than less."
The focus by economic prognosticators on urban data follows a history of seeking nontraditional signs of impending boom or bust. For instance, some economists consider cardboard-box production a leading indicator of economic activity.
But the newest offbeat indicators, made possible by improving systems for collecting and disseminating data, are painting even timelier and more geographically specific pictures of economic forces, economists say.
One rich repository of predictive data is Web searches, said Hal Varian, Google Inc.'s chief economist. Jumps in such queries as "unemployment office" and "jobs" can help predict increases in initial jobless claims, he said. Other search terms, he added, can anticipate traditional data on travel behavior and sales of cars and homes.
Some economists warn that urban data often are newer and more volatile than traditional indicators, making them harder to incorporate into analysis and forecasts. "I'll look at it, but I discount it very, very significantly," says Mark Zandi, chief economist at Moody's Analytics.
But sometimes, new indicators are more reliable than conventional ones, said Edward Leamer, an economist at the University of California, Los Angeles. He swears by diesel fuel sales, for example.
UCLA's Anderson School of Management recently teamed up with Ceridian Corp., a payments and payroll company, to collect data on diesel purchases by truckers nationwide. The data anticipate increases in U.S. industrial production and gross domestic product, said Mr. Leamer, director of the school's economic-forecasting group.
Mr. Leamer discovered that truckers' diesel purchases on Interstate Highway 5 from California to Oregon, a major timber-trucking route, are a leading indicator of construction employment in California. Diesel sales on Interstate Highway 80 from Sacramento to Salt Lake City, a trucking route for the San Francisco Bay area's manufactured goods, can help predict California's manufacturing employment, he said.
If only he had the diesel-fuel data in the first half of 2008, when major government-issued indicators failed to hint at the U.S. economy's impending downward spiral. At the time, Mr. Leamer said, UCLA forecasters chose not to announce a recession because GDP was still growing and the Bureau of Labor Statistics was reporting relatively mild job losses.
Bad call. The government later revised the GDP and jobs data downward, and the National Bureau of Economic Research concluded that the recession started in December 2007. The jobs data are unreliable because they are based on sample surveys and don't adequately capture company openings and closings, Mr. Leamer said in hindsight.
When the UCLA economists reviewed the fuel-purchases data late last year, they saw diesel buying had peaked in mid-2007, indicating that fewer goods were being made and moved across the country in the months after. "Had we been aware of that data in 2008," Mr. Leamer said, "we would have made a different call."
