How Google Searches For 'School Closings' Explain The Relationship Between Weather And The Economy

BofA Merrill Lynch economist Ethan Harris has turned to an interesting metric in order to discern the impact of an unusually harsh winter this year on the economy: Google searches for the phrase “school closings,” which this month hit the highest level on record.

A number of marquee indicators — including nonfarm payroll employment, retail sales, and industrial production — have disappointed relative to consensus estimates, and many lay the blame, at least in part, on the weather.

Harris, like many other market economists, has found this effect difficult to model, namely because “national temperature and precipitation data don’t fully capture how the weather impacts the economy.”

“Consider two kinds of weather events with the same temperature and precipitation: light icy rain in Atlanta and light snow in Boston,” says Harris.

“The first event shuts down a major city; the second event has no discernible impact.”

So, Harris has turned to Google searches, the usefulness of which he explains in his latest note to clients.

“We think this is a good measure of economic disruption because it proxies for working parents staying at home and sharply reduced travel in general,” he says.

“The data only go back to 2004, so it is hard prove a statistical link to the economy, but the numbers are impressive: this December and January had the most queries about school closings in the nine years of data. We also find unusually high readings for other queries we test, including ‘ice’, ‘weather’ and ‘flight cancellations’.”

Given the recent spike in weather-related search queries like these, Harris is saying what many others across the Street are saying as well: investors may have to wait until April, when economic data for the month of March are released, to get a clean read on the economy.

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