Your next restaurant review might offer insight beyond the merits of a local cheeseburger.
Data from the online restaurant- and business-review platform Yelp.com can provide an up-to-date reading on business conditions, new research suggests. Those findings are the lead item in our economic research roundup this week. We also summarize research on whether a common global factor is weighing down inflation, whether low stock-market volatility is a dangerous sign of complacency, and on spillovers from mass bond-buying programs. Check this column each Tuesday for blurbs on interesting studies from around the world.
The Yelp effect
Nowcasting the Local Economy: Using Yelp Data to Measure Economic Activity
Published November 2017
Available on the NBER website
Yelp data can measure economic developments in close-to-real time, new research shows, making the figures a potential complement to government data. Changes in the number of businesses and restaurants reviewed on Yelp can predict shifts in the number of establishments and restaurants in official figures, Harvard University’s Edward Glaeser and his co-authors find.
Focusing on New York specifically, the authors discover that Yelp seems capable of tracking how neighborhoods are changing even below the zip-code level. So beyond helping with timeliness, leveraging data from online platforms could help make government data more granular. One limitation to this measure: the algorithm they built using the customer-review website’s data is most accurate for dense, wealthy and more-educated areas, because those places make much more extensive use of Yelp than their more rural counterparts. Because it lacks the breadth and consistency of government surveys, the researchers suggest it's a complement to – rather than supplement for – official surveys.
The labor market is luring back people who had given up on searching for work, rather than drawing in large numbers of the unemployed. The graph above shows the two figures as a share of the total population. This matters because if people increasingly come in from off the sidelines, rather than from joblessness, the working population can expand without quickly pushing the headline unemployment rate lower. This is a cyclical pattern – it happened last time the U.S. had a tight labor market– but the gap has gotten wider today as the pool of officially-jobless shrinks.
Global disinflation? Not so fast.
U.S. Economics Analyst: What Can We Learn from Lower Inflation Abroad?
Published Nov. 12, 2017
Available to Goldman subscribers
Goldman Sachs Group Inc.’s economics team is still casting a skeptical eye on the idea that advanced economies are experiencing weak inflation because of common factors. While health care costs have been contained in many nations, weighing on price indices, a dive into other inflation components suggests that most of the slowdown in price gains is due to country-specific effects.
This bolsters the researchers’ confidence that as drag from health care and multifamily housing wanes in the U.S., prices should respond to a tight labor market by picking up. Sweden and Australia could be instructive, they suggest – in both countries, price increases have been gaining steam as tight resource utilization bites.
Complacent vs. rational
The Low Volatility Puzzle: Are Investors Complacent?
Published November 2017
Available on the New York Fed website
Does low stock-marker volatility suggest that investors are complacent? The jury is out, according to New York Fed researchers. On one hand, it’s possible that volatility has been historically elevated, making the current low-volatility situation a return to what should have been normal.
The logic here: theoretically, stock prices should represent the discounted value of future dividends, but in reality they’ve been a lot more volatile than dividends over time. Today’s level is close to what theory would predict, “suggesting that the low volatility puzzle is perhaps less puzzling than originally thought.” On the other, an estimate of the volatility risk premium – basically the expected return from selling insurance on stock-market volatility – is “somewhat low,” suggesting that investors have become more risk tolerant.
Easing here, helping there
The International Bank Lending Channel of Unconventional Monetary Policy
Published November 2017
Available on the European Central Bank website
Unconventional monetary policy in the euro area spurred greater lending from the region’s banks to the rest of the world, new research from the European Central Bank finds. The authors also find evidence that area banks boosted lending to Europe’s private sector in response to unconventional policy in the U.S. The effects were especially strong for banks that had been liquidity-constrained, suggesting that global central bank balance sheet expansion provided a major boost by increasing individual banks’ ability to lend.