Alternative Data Offers a Lot. Just Be Careful.

The age of coronavirus has presented investors, analysts, journalists and researchers with two data problems. First, traditional government numbers such as unemployment and gross domestic product growth only come out once a month or once a quarter, making it hard to spot fast-changing trends as they occur. Second, the pandemic produces a lot of unusual economic effects that make traditional numbers harder to interpret. For example, the large number of workers who were sent home but who still received paychecks caused some confusion about whether official unemployment numbers were accurate. And the spread of Covid-19 itself is a crucial factor in economic performance, but federal government agencies have been peculiarly slow to collect good data on key indicators such as hospitalization and testing.

In response to these problems, many people are turning toward alternative data sources. In the internet age, private companies gather a vast amount of information very quickly -- restaurant reservations, airline tickets, job listings, product prices, rents and many other pieces of information. These alternative data were naturally garnering steadily more attention in the years before the pandemic, but now they’re gaining even more in popularity.