More Data, Less Guessing on the Economy

Small businesses produce around 15 percent of the nation’s economic output but their activities are not recorded in official reports in a detailed manner. The lack of data within the small business sector can be overcome with Big Data, which is an emerging revolution.

Economic measurement from the small business sector will be revolutionized by the digital signals of behaviors from purchasing on the web, browsing, and cellphone location data. It could lead to a more accurate forecasting and well-informed policy making that is more science and less estimates.

Small businesses have allowed Intuit, a software maker, to collect data on their use of Intuit’s online payroll and accounting products for research on sales trends and employment. The data are removed of any identifying information and Intuit stressed that it utilizes the data to improve its products.

Intuit started its research in 2004 on small businesses and since then it extended the scope to include more companies. It has refined its data tracking as it added more products, services and clients. Researchers from the Bureau of Economic Analysis, which is the government’s statistical recorder of economic activity, have been experimenting with the data from Intuit. It wants to use it to improve the official estimates.

National income accounting was a by-product of the Great Depression. It was an effort to bridge the economic information gap then. In June 1930, President Herbert Hoover declared that the Depression was over based on the available data to him but in reality the conditions were worsening.

Government statistics is based on surveys made via telephone and personal interviews of household and businesses. These surveys are costly and time consuming. Gathering online behavior will garner more data in a faster rate. Governments will be able to see indicators of deflation, inflation and employment trends sooner and adjust their policies quicker.