Traditional vs Alternative Data: Which has the Better Measure of the US Labor Market?

(12 June 2020) When the US Bureau of Labor Statistics released its May 2020 employment report some analysts claimed that data on initial unemployment insurance claims was wrong because it contradicted the official unemployment figures where there were broad gains in employment across industries. Higher frequency data, including mobility trends and small business openings, also pointed to labor market recovery.

There's little doubt that high frequency alternative indicators offer important, maybe even critical depth and color as we try to understanding modern market behavior and economies, but alt data is not a panacea. It is part of the mosaic of data increasingly relied on by analysts and weighted according to the relevant time horizon and methodological approach.

• A couple of months ago we demonstrated how so-called alternative data had warned about the COVID-19 induced recession in early March while traditional leading economic indicators were still predicting growth would accelerate, making a strong case for wrapping alternative data into the sphere of leading economic indicators.
• At the same time, even with the growth in availability of certain high frequency indicators as foot traffic, mobility, container ships, web traffic, credit and debit card spending, analysts must address fundamental questions around reliability and availability. Below we share what a few sample high frequency labor market and mobility indicators tell us about the current US labor market.