Google Trends Shows Quantitative Easing Most Likely On The Way After Dismal May 2012 Unemployment Data:
Wondering if QE3 is on the way? It looks more likely than not according to top economists we follow. Some market participants are already “fighting the Fed” but will find themselves on the wrong side of the inevitable as global central banks hastily work to put more liquidity into the banking system.
Our forecasts show the probability the Fed will ease in June along with more central bank liquidity additions (globally) is over 80 percent. Be weary of those who don’t want any easing or believe it will have no impact. It’s most likely they were off by two easing programs and a ‘twist’ in terms of predictive power.
The Fed’s mandate is to keep employment at acceptable levels and they now have three months of data to show the U.S. economy is at levels that could make prolonged employment or a Japanese long-term recession more likely.
One way to see that quantitative easing is more likely is by watching the increase in news headlines related to ‘QE’. We actively catalogue search and social media data to help us make predictions about the direction of the U.S. economy.
Fiscal policy lags monetary policy actions and although an about-face is necessary in terms of action from President Obama regarding improving uncertainty and predictability for small business, we don’t see this coming anytime soon which will cause the Fed to act.
See the chart below from Google Trends that we determine as increased expectations of more quantitative easing. Chartists may see an upward spike coming. Keep in mind this is the same data that can be extrapolated to predict movements of the flu geographically based on search trends for symptoms. QE3 as well as other measures to help stimulate markets are very likely to decrease the negative wealth effect that would be disastrous in an already weak economy and we expect more direct signaling about additional liquidity this week.