Homebase Data Proves Accurate in Forecasting Economic Recovery Amid COVID-19 Pandemic Recession

Strategic Insights -

As the COVID-19 pandemic hit the US, Homebase, a software company that helps small businesses with scheduling and hiring, made a crucial discovery. The company saw that the lockdowns to contain the virus were having a huge impact on its clients, leading to mass closures and slashing employee hours worked. In response, Homebase dropped its roadmap and focused on helping Main Street survive, sharing its internal data with academics, government officials, and the media to bring attention to the issues.

The data team spent two days straight making the internal information publicly available, and then the company started sharing the data with academics, government officials, and the media to bring attention to what it was seeing. Just a few months later, Homebase data has become one of the top high-frequency indicators tracking the economic recovery from the pandemic recession, and has been cited in academic papers and media reports.

Key Takeaways:

  • Homebase data has proven to be an accurate tool in forecasting the economic recovery, correctly predicting the May jobs report, which showed a surprise increase of 2.5 million jobs.
  • The data has also been accurate in forecasting the nonfarm payrolls print in June and July.
  • The accuracy of Homebase data hinges on its user base of over 100,000 small businesses, which is crucial to the economy, employing nearly half of the US workforce and accounting for 44% of the economy.
  • Homebase data comes directly from businesses, instead of survey data, which is subject to user interpretation.
  • The company's transparency with its data has been praised by economists, who can download its raw data for use in forecasting models.
  • Economists warn that Homebase data should still be used with caution due to the uncertainty of the pandemic.
  • The August jobs report is expected to show generally flat growth between July and August, following the typical "summer bulge" that has been absent this year.

Statistics:

  • 100,000+ small businesses make up the Homebase user base.
  • 44% of the US economy is accounted for by small businesses.
  • Small businesses employ nearly half of the US workforce.
  • 65% of net new jobs in the US have been generated by small businesses since 2000.
  • 2.5 million jobs were added in the May jobs report.
  • 140,000 jobs were predicted to be lost in August by Economists, with mild gains of 625,000 jobs when seasonally adjusted.

Sources:

  • Business Insider's article on Homebase's data accuracy
  • Maximiliano Dvorkin, a senior economist at the Federal Reserve Bank of St. Louis
  • Ernie Tedeschi, an economist at Evercore ISI
  • Marianne Bertrand, a professor of economics at the University of Chicago Booth School of Business
  • The Small Business Administration
  • The Federal Reserve Bank of St. Louis
  • The Census Bureau
  • ADP private payrolls release
  • The SBA's Payroll Protection Program
  • William O'Neil's stock-picking strategy