The report found that businesses in states that
voted Republican in the 2016 presidential election had greater
economic growth than those that voted Democratic
Yelp Inc. (NYSE: YELP), the company that connects people with
great local businesses, today released its first-ever annual Yelp
Economic Average (YEA) report, a benchmark of local economic
strength in the U.S. The report found that most local economies
nationwide slumped in 2019, down 1.3% from the previous year, led
by underperformance in restaurant, food and nightlight categories,
as well as brick-and-mortar shops. A weak fourth quarter, down
1.4%, largely contributed to the 2019 drop and marked the largest
quarter-over-quarter decline since 2018. The report also found that
businesses in states that voted Republican in the 2016 presidential
election outpaced the economic growth of businesses in states that
voted Democratic.
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Yelp Economic Average Shows a Declining
National Economy in 2019 (Graphic: Business Wire)
YEA is calculated starting from the fourth quarter of 2016
nationally, as well as in 50 metros and every state including
Washington D.C., reflecting data from millions of local businesses
and tens of millions of users on Yelp’s platform. The report
measures local economic strength through business survival and
consumer interest. According to researchers, Yelp provides a timely
and accurate measure of a huge swath of the economy that is often
missed by many major indicators.
“The slowdown in overall economic growth in 2019 reflected
business profits declining, which contributed to a fall in business
investments. Uncertainty around trade policy also hindered local
economic growth in 2019,” said Carl Bialik, Yelp’s data science
editor. “For every quarterly release since the introduction of YEA
in Jan. 2019, its change from the prior quarter has matched the
change in GDP growth. If GDP continues to move the same way YEA
does, we can expect the GDP growth in the fourth quarter of 2019 to
show a decline from the third quarter’s level of a 2.1%
increase.”
Republican States Have Outperformed Democratic States Since
2016
YEA found businesses in states that voted Republican in the 2016
presidential election had greater economic growth than businesses
in states that voted Democratic – the local economies of blue
states lagged behind red states by 2.8 points relative to 2016,
widened from a gap of 1.3 points in 2018. The red-blue
local-economy gap persists in all four major regions of the
country: the Northeast, South, Midwest, and West.
Four out of the top five states with the strongest local
economies in the U.S. voted Republican in 2016 – North Dakota,
South Dakota, Wyoming, and Alaska – with services sectors and
several food-related businesses driving that growth. The five
states and districts with the lowest economic growth trended blue —
Washington D.C., Illinois, Massachusetts, Connecticut, and
California — primarily led by declines in retail businesses.
A Tough Year for Retail, Food, and Auto Businesses
Three crucial sectors dragged down the local economy in 2019 and
each one is expected to keep falling in the beginning of 2020.
Shopping categories declined in 2019 by 2.1 points
year-over-year, driven down by a weak holiday shopping period. The
weakest business categories varied by type and price point, and
included stores selling mobile phones, shoes, and appliances.
Restaurant, food, and nightlife businesses were collectively
down by 1.3 points in 2019 from a year earlier, driven by declines
across ice cream, grocery stores, and New American cuisine
categories. Fast-food restaurants also took a hit, down 1.5 points
from 2018 as diners opt for less standard dining and drinking
options, such as breweries (up 4.8 points), food trucks (up 3.5
points), and juice bars (up 2.2 points).
Auto businesses also slumped, down 2 points from a year earlier,
reflecting the possible effect of ride-sharing’s popularity on auto
businesses, such as gas stations and auto-repair shops that rely on
high driving levels in the general population.
Smaller States and Metros Gained Economic Ground in
2019
The top metros in 2019, among the 50 major metros around the
country we’re tracking, were Milwaukee; Honolulu; Portland, Maine;
Buffalo; and Pittsburgh. Services businesses fueled gains in these
metros, with some gains across food and nightlife businesses.
Orlando, New Orleans, and two of the 2019 boomtowns — Portland and
Honolulu — look most likely to continue to succeed in the first
quarter of 2020.
States with the most economic growth in 2019 were the Dakotas,
Wyoming, Hawaii, and Alaska, with growth driven by services sectors
and several restaurant and food businesses. Continued gains are
expected in some of these top-performing states, as well as in
Maine, Louisiana, and Nevada.
The bottom five metros in 2019 include Portland, Oregon; Dallas;
Chicago; San Jose; and San Francisco. Among the 50 states and
Washington D.C., the five lowest rates of economic growth since
2016 were posted by Washington, D.C.; Illinois; Massachusetts;
Connecticut; and California. Retail businesses led the decline,
across these metros and states. While California’s economy is the
fifth largest in the world, it ranked fifth from the bottom in YEA
for 2019. Oregon, Delaware, and Oklahoma are expected to fall in
the first quarter of 2020, along with continued declines from D.C.
and Connecticut.
See all of our Yelp Economic Average reports, how we calculate
YEA, and other resources at yelpeconomicaverage.com.
For more assets and images, please find them here. Find a video
recapping the YEA 2019 Annual findings, here. For more information
and Yelp’s latest company metrics, visit:
https://www.yelp-press.com/company/fast-facts/default.aspx
Methodology
The Yelp Economic Average (YEA) is a composite measure of the
economy, reflecting both business health and consumer demand among
businesses in 30 sectors.
The eight root categories The 30 business sectors, or
categories — the “Yelp 30″ — are drawn from eight umbrella business
categories on Yelp: restaurants, food, nightlife, local services,
automotive, professional services, home services, and shopping.
Root categories’ share of the 30 components The share of YEA
components from each of these eight categories is based on each
one’s share of the economy, as estimated from County Business
Patterns reports.
Choosing the Yelp 30 Each of the Yelp 30 is chosen based on
maximizing four criteria, relative to other candidates within its
family of categories, as measured in the first quarter of 2016:
- Number of businesses on Yelp in the category;
- Consumer interest on Yelp for businesses in the category, as
measured by activity such as page views, reviews, and photos;
- Number of the 50 metro areas — whose economic health we have
been measuring a year and a half, originally as part of our Local
Economic Outlook — in which the category is present;
- Uniform spread across the four Census Bureau-defined regions of
the country.
Choosing baseline categories We then chose baseline categories
against which to compare the fortunes of the Yelp 30. This step
helps remove changes due to seasonality and Yelp’s internal growth;
what remains is a reflection of real economic patterns. We selected
all other root categories not represented by the YEA components as
baselines because they provided the most robust controls against
seasonality and activity on Yelp.
Calculating the YEA scores For each of the Yelp 30 in each
quarter, its two scores — one for business population and one for
consumer interest — are calculated as follows:
- Count the component’s total for the quarter;
- For consumer interest only: Count the baseline’s total for the
quarter;
- For consumer interest only: Divide the component’s total by the
baseline total to get the component’s score;
- Divide the component’s score for the quarter of interest by the
component’s score in the equivalent quarter in 2016 — comparing,
for instance, the fourth quarter of 2018 to the fourth quarter of
2016, to adjust for seasonality;
- Multiply by 100 to make 100 a typical score.
Then the two scores are normalized to have the same variance, so
that each contributes equally across components.
To reduce the effect of outliers, the overall score for both
consumer engagement and business count is the median of each
component’s score.
The YEA is the mean of the overall consumer engagement score and
business-count score.
The YEA is separate from, and not meant to inform or predict,
Yelp’s financial performance because our figures are adjusted to
remove the effects of changes to usage of our product.
We calculated equivalent scores at the regional, state, and
metro level to provide a local look at the state of the local
economy. We also calculated scores by political party. We did so by
reviewing the performance of state's local economies (through
business survival and consumer business interest), comparing states
based on the political party that won the state in the 2016
presidential election.
We calculated annual scores by computing the mean of scores in
each year’s four quarters.
Forecasting YEA scores We used Facebook’s Prophet package to
forecast the current quarter’s YEA scores based on prior quarter’s
scores, at the national, business sector, and local levels.
Comparing YEA to GDP Growth We compare the change in both
indicators rather than the absolute magnitude because they’re
measured and reported differently.
About Yelp Inc.
Yelp Inc. (www.yelp.com) connects people with great local
businesses. With unmatched local business information, photos and
review content, Yelp provides a one-stop local platform for
consumers to discover, connect and transact with local businesses
of all sizes by making it easy to request a quote, join a waitlist,
and make a reservation, appointment or purchase. Yelp was founded
in San Francisco in July 2004. Since then, Yelp has taken root in
major metros in more than 30 countries.
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version on businesswire.com: https://www.businesswire.com/news/home/20200123005172/en/
Yelp Inc. Julianne Rowe jrowe@yelp.com
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