Yelp : Local Economies’ 2019 Slump Looks Likely to Continue, According to Yelp’s Economic Average

Most local economies nationwide slumped in 2019, according to Yelp data, dragged down by weakness in restaurants and retail.

As the local economy goes, so goes the national economy. The productivity of most plumbers, pastry chefs, and personal-injury lawyers isn't reflected in stock indexes and business headlines, but collectively they make up a vital part of the work force and the fabric of local commerce. We've been tracking local economic activity through the Yelp Economic Average (YEA) for the past year. In each of the four quarters that we've reported on the health of the local economy, national GDP has headed in the same direction as YEA.

If GDP growth continues to move the same way YEA does, we can expect fourth-quarter GDP growth to be below the third quarter's level of a 2.1% increase.

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 growth.

Using Yelp's unique data set, we designed YEA to measure something unlike existing economic indicators: the part of the national economy where business is done locally, near where you live, work, or travel. The link between YEA and GDP indicates that this important and understudied part of the economy, reported in near-real-time, moves the same way as the economy as a whole.

Fourth-Quarter Decline Looks Likely To Continue In The First Quarter

A weak fourth quarter contributed to the 2019 decline: YEA fell by 1.4 points to 97.9, the biggest quarter-over-quarter decline since a year ago, fueled by slumps in retail and services businesses. This is the fifth straight quarter that YEA has shown a level of local economic strength below 2016, as far back as we've calculated the measure.

Expect more of the same in the first quarter of 2020. For the first time, we're forecasting the current quarter's YEA scores, based on the last three years of trends. The forecast suggests a continued decline in local economic health-nationally and in many major markets and sectors. In the first quarter of 2020 we expect YEA to be dragged down by the retail and restaurant sectors, as well as weakness in many big state and metro economies: California, Texas, Florida, New York City, Chicago, and Seattle.

One Year Of Tracking The Local Economy

We're a year into our reporting on the state of local economies through the Yelp Economic Average, which measures local economic activity across business sectors. We use Yelp data to track the health in consumer demand and business growth of local economies-nationally as well as in 50 top metros around the country and, for the first time this quarter, in every state and Washington, D.C.

Yelp has information not only on millions of U.S. brick-and-mortar businesses but on the consumer demand expressed by the millions of consumers who view, review, and post photos of businesses on Yelp every day, which researchers have found makes us well positioned to accurately and quickly measure a huge swath of the economy that's often missed by many major indicators.

Republican States Have Outperformed Democratic States Since 2016

Since Donald Trump took office in Jan. 2017, political polarization has extended to the local economy. States won by President Trump in the 2016 election have experienced more local economic growth during his tenure than states that voted for Hillary Clinton.