Yelp Economic Average Finds California’s Urban Centers are Declining

Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today released third quarter data for the Yelp Economic Average (YEA), a benchmark of local economic strength in the U.S. The report finds slow national growth, up by only .07% in the third quarter, as several of California’s local economies continued long-term declines, led by San Jose and San Francisco.

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The Yelp Economic Average Rebounded Slightly in Q3 2019 (Graphic: Business Wire)

YEA is calculated from the fourth quarter of 2016, nationally and for 50 metros, 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. For every quarterly release since the introduction of YEA earlier this year, its change from the prior quarter has matched the change in GDP growth. 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.

“As China trade tensions, Fed deliberations, and impeachment inquiry talk trickles down to Main Street, the Yelp Economic Average has barely budged,” said Carl Bialik, Yelp’s data science editor. “At the same time, California’s biggest local economies are continuing to struggle. Construction limits and increasing rent are pushing consumers and workers farther from businesses, contributing to continued quarterly declines in some of the state’s biggest metro areas, with retail and restaurants taking the biggest hits.”

California’s Local Economy Declines

While reports show that California’s position in the national and global economies is strong, the state has seen the biggest decline in local economic activity among the 50 major U.S. metros YEA tracks. San Francisco, San Jose and San Diego all rank in the bottom five metros, while Los Angeles is in the bottom ten and Sacramento places below average. Limits to development around California have driven up housing costs, which has restricted the supply of workers, raised labor costs, and limited consumption, according to the McKinsey Global Institute.