Yelp: Despite a strong US consumer, local businesses slumped in 2019

Despite accounts of a strong U.S. consumer, local businesses slumped in 2019 based on data from the business review site Yelp.

Using data from business listings, Yelp compiles an “economic average” that measures customer interest and store counts for industries ranging from restaurants and clubs to automotive services and shopping. Consumer interest places value on engagement of Yelp listings, whether through photo uploads or reviews.

Yelp reported Thursday that businesses nationwide saw a 1.3% decrease in its economic indicator in 2019, when compared to the year before. The Federal Reserve, meanwhile, has pointed to a “solid” consumer as a main reason for extending the longest U.S. economic expansion on record.

The Yelp Economic Average reported a 1.3% decline year-over-year and a 1.4% quarter-over-quarter decline in economic strength, based on its measures of business survival and consumer interest. Source: Yelp

Yelp data science editor Carl Bialik said that secular trends like e-commerce are likely impacting the largely brick-and-mortar stores measured in the study. But Bialik said companies are also facing idiosyncratic challenges to making strategic investments with so much uncertainty from the administration’s trade wars.

“That can be a tough trap to get out of in a way, where things do feel challenging. So you do avoid making certain investments that could pay off down the line,” Bialik told Yahoo Finance’s YFi PM on Thursday.

Bialik added that businesses face other pressures in staying open, such as the rising expenses of rent and high wages.

“Even if consumer spending overall is strong, how are the local businesses doing in terms of staying in business or opening new businesses?” Bialik said. “There are challenges beyond consumer spending and interest.”

Yelp’s report noted some pockets of the country were able to grow, despite the national trend. Yelp said red states that voted Republican in the 2016 election appeared to have the strongest local economies. States like North Dakota, South Dakota, Wyoming, and Alaska saw growth coming specifically from food-related businesses and services sectors.

The Yelp Economic Average reported a 1.3% decline in economic strength, but Republican-leaning states appeared to see higher growth.

In contrast, Democratic states like Illinois, Massachusetts, Connecticut and California saw declines in retail businesses.

Bialik said the wider the margin by which Donald Trump won, the more economic growth that state tended to see.

“The pattern was clear and surprising,” Bialik said.

Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.

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