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Can Yelp Data Predict a Recession?

While the jobs market remains hot — small businesses continue to see hiring challenges — there are multiple indications that the economy faces future headwinds. One of them comes from a potentially unlikely source: Yelp.

The company recently announced a new index, called the Yelp Economic Average (YEA). It’s based on consumer-demand data and the openings and closings of SMB locations (listings data):

Yelp has information not only on millions of U.S. businesses but on the consumer demand expressed by our 34 million monthly app users and 75 million monthly mobile web users, which researchers have found makes us well positioned to accurately and quickly measure a huge swath of the economy that is missed by many major indicators.

We’re making this information available today with the release of our Yelp Economic Average (YEA), a new benchmark of economic strength. For 30 representative categories of businesses, we combine consumer demand on Yelp with openings and closings of businesses to calculate YEA.

The YEA looked at 30 local market sub-segments and found that only gas stations and self-storage saw growth. All other categories showed declines.

YEA

The 30 segments roll up under 8 larger headings: restaurants, food, nightlife, local services, automotive, professional services, home services and shopping. The Yelp post explains the company’s methodology in detail.

It will be interesting in the next 2 – 3 quarters to see how predictive this is of the state of the economy.

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