June 20, 2019, (San Francisco, CA) – The JPMorgan Chase Institute today released new analysis providing localized insights on the San Francisco economy, including trends in Online Platform Economy participation and revenues, local commerce, small business financial outcomes, and out-of-pocket healthcare spending. The data show San Francisco has a vibrant economy, but opportunity remains for neighborhood-based small businesses and women-owned small businesses to get ahead, especially in light of the region’s affordability challenges.
This new report, The San Francisco Economy: Household and Small Business Financial Outcomes, explores questions of economic relevance through the lens of de-identified transaction and account summary data from over 70 million consumers and 2.5 million small businesses.
“San Francisco has a vibrant economy, but opportunity is not evenly shared by all,” said Diana Farrell, President and CEO, JPMorgan Chase Institute. “As city leaders, the private sector and non-profit organizations make community investments, these data provide a roadmap for creating more inclusive growth, identifying which sectors are growing and which ones are struggling, while also identifying gaps in growth that can help inform potential interventions."
Key findings from the analysis include:
Online Platform Economy: San Francisco’s average driver and lessor revenues stood out for being significantly higher than other cities with similar participation rates in October 2018.
- In San Francisco, transportation sector participation increased from 0.17 percent in the first ten months of 2013 to 1.85 percent in the first ten months of 2018. Average driver revenues decreased by 27 percent from $1,696 in the first ten months of 2013 to $1,231 in the first ten months of 2018.
- In the transportation sector, San Francisco had the highest driver participation—just under two percent—and had the highest revenues of any metro area ($1,508 per driver in October 2018). The research shows patterns in engagement reflect patterns in revenues; San Francisco had one of highest engagement rates at approximately 15 percent.
- In October 2018, San Francisco had comparatively high average monthly lessor revenues ($2,812 per lessor), moderately high participation (0.21 percent), and high engagement (about 17 percent).
Local Commerce: Younger and lower income consumers contribute the most to spending growth in San Francisco. As online commerce grows, transactions among consumers and businesses in the same region is limited.
- In San Francisco, younger consumers under the age of 35 tended to contribute more to growth compared to their older counterparts. Over the course of the series, consumers under 35 contributed an unweighted average of 1.5 percentage points to an unweighted average topline growth number of 1.5 percent.
- Similar to age, consumers on the lower end of the income spectrum tend to contribute the most and most consistently to growth. In fact, consumers in the first two income quintiles combined have never subtracted from growth. Over the course of the series, consumers in the first two income quintiles contributed an unweighted average of 1.4 percentage points to an unweighted average topline growth number of 1.5 percent.
- In every month, since June 2015, spending by San Francisco residents grew faster than spending at San Francisco establishments. Contributions to spending growth mostly come from transactions in which the consumer was from a different region than the merchant. Over the course of the series, spending by those consumers from a different region than the merchant contributed an unweighted average of 1.2 percentage points to an unweighted average topline growth number of 1.5 percent.
Small Business: San Francisco small businesses lead the country in revenue growth.
- The small business sector in San Francisco had the highest level of revenue growth compared to 24 other major U.S. cities, as the aggregate revenue of small businesses operating in San Francisco grew 2.6 percent annually over a period of four years.
- While the region’s reputation as a technology hub, relative to other cities observed, still holds somewhat true for small businesses, small construction firms actually contributed the most to aggregate small business revenue growth in San Francisco (1.6 pp), with small high-tech services firms second (1.5 pp). Revenue growth contributions are net positive for restaurants (0.14 pp) and other professional services (0.43 pp).
- In San Francisco, the research found that organic growth firms, which are characterized by their intent to grow out of operating profits rather than the use of external financing, experienced the largest revenue growth. Moreover, within the top five percent of new firms, over 70 percent were organic growth firms.
- Overall, female-owned firms generated median first-year revenues that were about 34 percent lower than median revenues of male-owned firms. Firms founded by women were smaller than firms founded by men in every metropolitan area, though the size differential varied by location. In San Francisco, female-owned firms had $62K first year revenues whereas male-owned firms generated $94K their first year.
Out-of-Pocket Healthcare Spending: The Bay Area’s healthcare spending growth is among the highest in the country, exceeding a 10 percent increase from 2014-2017.
- Of the 23 states tracked, California showed the fastest growth in spending levels from 2016 to 2017. The high healthcare spending growth in California in 2017 holds true across different demographics groups.
- Top-spending counties in California tended to be high-income and located along the coast, especially in the Bay Area. The top three counties in terms of spending levels were Marin, San Francisco, and San Mateo, where the average annual growth rates exceeded ten percent from 2014 to 2017.
- High-income groups generally tended to spend more on healthcare, but it is notable that the growth in these high-income counties exceeded the growth in spending across the 23 states observed even among the high-income group.
About the JPMorgan Chase Institute
The JPMorgan Chase Institute is a global think tank dedicated to delivering data-rich analyses and expert insights for the public good. Its aim is to help decision makers–policymakers, businesses, and nonprofit leaders–appreciate the scale, granularity, diversity, and interconnectedness of the global economic system and use timely data and thoughtful analysis to make more informed decisions that advance prosperity for all. Drawing on JPMorgan Chase & Co.’s unique proprietary data, expertise, and market access, the Institute develops analyses and insights on the inner workings of the global economy, frames critical problems, and convenes stakeholders and leading thinkers. For more information visit: JPMorganChaseInstitute.com.