New report says digital economy was 6.5% of U.S. GDP in 2016

Amazon and Walmart are just a few of the global companies spending billions to chase digital dollars. A U.S. Department of Commerce report released Thursday (March 15) provides some detail as to why e-commerce matters.

The U.S. Bureau of Economic Analysis, a division of the Commerce Department, said preliminary figures show the digital economy was 6.5% of the U.S. GDP in 2016. Thursday’s report – Defining and Measuring the Digital Economy – is the first time the Bureau has attempted to capture the impact of the digital market.

The 6.5% GDP for goods and services transacted in “primarily” digital translates into $1.2 trillion in economic activity.

Included in the BEA definition of the digital economy are three major types of goods and services:
• The digital-enabling infrastructure needed for an interconnected computer network to exist and operate;
• The e-commerce transactions that take place using that system; and
• Digital media, which is the content that digital economy users create and access.

Examples include computer hardware and software, telecommunications services, margins on retail e-commerce transactions, and subscriptions to online streaming services. The data does not include “sharing” aspects of the economy like AirBnb or ride-sharing services like Uber and Lyft.

“From 2006 to 2016, the digital economy grew at an average annual rate of 5.6 percent, outpacing overall U.S. economic growth of 1.5 percent per year,” the report noted. “In 2016, the digital economy supported 5.9 million jobs, or 3.9 percent of total U.S. employment.”

Following are some of the report highlights
• Digital economy employees earned $114,275 in average annual compensation compared with $66,498 per worker for the total U.S. economy.

• Average annual growth in the digital economy between 2006 and 2016 was 5.6%, well above the 1.5% growth in the overall U.S. economy.

• The digital economy supported 5.9 million jobs in 2016, accounting for 3.9% of total U.S. employment.

• From 2011 to 2016, employment growth in the digital economy grew at an average annual rate of 3.7%, higher than the average annual rate of 1.7% for job growth in the overall economy.

• Of all digital economy workers, 88.2% worked in service industries like computer systems design, and 984,000 worked primarily in retail ecommerce.

“This report offers BEA’s first digital economy estimates within the framework of the national accounts. These new statistics provide a deeper understanding of the size and economic importance of the digital economy so that policymakers, businesses, and other stakeholders can make informed decisions,” the BEA noted.

The BEA also noted challenges in accurately measuring the digital economy include frequent price changes for digital goods and services, accurately measuring the “sharing” economy, and changes in how consumers access digital goods and services.