The San Francisco Bay Area Economic Outlook

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The San Francisco Bay Area Economic Outlook

• By Anne Ramstetter Wenzel, M.A.
• Econosystems

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The SF Bay Area Economy at a Glance
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The Bay Area Accounts for 27 of Californias
Total Personal Income
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The Bay Area Remains a High Earning Region
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(No Transcript)
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SOURCE EDAB.org
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Job growth has been very slow

• The Oakland metropolitan area (Alameda and Contra
  Costa Counties) now has the largest number of
  jobs of the 6 MSAs in the SF Bay Area (1 million
  out of 3.2 million).
• The San Jose area boomed to no. 2 in 2000, but
  employment there has fallen back to 1996 levels
  (employment now ranges from 866,000 to 867,000
  depending on season).
• The North Bay economy is growing, but represents
  just 12 of the SF Bay Area total employment.

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A few industries show growth

• Construction Wont outlast historically low
  interest rates.
• Leisure and hospitality Normally a cyclical
  industry, its benefiting from the economic
  recovery.
• Finance, insurance and real estate Also
  benefiting from low interest rates.
• Healthcare Growth is here to stay as baby
  boomers age and biotech grows.
• Biotech Small but growing 20 in 05.

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There has been a structural reduction in the
number of Business Services and Manufacturing
jobs in the Bay Area.
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Commercial real estate recovers

• Vacancy rates finally dropping for office space,
  despite very slow employment growth.
• Leasing space at low prices in anticipation of
  growth?
• Small businesses requiring less than 5,000 square
  feet are fueling demand.
• Small businesses usually drive employment growth.

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Apartment rents will eventually recover

• As employment grows slowly, so will population
  and demand for rental units.
• The Baby Boom Echo is coming of age, will drive
  demand for apartments.
• High price of recent rental property purchases
  will necessitate aggressive landlord pricing
  policies as soon as the market allows.

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VC investing has slowed

• Tough IPO market, tough markets overall may be
  dampening enthusiasm that was emerging in 2004.
• The U.S. economy overall is slowing only 78,000
  payroll jobs were added in May.
• The global economy is slowing, too The IMF
  lowered their forecast of global economic growth
  to 4.3 in 2005, down from 5.1 growth in 2004.

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The Bay Areas structural adjustment is over, but

• Not much help from the overall economy for help
  stimulating jobs.
• Recovery from steep losses will continue.
• Optimism is high for small and medium sized firms
  unless spirits are crushed by an economic
  shock, payrolls should continue to grow.
• Slow jobs growth will continue even when
  ?interest rates hit finance construction.