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South Bay Accent - June/July 2017

As an ongoing economic trailblazer for the rest of the nation and the world, Silicon Valley again maintained its remarkable streak of economic good fortune, leaving a distant memory of the Great Recession of 2008 in its wake. But new jobs weren’t confined to the tech-internet nexus. Other healthy industry sectors last year included construction, with job growth totaling 6,864—much of that coming from a robust market for new office and R&D space—and health care, accounting for 6,829 new jobs. The unemployment rate for the region dropped into the low single digits, plummeting to 3.1 percent in May 2016. That was down from 3.6 percent only six months earlier in November 2015. These largely optimistic measurements of the past year highlighted the 2017 Silicon Valley Index, compiled by Joint Venture Silicon Valley. Other economic measurements, while still impressive, showed some decline year-over-year. Total venture capital investment, though it decreased a bit last year compared to 2015, was still robust at $9.3 billion for Silicon Valley companies and $13.8 billion for those in San Francisco. That said, two areas retreated sharply: Mergers and acquisitions were down steeply last year, from 853 in 2015 to 593 in 2016, and the nine Initial Public Offerings, or IPOs, in 2016 represented seven fewer than 2015 and a decrease of 14 compared to 2014. Hancock said the small decrease in VC funding to just over $23 billion in both Silicon Valley and San Francisco is not really a cause for concern, given the almost gaudy level of $24.5 billion in 2015—the largest amount since 2000, when the dot.com era climaxed. The 2015 total represented a nearly $5 billion increase from the year before. Innovative, highly visible and, at times, controversial San Francisco-based sharing-economy companies like Airbnb, Uber and Lyft accounted for much of that funding. “You have self-driving cars, even flying cars, and credible people are engaged in this work.” TWO-TIERED ECONOMY A marginally slower rate of job growth and small declines in other categories had no adverse effect on Silicon Valley affluence. It’s easy to understand why workers in many regions of the country might want to find their way to San Jose. The average annual local earnings reached their highest-ever level in 2016—$125,580, including wages and other forms of compensation. According to the Index, per capita income hit an all-time high at $86,976, while median household income stood at $102,036 last year. By comparison, the median household income nationwide was $56,616. In California as a whole, that figure totaled $64,500 through 2015, the most recent available latest year statewide statistics. “There is really nothing wrong with this picture,” said Hancock. “The Bay Area economy and job market are still substantial and robust. We’re kind of like a racecar when the driver takes his foot off the gas pedal. It’s going 110 miles per hour instead of 120.” But it’s also a racecar encountering something of an obstacle course these days. Hancock cautions that the Bay Area’s breathtaking cost of housing and ever-worsening traffic congestion suggest a region that is choking a bit on its success. And that success is not equally shared. 54 South Bay Accent “We have 50 billionaires and 10,000 millionaires in Silicon Valley, but there are lots of low-income earners,” he said. “Three out of every 10 households in the area live in poverty. We are great at producing high-income jobs, but we are no longer creating middle-income jobs and careers. Silicon Valley has become a two-tiered economy.” Hancock is not alone expressing reservations along with the continued good news. Some observers caution the slowdown in new-job creation last year is not a temporary blip or insignificant development. “Silicon Valley is not an island, even though we outperform the rest of the nation economically,” said Micah Weinberg, president of the Economic Institute of the Bay Area Council, a San Francisco-based advocacy organization for the region’s largest employers. “I do foresee a softening in the economy regarding job creation as primarily part of the normal ups and downs of the business cycle.” But jobs are just one part of the picture, housing another, Weinberg said. “In a place that has essentially stopped building new housing in any appreciable amount in recent years, workers are being bused in from Sacramento,” he said. “We’ve just stopped building workforce homes in Silicon Valley.” Weinberg said it’s not only “morally questionable” to shut low- and middleincome earners out of local housing, but economically troublesome, too. “A lot of Bay Area cities look like they are committed to preserving in amber some 1950s-era image of themselves,” he said. “I talk to a lot of CEOs and many of them today can only afford to have their highestearning employees live in the Bay Area. They are placing a lot of their other employees, including some who make very good salaries, at their facilities in other parts of the country. These are not just call-center type jobs. A region without a middle class is not a resilient region, economically speaking.” Building only one unit of new housing for every eight new jobs in 2016 is a ratio that will have to change in the future for Silicon Valley and the Bay Area to retain its economic luster, according to Jim Wunderman, president and CEO of the Bay Area Council. “The lack of affordable housing is already causing a talent drain that is only going to get worse in the future,” he said. “The reason the Bay Area became the successful place we see today is that top talent wanted to come here. But they won’t, if they can’t afford to come here in the first place or stay here on a long-term basis.”


South Bay Accent - June/July 2017
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