It has certainly been a rough August for the financial markets, and we still have more than a week to go! Wall Street has taken us on a wild rollercoaster ride with volatility spiking to its highest level since the end of the recession. One day the Dow’s down 400 points, the next its up 400, then down again. Much of the turmoil is due to worries about the U.S. economy and whether we’re headed for a double-dip recession, as well as the political infighting in Washington over the debt ceiling, and the European sovereign debt concerns.
The troubled economic backdrop has many people wondering if this is 2008 all over again. And more specifically, what impact will all of this have on the nation’s housing market, and our local markets here in the Bay Area?
Without glossing over our current economic challenges, I strongly believe that we are in a very different place today than we were three years ago. At the depth of the recession we had a liquidity crisis. Today, banks aren't lending as much as we'd like, but their balance sheets are strong with enormous cash reserves. Top 500 corporate earnings continue to be very strong, and capital investment is increasing. Although GDP growth rates are lukewarm, we've nonetheless had eight straight quarters of economic growth.
Nationwide, foreclosures have declined for a 10th month in a row. We have not seen the end of the foreclosure pipeline, but these declines are still a good signal to the public. There is no doubt that structural issues remain in our economy. But they are not fundamentally different from two weeks ago, before the S&P downgrade of U.S. debt. As such, there's little justification for the current reaction other than issues of confidence and perception.
Real estate has always been a very local business. And while the national headlines may frighten us, it’s important to remember that the Bay Area has consistently had a stronger economic base and thus a more resilient housing market than most other parts of the country. That’s especially true with Silicon Valley, the Peninsula, and San Francisco.
Why is it that the Bay Area seems to fare better than many parts of the U.S. when economic turmoil strikes? One reason, of course, is the rapid growth of new Silicon Valley companies, and along with them, high-paying jobs. Another is the booming social media sector, which is also being led by Bay Area firms (Facebook, Twitter, LinkedIn). We’re also the center of the rapidly expanding biotech field and the burgeoning “green” technology industry.
According to the Bureau of Labor Statistics, seven of the nine Bay Area counties saw year over year employment growth. Additionally, the jobs being created tend to be much higher-paying positions than elsewhere in the U.S. Santa Clara County recorded the highest average weekly wage in the state, as well as the nation, at $1943, more than twice the national average, followed by San Francisco ($1573) and San Mateo ($1564).
A couple of recent reports by the Bay Area Council underscore why our local region really is at the forefront of job creation.
According to a report released by the Brookings Institution, in partnership with the Bay Area Council Economic Institute, the San Jose-San Francisco-Oakland Bay Area now leads the nation in clean tech jobs, with 11 percent of all US clean tech jobs located in the region. The Bay Area exports more than $1 billion in clean tech products, including building control systems and electric vehicles.
What does this translate into as far as hiring? The Bay Area now supports 70,679 clean tech jobs (51,811 in San Francisco and 18,686 in San Jose). In San Jose, the largest segment is wind energy with 3,000 jobs, and the fastest growing segments were Fuel Cells, where employment grew 24.7 percent in the past seven years, and Wind Energy, where employment grew 17 percent. In the San Francisco-Oakland area, the largest employment is Professional Energy Services with 7,532 jobs.
Likely due to the passage of the Global Warming Solutions Act, and various tax credits and incentives, between 2003 and 2010, clean tech jobs grew by an average annual rate of 5.4 percent in San Francisco and 12.6 percent in San Jose, far outpacing the 4.2% pace of job creation for jobs nationally.
The growth of the clean tech sector in the Bay Area is one more reason why local hiring is one the rise, according to another study by the Bay Area Council. In spite of the economic headwinds at the national level, small and medium Bay Area businesses are still looking to hire over the next six months, researchers found. The business confidence index – the number that distills the survey findings – registered at 62. A reading over 50 signals positive economic times, while below 50 is negative.
“Despite all the national talk about a dreaded double-dip recession, the Bay Area seems to be weathering the recovery much better than other regions,” said Jim Wunderman, President & CEO of the Bay Area Council. While acknowledging the economic concerns, Wunderman said, “Confidence amongst business leaders continues to slowly build.”
All of this is not to sugarcoat our current economic problems. We’re certainly not out of the woods yet and we have a ways to go before we see a full housing market recovery. But we are making progress, even if it’s not at the pace we’d all like to see. And given our region’s track record of economic growth and leading the way in the creation of jobs for the future, I’m confident we’ll continue to see better days ahead.
Rick Turley
President, Coldwell Banker
Monday, August 22, 2011
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