The document provides an economic forecast for the South Bay and San Francisco regions for 2011-2013. It finds that unemployment is decreasing but remains elevated compared to pre-recession levels. Technology and business services are driving employment growth, though the labor force is aging. Housing is recovering locally in the South Bay while tourism and social media are important in San Francisco. Both regions face challenges from an aging population.

1. 12/16/11
South Bay / San Francisco
Economic Forecast: 2011-2013
Bodega Bay
Petaluma
Marin
Newark
Fremont
Milpitas
Mountain Vie w Novato
Inverness
Sunnyvale
Palo Alto Santa
Cupertino San Jos e
Saratog a
Los Gatos
Clara San Rafael
Mill Valley
Lexington Hill s
Morgan Hill Tiburon
San Martin
Gilro y
San Francisco
Daly City
Pacifica
San Bruno
Hollister
Montara
El Granada Redwood
City Menlo
Park
Half Moon Bay Atherton
San Woodside
Benito San
Mateo
Jon
Haveman
Chief
Economist,
BAC
Economic
Ins2tute
December,
2011
Unemployment
Unemployment
Rate
(%,
SA)
Oct-­‐
Oct-­‐
Oct-­‐
2009
2010
2011
12
California
12.1
12.5
11.7
10
Bay
Region
Oakland
(MD)
11.3
11.2
10.1
8
San
Francisco
(MD)
10.4
10.3
9.2
6
San
Jose
(MSA)
11.7
11.0
9.7
Southern
Calif.
4
Los
Angeles
12.1
12.9
12.2
San
Diego
10.5
10.5
9.7
2
Jan-­‐90
Aug-­‐91
Mar-­‐93
Oct-­‐94
May-­‐96
Dec-­‐97
Jul-­‐99
Feb-­‐01
Sep-­‐02
Apr-­‐04
Jun-­‐07
Nov-­‐05
Jan-­‐09
Aug-­‐10
Orange
County
9.7
9.4
8.5
Oakland
(MD)
San
Francisco
(MD)
San
Jose
(MSA)
Source:
California
Employment
Development
Department
1

2. 12/16/11
Labor Markets
Total
NonFarm
Employment
Peak
to
Oct-­‐
Current
2011
(%)
1,150
1,100
Inland
Empire
1,124.1
-­‐12.0
1,050
Orange
County
(MD)
1,378.0
-­‐9.7
Oakland
(MD)
947.1
-­‐9.9
1,000
Los
Angeles
5,173.8
-­‐8.4
950
CALIFORNIA
14,151.6
-­‐7.0
900
San
Diego
1,248.1
-­‐5.1
850
San
Francisco
(MD)
953.3
-­‐4.9
800
San
Jose
882.1
-­‐4.2
Jan-­‐98
Feb-­‐99
Mar-­‐00
Apr-­‐01
May-­‐02
Jun-­‐03
Jul-­‐04
Aug-­‐05
Sep-­‐06
Oct-­‐07
Dec-­‐09
Jan-­‐11
Nov-­‐08
Oakland
(MD)
San
Francisco
(MD)
San
Jose
(MSA)
Source:
California
Employment
Development
Department
Bay Employment Growth
San Jose (MSA)
Total
NonFarm
Employment
Growth
106
Index
=
100
at
Onset
of
Recession
104
102
100
98
96
94
92
90
88
86
84
82
80
0
6
12
18
24
30
36
42
48
54
60
Months
Since
Onset
of
Recession
1990
2001
2007
Source:
Bureau
of
Labor
StaYsYcs
2

3. 12/16/11
Bay Employment Growth
San Francisco (MD)
Total
NonFarm
Employment
Growth
104
Index
=
100
at
Onset
of
Recession
102
100
98
96
94
92
90
88
86
84
0
6
12
18
24
30
36
42
48
54
60
Months
Since
Onset
of
Recession
1990
2001
2007
Source:
Bureau
of
Labor
StaYsYcs
CA Employment Growth
Total
NonFarm
Employment
Growth
106
Index
=
100
at
Onset
of
Recession
104
102
100
98
96
94
92
90
88
0
6
12
18
24
30
36
42
48
54
60
Months
Since
Onset
of
Recession
1990
2001
2007
Source:
Bureau
of
Labor
StaYsYcs
3

4. 12/16/11
What do we know about
SB/SF Economies?
South
Bay
San
Francisco
• Technology
is
booming
• Bus
Srvcs/tourism
• Housing
is
picking
up
–
oriented
locally
• Social
media
• Biotech
Common
Aspects/Issues:
• People
– Highly
educated/high
income
populaUons
– Aging
• Business
– Business
services
are
important
– Venture
capital
plays
a
big
role
–
patent
heavy!
– Significant
goods
movement
gateways
• InUmately
linked
with
rest
of
Bay
Area
Age Related Challenges
San
Jose
(MSA)
PopulaYon
Forecast
San
Francisco
(MD)
PopulaYon
by
Age
Forecast
by
Age
35
40
30
35
Percentage
of
PopulaYon
Percentage
of
PopulaYon
30
25
25
20
20
15
15
10
10
5
5
0
0
20
to
34
35
to
54
55
to
64
65
+
20
to
34
35
to
54
55
to
64
65+
2010
2020
2010
2020
• Prime
working
age
populaUons
shrinking
• ReUrement
age
populaUons
growing
significantly
Source:
California
Department
of
Finance
4

5. 12/16/11
Educational Opportunity
Share
of
PopulaYon
with
a
Bachelor's
Degree
or
Higher
for
Selected
California
CounYes,
2009
Marin
San
Francisco
Santa
Clara
San
Mateo
Alameda
Contra
Costa
Orange
San
Diego
Ventura
San
Luis
Obispo
California
Los
Angeles
Sacramento
Riverside
San
Bernardino
0
10
20
30
40
50
60
Percentage
of
PopulaYon
Source:
US
Census
Bureau
Income
Median
Household
Income
for
Selected
California
CounYes,
2009
Marin
Santa
Clara
San
Mateo
Contra
Costa
Orange
Ventura
San
Francisco
Alameda
San
Diego
California
San
Luis
Obispo
Riverside
Los
Angeles
Sacramento
San
Bernardino
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Source:
US
Census
Bureau
5

6. 12/16/11
Compensation per Employee
$120
$100
Thousands/Year
$80
$60
$40
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
CA
San
Francisco
(MD)
Oakland
(MD)
San
Jose
(MSA)
Source:
Bureau
of
Economic
Analysis,
California
EDD
Employment by Industry
San
Jose
(MSA)
Employment
by
Industry
–
October
Professional/Business
Manufacturing
EducaUon/Health
Government
Retail
Trade
Leisure
and
Hosp.
InformaUon
Wholesale
Trade
ConstrucUon
Fin.
AcUviUes
Other
Services
Transport
Warehouse
0
5
10
15
20
25
2011
%
Share
of
Total
Non-­‐Farm
Employment
Source:
California
Employment
Development
Department
6

7. 12/16/11
Employment by Industry
San
Francisco
(MD)
Employment
by
Industry
–
October
Professional/Business
Government
Leisure
and
Hosp.
EducaUon/Health
Retail
Trade
Fin.
AcUviUes
InformaUon
Other
Services
Manufacturing
Transport
Warehouse
ConstrucUon
Wholesale
Trade
0
5
10
15
20
25
2011
%
Share
of
Total
Non-­‐Farm
Employment
Source:
California
Employment
Development
Department
Bay Area Employment
Interlinkages
Santa
Clara
San
Mateo
San
Francisco
%
of
Employed
Residents
Employed
Outside
of
County
Marin
%
of
Local
Employees
from
Outside
of
County
Contra
Costa
Alameda
0
10
20
30
40
50
60
70
Source:
U.S.
Census
Bureau,
LEHD
7

8. 12/16/11
Job Moves: Santa Clara
• 2
largest
job
trade
partners
are
in
Bay
Area
• ConUguous
counUes
• Job
moves
are
SMALL
in
#
Job Moves: San Mateo
• 3
largest
job
trade
partners
are
in
Bay
Area
• ConUguous
counUes
• Job
moves
are
SMALL
in
#
8

9. 12/16/11
Job Moves: SF County
• 4
largest
job
trade
partners
are
in
Bay
Area
• Job
moves
are
SMALL
in
#
• Mecklenberg??
BofA
(Charloge)
Employment Dynamics
San
San
Jose
East
Bay
Francisco
(MSA)
San
Mateo
Job
CreaYon
(%)
-­‐
Births
54
51
52
45
-­‐
Expansions
39
44
43
44
-­‐
Moves
7
5
5
11
Total
100
100
100
100
Job
DestrucYon
(%)
-­‐
Deaths
64
60
63
62
-­‐
ContracUon
31
30
30
26
-­‐
Moves
5
10
7
12
Total
100
100
100
100
Source:
NETS
2009,
CalculaYons
by
BACEI
9

10. 12/16/11
Manufacturing
Manufacturing
ProducYvity
Manufacturing
ProducYvity
San
Jose
(MSA)
San
Francisco
(MSA)
60
250
60
170
Employment
Employment
Billions
of
Dollars
Billions
of
Dollars
55
240
50
160
50
230
45
220
40
150
40
210
35
200
30
140
30
190
20
130
25
180
20
170
10
120
15
160
10
150
0
110
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Gross
Output
Employment
Gross
Output
Employment
Source:
California
EDD,
Bureau
of
Labor
StaYsYcs
National Phenomenon
Manufacturing's
Share
of
Total
Employment
35
30
25
Percentage
of
Total
Nonfarm
20
15
10
5
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
San
Francisco
(MD)
Oakland
(MD)
San
Jose
(MSA)
Michigan
California
Texas
Source:
Bureau
of
Labor
StaYsYcs
10

11. 12/16/11
Employment by Industry
San
Jose
(MSA)
Employment
by
Industry,
YTD
to
Oct.
ConstrucUon
InformaUon
EducaUon/Health
Professional/Business
Total
Nonfarm
Manufacturing
Wholesale
Trade
Retail
Trade
Government
Leisure
and
Hosp.
Other
Services
Transport
Warehouse
UUl.
Fin.
AcUviUes
-­‐6
-­‐4
-­‐2
0
2
4
6
8
10
12
%
Change
(Annualized
Rate)
Source:
California
Employment
2010
2011
Development
Department
Tech Sector Growth
Oct. 2009 – Oct. 2011
Total
3.8%
Computer
&
Elec
Prod
Manuf
7.8%
InformaUon
16.2%
Professional
&
Business
Srvcs
7.2%
Source:
California
Employment
Development
Department,
San
Jose
MSA
11

12. 12/16/11
Employment by Industry
San
Francisco
(MD)
Employment
by
Industry,
YTD
to
Oct.
Professional/Business
ConstrucUon
Leisure
and
Hosp.
Other
Services
Total
Nonfarm
EducaUon/Health
InformaUon
Fin.
AcUviUes
Government
Transport
Warehouse
UUl.
Wholesale
Trade
Manufacturing
Retail
Trade
-­‐8
-­‐6
-­‐4
-­‐2
0
2
4
6
8
%
Change
(Annualized
Rate)
2010
2011
Source:
California
Employment
Development
Department
Airports – Passenger Flows
SJO
SFO
(Seasonally
Adjusted
Trend)
(Seasonally
Adjusted
Trend)
1,200
45
2,800
800
InternaYonal
Passengers
(`000s)
DomesYc
Passengers
(`000s)
InternaYonal
Passengers
(`000s)
DomesYc
Passengers
(`000s
40
2,600
700
1,000
35
600
2,400
800
30
500
25
2,200
600
400
20
2,000
300
400
15
1,800
10
200
200
5
1,600
100
-­‐
-­‐
1,400
-­‐
Jan-­‐00
Jan-­‐02
Jan-­‐04
Jan-­‐06
Jan-­‐08
Jan-­‐10
Jan-­‐00
Oct-­‐01
Jul-­‐03
Apr-­‐05
Jan-­‐07
Jul-­‐10
Oct-­‐08
DomesUc
InternaUonal
DomesUc
InternaUonal
Source:
RITA
12

13. 12/16/11
Venture Capital
CA
and
Bay
Shares
of
U.S.
Venture
Capital
to
Q3-­‐2011
60
55
Value
of
All
%
of
Total
Q3-­‐2011
Deals
(Millions)
US
VC
50
45
California
3,287
47
40
(%)
Bay
Area
2,668
38
35
30
Oakland
(MD)
196
3
25
San
Francisco
(MD)
1,554
22
20
San
Jose
(MSA)
897
13
15
Q1-­‐95
Q2-­‐96
Q3-­‐97
Q4-­‐98
Q1-­‐00
Q2-­‐01
Q3-­‐02
Q4-­‐03
Q1-­‐05
Q2-­‐06
Q3-­‐07
Q4-­‐08
Q1-­‐10
Q2-­‐11
United
States
6,952
Bay
California
Source:
PriceWaterhouseCoopers
MoneyTree
Venture Capital
Top 10 VC Investments of 2011 in San Jose (MSA)
Amount
Company
City
($
Millions)
Industry
Electronics
PlasUc
Logic
Ltd.
Mountain
View
200
InstrumentaUon
PalanUr
Technologies
Inc.
Palo
Alto
118
Solware
Tabula
Inc.
Santa
Clara
108
Semiconductors
Coupons.com
Inc.
Mountain
View
100
Media
and
Entertainment
SoloPower
Inc.
San
Jose
79
Industrial
Energy
Alta
Devices
Inc.
Santa
Clara
72
Biotechnology
Medical
Devices
and
Intrapace
Inc.
Mountain
View
61
Equipment
CardioDX
Inc.
Palo
Alto
58
Biotechnology
iControl
Networks
Inc.
Palo
Alto
52
Solware
Flipboard
Inc.
Palo
Alto
50
Media
and
Entertainment
Source:
PriceWaterhouseCoopers
MoneyTree
13

14. 12/16/11
Venture Capital
Top 10 VC Investments of 2011 in SF (MSA)
Amount
Company
City
($
Millions)
Industry
BrightSource
Energy
Oakland
201
Industrial
Energy
Airbnb
Inc.
San
Francisco
112
Media
and
Entertainment
Square
Inc.
San
Francisco
100
IT
Services
Kabam
Inc.
Redwood
City
85
Solware
Fulcrum
BioEnergy
Pleasanton
75
Industrial
Energy
BridgeLux
Inc.
Livermore
67
Semiconductors
Adchemy
Inc.
Foster
City
61
IT
Services
Nevro
CorporaUon
Menlo
Park
5
Medical
Devices
and
Equipment
Yapstone
Inc.
San
Francisco
50
IT
Services
Eventbrite
Inc.
San
Francisco
50
IT
Services
Source:
PriceWaterhouseCoopers
MoneyTree
Venture Capital
Top VC Investment by Sector in 2011 to Q3
Bay
Area
East
Bay
San
Francisco
San
Jose
1
Solware
Industrial
Energy
Solware
Solware
Media
and
Medical
Devices
Media
and
2
Entertainment
and
Equipment
Entertainment
Semiconductors
Medical
Devices
Medical
Devices
3
and
Equipment
Solware
IT
Services
and
Equipment
4
Industrial
Energy
Biotechnology
Biotechnology
Industrial
Energy
Source:
PriceWaterhouseCoopers
MoneyTree
14

15. 12/16/11
Patents Granted
Rank
Among
Total
CounYes
County
2009
2010
(‘06-­‐’10)
1
Santa
Clara
7,805
10,047
40,290
2
King,
WA
3,026
3,637
13,075
3
Los
Angeles
2,216
2,817
11,800
4
San
Diego
1,964
2,993
11,120
5
San
Mateo
1,954
2,664
10,103
6
Middlesex,
MA
1,822
2,564
9,899
7
Alameda
1,690
2,191
8,971
8
Orange
1,648
2,175
8,782
29
Contra
Costa
500
659
2,516
Source:
US
Patent
and
Trademark
Office
Local Housing Markets
Sales
Volume
Median
Price
Oct-­‐10
Oct-­‐11
%
Chng
Oct-­‐10
Oct-­‐11
%
Chng
Santa
Clara
1,374
1,417
3.10%
$502,500
$450,000
-­‐10.40%
Contra
Costa
1,333
1,329
-­‐0.30%
$260,000
$250,750
-­‐3.60%
Marin
205
230
12.20%
$630,000
$602,909
-­‐4.30%
Riverside
3,264
3,026
-­‐7.30%
$198,000
$187,000
-­‐5.60%
San
Bernardino
2,343
2,300
-­‐1.80%
$150,000
$150,000
0.00%
Sonoma
386
490
26.90%
$309,000
$283,500
-­‐8.30%
Orange
2,298
2,241
-­‐2.50%
$438,000
$405,000
-­‐7.50%
Alameda
1,252
1,308
4.50%
$365,000
$340,000
-­‐6.80%
Los
Angeles
5,470
5,830
6.60%
$325,000
$300,000
-­‐7.70%
Solano
517
554
7.20%
$205,500
$188,000
-­‐8.50%
San
Diego
2,750
2,759
0.30%
$334,500
$315,000
-­‐5.80%
San
Mateo
528
566
7.20%
$561,250
$525,000
-­‐6.50%
Ventura
619
673
8.70%
$355,000
$335,000
-­‐5.60%
San
Francisco
436
448
2.80%
$652,000
$635,000
-­‐2.60%
Napa
91
102
12.10%
$307,000
$310,000
1.00%
Source:
DataQuick
15

16. 12/16/11
Median Home Prices
Through Q3-2011
$1,200
• Price
Declines
–
Peak
to
$1,000
Current
– Bay
Area:
-­‐39%
$800
– Marin:
-­‐18%
Thousands
MARIN
– San
Francisco:
-­‐19%
$600
SAN
FRANCISCO
SAN
MATEO
– San
Mateo:
-­‐21%
$400
SANTA
CLARA
– Santa
Clara
-­‐27%
BAY
AREA
$200
$0
1989Q3
1991Q2
1993Q1
1994Q4
1996Q3
1998Q2
2000Q1
2001Q4
2003Q3
2005Q2
2007Q1
2008Q4
Source:
DataQuick
How Many Underwater?
as of Q3-11
#
Mortgages
NegaUve
Equity
State
Underwater
Share
Nevada
328,369
58.3
Arizona
617,876
47.1
Florida
1,911,419
43.9
Michigan
477,104
34.5
California
2,030,292
29.7
Georgia
488,310
30.0
United
States
Total
10,723,410
22.1
Local
MSAs
Oakland-­‐Fremont-­‐Hayward
157,146
29.0
San
Jose-­‐Sunnyvale-­‐Santa
Clara
60,382
17.5
San
Francisco-­‐San
Mateo-­‐Redwood
City
33,036
10.2
Source:
First
American
CoreLogic
16

17. 12/16/11
Home Price Forecast
1,000
Thousands
of
Dollars
900
San Francisco
800
700
600
500
East Bay San Jose
400
300
200
100
0
Q1-­‐1995
Q1-­‐1996
Q1-­‐1999
Q1-­‐2000
Q1-­‐2001
Q1-­‐2002
Q1-­‐2003
Q1-­‐2005
Q1-­‐2006
Q1-­‐2009
Q1-­‐2010
Q1-­‐2011
Q1-­‐2012
Q1-­‐2013
Q1-­‐2015
Q1-­‐2016
Q1-­‐1997
Q1-­‐1998
Q1-­‐2004
Q1-­‐2007
Q1-­‐2008
Q1-­‐2014
SF
Actual
EB
Actual
SJ
Actual
SF
Forecast
EB
Forecast
SJ
Forecast
Source:
Beacon
Economics
Foreclosures
Through Q3-2011
9.0
• Current
Rates
8.0
– Bay
Area:
2.6
7.0
– Alameda:
2.6
Foreclosures
/
1,000
Homes
6.0
– Contra
Costa:
4.2
5.0
San
Francisco
(MD)
– San
Francisco:
0.7
4.0
Oakland
(MD)
– San
Mateo:
1.3
San
Jose
(MSA)
– Marin:
1.2
3.0
– Santa
Clara:
1.4
2.0
1.0
0.0
1995Q1
1996Q2
1997Q3
1998Q4
2000Q1
2001Q2
2002Q3
2003Q4
2005Q1
2006Q2
2007Q3
2008Q4
2010Q1
2011Q2
Source:
DataQuick
17