Strong hiring by resurgent Silicon Valley is helping to stabilize the Northern California economy. Apple, Cisco Systems and Google, among others, were hiring strongly in the second half of 2011. Health care company Kaiser Permante also posted a significant number of help wanted ads last fall. Balancing out the surge in high tech jobs, the Northern California economy is heavily dependent on state and local government jobs. State and local government employment in California was hit particularly hard by the recession-induced budget crisis. In the three years from June 2008 to June 2011, statewide, some 148,000 state and local government jobs were cut from California payrolls. Tax revenues continue to be a source of frustration. According to the state controller’s office, state revenue in December 2011 was $165 million short of budget projections. Controller John Chiang stated that “ legislative action may be needed” to deal with the unexpected shortfalls.
Tourism is also an important driver of Northern California’s economy. Both dollars spent by tourist and tourism-related employment took a hit in 2009. Spending improved by 2010, the last year for data, but employment remained soft. Employment in the leisure and hospitality industry declined well below the U.S. average, on a percentage basis, through 2009. The good news is that the rate of job growth statewide in leisure and hospitality industries in 2011 was above the U.S. average.
House prices in Northern California were particularly hard hit by the Great Recession. Since peaking in 2007Q1 the FHFA house price index for the U.S. is down about 16 percent. From its later peak in 2009Q1, the San Jose FHFA house price index is down about 23 percent. Housing starts, particularly on multifamily projects have recently been on the upswing. Declining vacancy rates and improving rents are incentivizing multifamily builders.
Click here for the complete Northern California Regional Economic Update, including a forecast table and charts of regional economic activity: NorthernCA2012Q1.