2019 sacramento economic forecast - bay area...
TRANSCRIPT
January 16, 2019
2019 Sacramento Economic Forecast
Jim Wunderman, President & CEO, Bay Area Council
• The Bay Area Council is a
business-sponsored, public policy
advocacy organization for the
nine-county Bay Area.
• The Council proactively advocates
for a strong economy, a vital
business environment, and a
better quality of life for everyone
who lives here.
• Today, more than 325 of the
largest employers in the region
support the Bay Area Council and
offer their CEO or top executive
as a member.
The Economic Institute is the leading
think tank focused on the most critical
economic and policy issues facing the
nine-county Bay Area region.
2019 Research Includes:
• North Bay: Building a More Resilient
and Inclusive Economy in the Wake
of the Fires
• Homelessness in the Bay Area
• Valley to Valley: Shaping the Future
of Fresno
• Future of Work Research and
Interviews
The Northern California Megaregion
BAC Megaregion work includes:
• Valley to Valley: Shaping the Future of
Fresno
• The Northern California Megaregion
Report
• UC Merced Public Private Partnership
Let’s start with the Bay Area
SOURCE: Global Insight, BEA, team analysis
4,897
3,737
2,809
2,6782,243
2,150
2,0961,938
1,838
1,5011,3591,304
1,261
869854822
748686
610580531
525
523
South Korea
United Kingdom
Germany
Canada
Russia
Brazil
Spain
France
India
Australia
Italy
Argentina
Saudi Arabia
Switzerland
Bay Area1
Taiwan
Indonesia
Netherlands
Poland
Turkey
Sweden
9,181
16,768
Japan
United States
China
Mexico
2017 Nominal GDP
$ Billion
1 Bay Area defined as San Jose-Sunnyvale-Santa Clara, San Francisco-Oakland-Hayward, Napa, Santa Rosa, and Vallejo-Fairfield MSAs
Note: 21-county Northern California Megaregion would have the 16th largest economy at $952 billion
Real GDP CAGR
2014-2017, %
4.3
2.5
1.2
1.8
2.2
6.8
1.2
2.0
1.9
7.3
1.3
-2.2
1.1
-0.5
2.9
2.4
3.3
2.3
5.0
4.9
1.6
1.0
1.6
3.3
3.5
#19
Rank in 2014
21
18
20
11
1
2
3
4
5
10
6
7
8
9
13
12
14
15
17
16
19
2427
23
25
If it were a country, the Bay Area would be the 19th largest economy in
the world with a GDP of $748 billion
Bay Area output generally outpaces that of the US, but employment has
only accelerated in the years post-recession
185
170
165
160
200
195
180
175
155
150
190
145
120
110
140
125
90
105
100
95
135
115
85
130
US
20171997 2007
Bay Area
115
105
110
90
100
85
95
135
125
120
150
145
140
130
2017
US
Bay Area
1997 2007
Bay Area1 vs. United States GDP through Dec 2017
Indexed to 100 (1997 benchmark)
Bay Area1 vs. United States Employment through Dec 2017
Indexed to 100 (1997 benchmark)
SOURCE: BLS, BEA, Moody's Analytics
1 Bay Area defined as San Jose-Sunnyvale-Santa Clara, San Francisco-Oakland-Hayward, Napa, Santa Rosa, and Vallejo-Fairfield MSAs
High-tech sectors provide boost to productivity that benefits the Bay Area
Sacramento (0.75)
The Bay Area population continues to be one of the most educated
compared to other US regions
Bay Area1 educational attainment against peer regions,
Percent w/ bachelor’s degree and higher age 25+
48
2008 2010
44
42
40
38
20142006
46
0
30
34
36
32
28
2012 2016
US Average
San Diego
Los Angeles
New York
Houston
Dallas
Boston
Austin
Atlanta
Seattle
Bay Area
1 Data is at the MSA level, includes San Jose-Sunnyvale-Santa Clara, San Francisco-Oakland-Hayward, Napa, Santa Rosa, and Vallejo-Fairfield MSAs
SOURCE: Moody's Analytics, ACS
29
27
25
23
22Los Angeles
New York
San Jose
San Francisco
Boston
Percent of those w/ bachelor’s degree
born in home state, 2016
Sacramento (32%)
The Bay Area far outpaces its peers in patents issued, producing 17% of
all patents issued in the U.S. during 2015
SOURCE: US Patent and Trademark Office, US Census Bureau, team analysis
1 Data for San Jose-Sunnyvale-Santa Clara and San Francisco-Oakland-Hayward MSAs
2 All other data points include full MSA data, not just the stated city
24,350
Los Angeles
Bay Area1
San Diego
New York2
Boston
3,909
Seattle
5,949
4,739
6,476
7,754
Chicago
5,460
1,271
1,248
1,659
410
3,683
385
488
5.5
4.6
4.2
3.9
3.4
2.8
17.3%
Total patents, 2015
Patents per million
inhabitants, 2015
Share of US patents, 2015
Percent
www.bayareaeconomy.org
Sacramento
$179.3 Million
Sacramento
24 Deals
The Bay Area attracts much of the nation’s venture capital investment, and deal size in the region is growing
1 Bay Area defined as the San Francisco and Silicon Valley constituent MSAs given data availability on source reports
SOURCE: PwC Moneytree Report, team analysis
The Bay Area has a strong presence of headquartered Fortune 500
companies, and significantly more than similarly-sized metro areas
SOURCE: Fortune Magazine, D&B Hoovers
1 Data presented are for metropolitan statistical areas in all cases except for the Bay Area, which represents companies from nine counties.
Number of Fortune 500 companies in 2018 vs. 2013
Detroit
Los Angeles
Boston
Seattle
Atlanta
St. Louis
Minneapolis
Denver
Washington
Philadelphia
Houston
Dallas
Bay Area1
Chicago
New York
Gone from 2013 list:
▪ Advanced Micro-
devices
▪ Agilent
Technologies
▪ Safeway
▪ SanDisk
▪ Symantec
▪ URS
▪ Yahoo
New to list in 2018:
▪ Adobe Systems
▪ HP Inc.
▪ Lam Research
▪ Netflix
▪ Nvidia
▪ PayPal
▪ Salesforce
▪ Tesla
20182013
On the list in 2013 & 2018:
Apple
Applied Materials
Charles Schwab
Chevron
Cisco Systems
Clorox
Core-Mark Holdings
eBay
Franklin Resources
Gap
Gilead Sciences
Google/Alphabet
Hewlett-Packard
Intel
McKesson
NetApp
Oracle
PG&E Corp
Ross Stores
Sanmina
Synnex
Visa
Wells Fargo
Western Digital
80
31
32
19
27
18
18
13
17
8
10
10
9
12
11
84
35
33
22
21
18
15
15
14
11
11
10
10
10
10
The Bay Area has strong industry diversification across its top performing
companies compared to other U.S. economic hubs
SOURCE: Fortune, Capital IQ, McKinsey analysis
2018 US Fortune 500 Companies by Industry
Houston
Region
New
York
City
Bay
Area1
Energy Financials / Insurance Tech / Telecom / Media OthersConsumer
Products
1 Bay Area headquarters inclusive of 17 cities: Cupertino, Dublin, Foster City, Fremont, Los Gatos, Menlo Park, Mountain View, Oakland, Palo Alto,
Redwood City, San Jose, San Mateo, San Ramon, Santa Clara, San Francisco, South San Francisco, Sunnyvale
1 Based on Pitchbook data pull 12/22/2017
Company
Current Valuation
(USD billion)1
Latest funding
round
(USD million)
1
2
3
4
5
15.1
20
31.0
12.3
68.0
250
600
2,000
150
448
▪ Privately-held
companies like
Uber and Airbnb
are now valued
higher than a
significant
number of
companies in
the Fortune 500
list
▪ Dropbox was
valued at $10B
before its 2018
IPO and is now
valued at $8.8B
Five privately-held Bay Area companies have a valuation close to or
greater than $10B
SOURCE: Pitchbook
Is the Bay Area still a good place to do business?
Companies that have moved or
aggressively expanded outside of
the Bay Area:• Jamba Juice
• Charles Schwab
• McKesson
Companies that have moved to or
aggressively expanded inside of
the Bay Area:• Amazon
• Chase
• Dell
26%
19%
13%
20%
21%
21%
11%
14%
12%
15%
16%
23%
28%
30%
31%
46%
40%
34%
42%
46%
54%
2018
2017
2016
Stronglyagree
Somewhatagree
Don’t know Somewhatdisagree
Stronglydisagree
Total
Agree
Total
Disagree
I am likely to move out of the Bay Area in the next few years.
For the first time, more people agree than disagree that they are likely to
leave the Bay Area
SOURCE: 2018 Bay Area Council poll, conducted by EMC Research
Population growth is the only area where the Bay Area lags competitors;
the region’s fast recent growth is based largely on industry mix, not an
ability to attract new workers
SOURCE: Moody’s Analytics
2009-2014 2014-2017
Wage Growth,
% CAGR
GDP Growth,
% CAGR
Population Growth,
% CAGR
Household Income Growth,
% CAGR
Employment Growth,
% CAGR
Bay Area 8.5% 6.1%
Peer1 Average 4.6% 3.2%
Productivity Growth,
% CAGR
Income per capita Growth,
% CAGR
Bay Area 6.2% 5.1%
Peer Average 4.6% 2.7%
Bay Area 1.5% 1.3%
Peer Average 1.0% 0.3%
Bay Area 2.8% 2.9%
Peer Average 2.1% 2.2%
Bay Area 2.6% 5.7%
Peer Average 0.9% 3.2%
Bay Area 4.5% 4.3%
Peer Average 3.1% 2.5%
Bay Area 1.6% 0.8%
Peer Average 1.4% 1.0%
1 Peers include New York, Los Angeles, Austin, Dallas, Boston, Seattle, and San Diego
Outperforms
peers
Underperforms
peers
Peer average
Sacramento MSA
2009-2014 2014-2017
1.1% 1.1%
The Bay Area builds fewer homes than other similar metros
Sacramento (363)
Home prices have increased rapidly in the Bay Area, while Sacramento
remains relatively more affordable
Net domestic migration to/from the Bay Area has turned negative…
…And moved more positively in the outlying areas of the megaregion
86,445
42,346
Data Source: American CommunitySurvey, one-year estimates, 2017Analysis: Bay Area Council EconomicInstitute
10
,30
7
40,282
Monterey Bay Area
Bay
Area
Northern
San Joaquin
Valley
Sacramento
Area+33%
+43%
+19%
Daily Megaregional
Commuters in 2017
% Change 2010 - 2017
San Francisco congestion is third worst among U.S. cities, but traffic is
highly correlated to economic activity
SOURCE: INRIX
2013
2017
XX
XX
Worsening
Improving
1 Historical number is from 2013, except for Chicago and Atlanta which are from 2015
Sacramento residents spent only 25 hours in traffic in 2017 versus 79 hours for Bay Area residents.
Government makes up a large piece of Sacramento’s economy, while
professional and business services dominate San Francisco’s economy
Note: Data represents counties
Source: Bureau of Labor Statistics, Quarterly Census of Employment and Wages
Analysis: Bay Area Council Economic Institute
Tech job growth has been concentrated largely in places like San
Francisco since the Great Recession
Reno’s GDP grew 4.3% annually over the past five years, compared to
Sacramento’s growth of 2.6%
Sacramento business leaders have a unique opportunity to effect change
in state government
How Sacramento Can Succeed
1) Focus on the basics: housing, transportation, workforce
2) Expand reach and capacity of Sacramento International Airport
3) Reinvent and modernize government
4) Improve opportunities for technology transfer at UC Davis
5) Act as a leader in improving CA’s regulatory environment and bringing down cost of doing business
6) Work together with BAC on megaregion strategy
Aggie Square
