Were it a country, the Bay Area’s economy would be larger than Saudi Arabia’s, getting rich from its residents’ minds rather than minerals pumped from the ground, according to a new report.
The Bay Area’s annual growth rate of 4.3 percent over the past three years was nearly double that of the U.S. as a whole, bringing the region’s gross domestic product to $748 billion, behind only 18 countries, according to the Bay Area Council Economic Institute, a think tank backed by the local business group, and consulting firm McKinsey.
“It’s impressive. The diversity of the Bay Area economy should hopefully lead to more resilience in the next downturn,” said Micah Weinberg, president of the think tank.
Tech jobs boomed since the end of the recession, growing 45 percent to to more than 750,000 workers in July 2017. Overall employment in the region grew 26 percent.
The per capita GDP of the nine-county Bay Area, nearly $80,000, ranked first among similar U.S. major metropolitan regions, reflecting the affluence of a growing tech workforce.
The Bay Area also led the country in patents issued. In 2015, it garnered 24,350, the most in the country and more than triple the New York region’s total.
PwC, Wells Fargo, the San Mateo County Economic Development Association and the North Bay Leadership Council supported the study.
Christopher Thornberg, founding partner of research firm Beacon Economics, expects growth to continue but said soaring housing costs are hurting the region’s economic diversity.
“You’ll have continued growth in the Bay Area. I don’t see any reason for it to slow down,” said Thornberg. “Tech continues to thrive, but tech grows at the expense of older parts of the economy. Because of the region’s unwillingness to densify … every time a new Google worker moves in, an old economy worker moves out.”
Census data showed that the Bay Area lost a net of 45,670 people to other places in the U.S. from July 2016 to July 2017. Those departures were offset by a gain of 58,156 people from abroad during the same time period.
Across California, less expensive regions like the Inland Empire, Sacramento area and San Joaquin Valley are seeing greater population growth. Last year, Riverside County alone added 36,744 people, the third highest of any U.S. county, according to census data.
People leaving the Bay Area and the state altogether were concentrated in lower-paying sectors like sales, transportation and food preparation, which meant they would be less affected by the state’s high tax rates, according to Beacon.
Thornberg is encouraged by a housing boom in Oakland and the rest of Alameda County, which issued permits for around 6,000 housing units in the last year. But he said more had to done, particularly in low-density areas like San Mateo County.
“It’s a step in the right direction,” he said. “It’s got to be a regional effort.”
Federal policies including trade tariffs and immigration restrictions also threaten the region’s future, said Weinberg, of the Bay Area Council Economic Institute.
“Trade and immigration policies are the things I’m most concerned about in their effects on the Bay Area,” Weinberg said. “To the extent that there continues to be a real chilling effect on immigration of all types and international cooperation — that’s really the biggest threat.”
A few months ago, Bay Area Council representatives visited Washington to advocate for issues including free trade, Weinberg said. The reception from the White House wasn’t encouraging, he said.
“The administration seems hell-bent on pursuing the failed policies of mercantilism from the earliest 20th century,” Weinberg said.
More restrictive immigration policies, such as the elimination of H-1B visas for skilled workers, could choke the supply of foreign employees as well as new company founders, Weinberg said.
Egon Terplan, regional planning director at San Francisco urban planning think tank Spur, agreed that tackling challenges like housing and transit are critical for the future.
“This is one of the most dynamic economies in the U.S. It’s worth ensuring that it maintains its competitive edge,” Terplan said.