News

Silicon Valley Index suggests economic recovery

But massive layoffs, tough choices loom for public sector, report says

From more jobs to more IPOs, an economic recovery is stirring in Silicon Valley's private sector, according to an annual snapshot of the region's economic and social health.

However, with public coffers empty and job losses among public employees growing, the region faces a bitter reckoning on how many public safety, health and welfare services it can afford.

Those were the main conclusions of the 16th annual Silicon Valley Index released Monday (Feb. 14) by the nonprofit Joint Venture Silicon Valley Network and the Silicon Valley Community Foundation.

The Index reports the latest data and trends in economic development, workforce, housing, education, public health, land use, environment, governance and culture throughout Santa Clara and San Mateo counties, as well as in portions of Alameda and Santa Cruz counties.

Data in the report was gathered and analyzed by Collaborative Economics of San Mateo.

"Silicon Valley's economy is making slow but noticeable progress recovering from the major blow delivered by the recession," Joint Venture CEO Russell Hancock said Monday, noting upticks in new business establishments, patent registrations and venture-capital activity emanating from the region.

But with the loss of 4,200 public jobs -- mostly in education and city government -- and people such as the police chief of Half Moon Bay cutting back to part-time schedules, the public sector faces a looming crisis.

"You're going to see huge layoffs of staff and massive reductions in public services," Silicon Valley Community Foundation CEO Emmett Carson predicted at Monday's press conference.

"The question isn't how to avoid that. The question is, 'Are we having the broader adult discussion about what kind of community we'd like?'"

Federal economic-stimulus funds, which cushioned the blow of public layoffs last year, have run out, Carson said.

And supposed silver bullets such as reforming public-employee pension costs -- comprising 10.6 percent of city-government expenditures and 7 percent at the county level -- won't begin to solve the problem, he said.

Hancock and Carson said their groups later this week will offer up a "third path" to new governmental efficiencies through agency consolidation, shared services and cross-jurisdictional collaboration.

"We'll propose this as a path Silicon Valley really needs to consider," Hancock said.

Currently, the largest single category of county spending is in public safety at 33 percent, followed by public assistance at 27 percent, Carson said.

"We'll have to look at a multiplicity of approaches for the new normal, have the tough discussions about, 'Is it the youngest people we want to protect, or the oldest folks? Where do we really want to protect the environment -- is it the water or the air?'

"We're going to have to make hard choices because we no longer have the revenue streams for the world we used to have."

In the private sector, Silicon Valley added 12,300 new jobs over the past year, Hancock said.

Unemployment in the valley, at 9.8 percent, is out of the double digits and compares to a similar national unemployment rate and a 12.3 percent California rate.

The region had a net gain of 20,200 new business establishments in the past year, he said.

"Entrepreneurship is alive and well. In a difficult economy, people are still coming to Silicon Valley to start new companies."

After two years of falling, the region's household income has stabilized at an average of $79,999, with a median of $86,000 a year, he said.

Venture-capital investment in the region is up 5 percent and in certain sectors, such as information technology and telecommunications, by much more.

Patents emanating from the region grew by 9 percent, outstripping the national growth of 6 percent, he said.

And IPOs in Silicon Valley rebounded to 11 last year -- 6 percent of the nation's total in a region with just 1 percent of its population, Hancock said.

But some social indicators, such as health-insurance and food-stamp participation, were troubling, he said.

The percentage of Silicon Valley residents with no health insurance rose from 14 percent to 18 percent, and those receiving food stamps grew from 2.6 percent to 4 percent.

Carson noted the stark dichotomy between the local haves and the have-nots.

"On one hand we have Google giving 10 percent across-the-board raises ... and at the same time our unemployment continues to hover around 10 percent ... and one in 10 people gets (public assistance)," he said.

"Everything's wonderful here and there's a hiring war going on if you're in tech and you can write app code. The sky's the limit. Yet there's this other half ... that lives in a very different world.

"Where do these people come together to even have a discussion?"

Comments

Posted by thank you, a resident of College Terrace
on Feb 14, 2011 at 8:37 pm

Thank you for your hard work, Mr. President.


Posted by Charlie, a resident of Barron Park
on Feb 14, 2011 at 10:05 pm

It's just telling us the GAP is even wider. Like housing, the good area are getting higher offer and the "bad" area are having double dip in home values.


Posted by Ed, a resident of Menlo Park
on Feb 14, 2011 at 10:37 pm

I can only assume the comment by "thank you" regarding the President is meant as a sarcastic jab. The implicit point is that if only there had been a different leader in place, our economic conditions wouldn't be in this sorry state.

The only thing I can't figure out is -- does "thank you" really mean President Obama, or President Bush? It wasn't specified, but after all either one of them could be the target of such sarcasm. However, I am betting this was aimed at the current President, despite the fact that the economy was falling off the table before he ever took office.

The funny thing is how many conservatives who vehemently oppose the President at the same time vilify him for failing to "fix" the economy within less 2 years, as if that would have magically happened if John McCain had won the election. Or perhaps some mythical conservative leader who would have saved the country by letting GM fail and even more millions of unemployed go out on the street due to the ripple effects.


Posted by Steve C, a resident of Menlo Park
on Feb 15, 2011 at 12:21 pm

I question how much this will help the people who are hurting the most economically. Good for the twenty-somethings and wealthy investors, same old same old for everyone else.


Posted by Lisa, a resident of Old Palo Alto
on Feb 16, 2011 at 7:25 am

Dear Thank You

People don't realize that the seeds of the national debt were laid by Reagan. In 1980, the debt was about $1Trillion. Reagan spent money of defense, cut taxes.

Guess what - national debt went to $5T, decreased under Clinton - and actually a surplus, then BushII ran it up again, by cutting taxes and having wars that were not paid for. So no wonder. Get real people.


Posted by Steve C, a resident of Menlo Park
on Feb 16, 2011 at 7:57 am

The deficit is not the only problem that can be laid at Reagan's feet. The whole de-regulation fiasco began with Reagan as well, planting the seeds for the greatest financial debacle this country has ever seen. Reagan was the Prince of Economic Darkness.


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