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February 20, 1992
HONORABLE CITY cOUNCIL
Palo Alto, Cal ~fornia
ASSOCIATION Of BAY AREA GOVE~~ENTS ?ROJECTIONS
~AN FBAllDSCO BAY AREA teOiIOMY: 1991 AND 1993
Members of the Council:
Report in Brief
T~',s is if'. informational staff r€'port transmitting irlformation presented at in
AssOCiation of Bay Area Governments CA.BAGJ conference. "San Francisco Bay Area
Economy: 1992 and lS93.· The economic analysis and projections presented at
tne conf~rence have relationships to the information contained in tne Gruen
Gruen -+ Associate::; report, A Planning Policy Audit of Retail Areas in the City
of Palo Alto, rece~tly distributed to the Plannirl'i tomrnlssion and City Council
{CHR:138:92) and schedu1ed for review by the Commission on February 26 and the
Council on March 16, 1991.
tU_ghJjghts gf the ABAG rnf_QLn:!_~ti an
A8AG Research Director Raymond Brady stressed t~e importance. in anaTjzin9 the
current and r.ear-term future of the Bay Area eco~omy. of understanding that
this a':"'ea, as well as the country, is undergoing twQ recessions at the same
time. One recession is a cycHcal recession triggered primarily by o .... ervalued
specuTati .... e real estate and banking and liquidity problems. the second
recession ;s a structurai recession caused primarily by technology change and
competitive market shifts. lhe attacnfd artiCle from the February 7. 1992 San
J~se ~rv New~ elaborates on same cf the structural changes that ma~e this
recession different from typical post World Wa"" II reces~ions.
A Key feature of the structural recession in the Bay Area is the permanent
loss of higher-paying manufacturing and other white co11ar jobs. According to
ABAG analysis, these structural changes probably began in the mid-1970s and
CMR: 155:92
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~ave gained increasing momentu~ since the mid~19S0s. An impact for the Bay
Are .. 1S an actual o'ec1il'le in the numbi!r of hi9her paying manufar:turing jobs
ilnd an increasing percenta9~ of new jobs In l{)wer-pa.Ying service, f'etail
wholesale tra~e and finance, insura~ce and real estatp. (F_I.R.E.) act'~ities.
Attached to this report are se1ectect handouts from the ABAG presentation
including;
• Pages B-1 and 8-2 - A summary of the structural changes described
in the precedir.g paragraphs.
• Pege B-3, Bay Arai Per Capi ta Inco~ and Tax.itbl e Sales -S; nce
1'984, Hie historic corre1ation between ~ncome and taxab1e sales
has broken down, Per capita' taxable sales are !ssentially
unchanged (in 1989 dollars) betw,en 1934 and 1990. The failure of
taxable sales to continu~ para1leling income has impacted the
revenues of the Cit~ as _ell as many other Bay Area governments.
• Page B-4 -Summarizes the impact of increased Bay Area housing
costs i~ the 19805. ABAG's conclusion is that -disposable income
fe1l d'Jl"ing 19805 for most Bay Area reside;,ts,-
• Page 8-5, Bay Area inflation -Id!ntifies actual and projected Bay
Area inflation from 1987-88 throu~h 1991-93.
• Page B-6 -Identifies key findings re9arding Bay Area income
growth in the 19805. Note that incri!ased labol" force
pa"r"ticipatior'l and investment and rental income Imlre thar, offs€t
the decline in per-employee income (page 8-7). Labor force
partiCipation is not expected to incre~s~ significantly in t~e
1990s and recent lowering of interest rates will impact total
investment income.
• Page B-7~ Bay Area Income Per Emp10yee -Identifies rfcent and
pr~jected Bay Ar!a. 1nc~me per emplojee. Note tnat in 1972
dollars, income per emp10yee wl1l decline (approximatel1 8.8
porcent) from 1971 to 199;.
• Page 8-e, Job Gro~th in th~ Bay Area -Identifies ~verage annua1
ch .. nges in .gay Area emp1oyment. ASAG predicts a slow ;:-r,ding of
the cy ... lic.al recession in 1992-93 but \IIIith job formation
Significantly lower than the 1977-1990 anniJal ilverage
(continuation of the structural recession).
• Page 8-9, Job Growth by County . 8rP.~ks down the 8ay Area into
county totals. Note that Santa Clara County was the only county
to experience job losses in ]990-91 ilnd 1991-92, and this is a
radical departure from the 1977-90 average annual employment
; ncreases.
• Page 8-10, Average Annual Percent Growth i~ Total Personal
CMR:1SS:92 2/20/92
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Income· Santa Clara County na, ~xper;enced the sharpest decline
and is projected to ha~~ the 10wEst county inco~e growth in the
Boy Area for 1991-93.
• Page 8-11, Annual Percent Growth of Tota1 Taxable Sa1es Total
taxable sales in Santa Clara County a~eraged ].6 percent per year
(dollars net adjusted for infla!ion) from 1~81-1990j declined by
0.6 percent in 1991; and are projected to incre~se only 1.6
perc~nt in 1992 b~fore increising by 8.1 perce~t in 1993.
• Page 8-12, Average Sales per Store: 1970. 1980, 1990 -Shows the
d€clining amount of sales per store trigger~d by the increase in
retail outlets for many sales categcries and Slower growth of
taxable sales ~alume in the 1980s and especially since the mid-
1960s.
Conclusion
ABAG's economic information concludes that significant structural cnanges are
occurring to the Bay Area's economy (as well as the state and national
economies') Uat influence and increase the intensity of the current recession.
Job gr~h has sTowed, especially for higher paying jobs, and growth of per
capita income has either declined or slowly increased, depending en ~hetr.er
interest, di~idends and other in~estment income is included. Since the mid-
19aOs, per capita taxable sales in inflation-adjusted dollars have remained
constant for many types of retail acti~ity. Sales vc1ume p~r store has
dec1ined for many activities, especially from lSBO to 1990. A8AG's
information is rele~ant as the City reviews the Gruen ~ruen + ASSOCiates
report, A PTil!'l:1ing Pol icy f..udit of Retail Areas in the City of PaT a Alto, and
e~aluates the economic viability of the City's retail ar~as.
Respectfully submitted.
~{/uZA~ ;:{' ,dC.,ku:{/
KENNETK R. SCHREl3fR
Director of Planning and
Cornnunity Emdronmerrt
Attilc~ments: Februa.ry 2, 1991 article
1\)U\0'w:1J.~
J~E FLEMING
Assistant City Manager
12 pages from materia1 distributed at ABAG's confe-rence,
·San Francisco Bay Area Economy; 1992·1993"
cc: Planning Commission
Architectural Review Board
Chamber of Co~rce
Stanford University (Andy Ooty, DiCiine Healey)
Stanford Shopping Cpnter (David Longbine)
CMR: 155:92
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2/20/92
Pag€ 3
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Cnarleston Meado~s Neig~bornood Association
Barron Park Association
Btrron Square C~ndo A~sociation
Jnt~rdale Way Hc.meo~n~rs Ass~(ia~ion
P4rk Central Commercial C~ndominium ~ssociat1on
Ventu~a Neignborhood Association
Hoover Park Neighborhood Association
Greenmeadow Community Association
College Terract! Neighborhood Assc;;iation
Evergreen Plrk Hei~hborhood Association
Grant Avenue Condominium Owners Association
Chestnut-Wilton Homeowners Association
CMR:155:92
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2/20/92
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J ohs crisis ~
ST. ",QC'u":l IV",,"> -;;;'/'1:L .~
I masked hy~
! official ratt{
This slump
isn't like past
• recessIOns
But May'a I'1!C'eSSlon is thIim-.
eo!., and the rt"C'(J\'UY !rom it ~
be painfully dilll"1""'......nl, too, &lWysU
.. y.
Many inc1ustri.es t.od.Iy art bOt
loing througb a typical sbcnt
dowl1turn in the busine£.:ll cycle.
Ra.tl1tr. man,Ji a.re restruclurinil
themselves Wi! to bolwm 10 shed
debt. to adjust to a De. I!!ra Ilf low
Set? JOBS, P\l~e 7F
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Jobless rate doesn't reflect crisis
btical clil!lai!! DlO!IIIC there lI!'ill
DeY'IS'" apllI be as many del'mIie
~ Dett, ~ saki..
tc Decunber, tbe Labor Depart
ment uid 782,000 fewer payron
jobI ~ tb.a..c ODe year earlier.
ADd stattatieal ~ODI will add eso,ooo InOf'e to brine tDtal rulr.)
her of jobs kist III tbe IltSll l1!C'e5-
sloo W moce t.b.aIl 1 40 miIlioa, &-
reau 01. t.bor Statisti<::s assatallt
~ Martin Ziegler saic!.
Md. "JOO,OClQ more jot. will be
~ Uns fUr t! crxparatil>ll!l keep
alaIhiD& payroOs at theU-C1ll1"I!!!It
MerC1.l.I""J Ne-w~ Stal! y.·n!t~ To,.·
cnaLe La>andn" C"£mll"l2>l;lot"d Ie chI<
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,Structural Changes in the Bay Area Econom)
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.; Between 1977 and 1985, the Bay Area annually added
approximately 80,000 lobs.
.; Between 1985 and 1990, the Bay Area annually added
GJ approximately 64,000 Jobs.
I
.; Jobs classified as "High Technology" Manufacturing
(SIC 35,36,37,39) Increased annually by 15,800
between 1977 and 1985. Between 1985 and 1990, these
Jobs DECLINED annually by 5,500. In 1985, there were
314,000 of these Jobs in the Bay Area; In 1990, that
number was 286,000. As of the beginning of 1992, ABAG
estimates that number has declined to 272,000 .
.; Wages of manufacturing workers In the Bay Area
are 40 percent higher than average Bay Area wages.
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Structural Changes in the Bay Area Economy
V Between 1977 and 1985, 76 percent of total Job growth was
In Services, .Retall.Who/esale Trade, and Finance,
Insurance and Rea/.Estate (F.I.R.E.) .
v Between 1985.and 1990,88 percent of total Job growth was
In Services, Retail-Wholesale Trade, and Finance,
Insurance and Real Estate (F.I.R.E.)
v In 1989, the average annual wage and salary of the above sectors
was $24,897 or 86 percent of the average annual wage and salary of $29,051.
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1 j Source: ABAG: California Employment Development Department . ,. ,
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BAY AREA PER CAPITA INCOME AND PER CAPITA TAXABLE SALES
TREND LOOKS GOOD UP TO 1984
1989 CONSTANT $
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1970 1975 1980 1985 1990
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I RETAIL TRADE, HOUSIN,G, A,N",D, INCO, M,ES: PROBLEMS"A-HEA.D ?I
SIGNS OF A WEAKENING ECONOMIC FUTURE ~
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/ BAY AREA MEDIAN RENT JUMPED 131.8% BETWEEN 1980-1990
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(i.e. $ 274 TO $ 635 PER MONTH) !
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_, .-1:"" I BAY AREA MEDIAN VALUE OF OWNER-OCCUPIED UNITS UP 162.8%
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I BETWEEN 1980-90 (i.e. $ 98,100 TO $ 257,'775) .J::
/ MEDIAN HOUSEHOLD INCOME INCREASED Z6% BETWEEN 1980-90
(i.e. $ 21,761 TO $ 38,300)
I BAY AREA CPIINCREASED 64.3%, BETWEEN 1980 AND 1990 ' )
/ GIVEN DIVERGENT TRENDS, DISPOSABLE INCOME FELL
DURING 1980s FOR MOST BAY AREA RES!DENTS
j I ~RQE: ABAG; CENSUS
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Bay Area Inflation I
Annual Change in CPI
Year* Percent
Change
1987-1988 4.4 %
1988-1989 4.9 %
1989-1990 4.5 %
1990-1991 4.4 %
1991-1992 3.9 %
1992-1993 4.2 %
l Source: BLS; ABAG
, *Note: '87-91 (actual) ;'92-93 (forecast)
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Wha1t Happened to Incom,e Growth in the 1980s
Data for BayArea
j (Average) Wage, Salary and Proprietors' income increased 72 percent
between 1980 and 1990; in inflation-adjusted (1989$) values,
that increase was 8 percent.
j All of the increase occurred between 1980 and 1986. Since 1986,
virtually no increase in real wages occurred. Beginning in 1988,
real wages (1989$) began to decline. In 1990, real wages were $347
less than in 1988 and were $2,350 less than in 1972 (1989$).
j (Average) household income increased 90 percent in the 19805. That
was a 25.7 percent real increase in 1989$.
.I (Median) household income increased by approximately 76 percent between
1980 and 1990; in real 1989$, that was an 11.7 percent.
j Virtually all of the increase in household income came from:
(a) increased labor force partiCipation,
(b) investment and rental income.
Source: ABAG; BEA
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Bay Area Income Per Employee
Little Recovery
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Constant % Real
Year* i g~rl~r~t '89 Dollars Growth ",j
1987 f$26,-736 $29,285
1988 ' $28,073 $29,447 0.6%
<::P , 1989 $29,051 $29,051 ',j -1.3 %
1990 $30,400 $29,100 0.2 %
"1991 ! $31,400 $28,700 -2.4 %
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1992 I $32,300 $28,500 -0.7 %
1993 I $33,900 $28,700 1.1 %
1972 I $10,054 $31,457
i i Source: ABAG j * '87·89 (Actual); '90-91 {Estimate}; '92·93 (Forecast)
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Job Growth in the Bay Area 1
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tor I 77-90 I 89-90* 90-91 91-92 92-93 Long-Term Sec .)
Constr Action 9900 -3030 4100 4310 4300
Manuf cturing -8300 -5310 -9360 8490 8700
:::ommun., 7520 2920 2520 1270 2100 JV Trans., I
~ Util.
Whole ale 5450 -1450 1010 4220 4500
Retail 12610 6660 4990 7700 13400
F.I.R.E 1290 1620 -590 530 5550 , )
Servic ~s 47320 26310 9780 27380 33400
Govern 1480 2820 960 -350 1200
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I : 77270 I 30540 I 1341 0 I 53550 73100 TOTAL
,
I Source: ABAG i * April of each year
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Job Growth by County
From Recession to Recovery
\
__ '-I an ~1tl/_l1~<2r):uJ,-"e
County 89-90" 90-91 91-92 92-93 77-90
I Long-Term " ,
Alameda 13570 9170 1820 10990 13100
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I Contra Costa 11390 6020 1810 6170 10300 J -~l
Marin 3070 870 1460 2580 3100
Napa 2820 1250 1040 1720 1500
San Francisco 6770 3220 2810 8110 6000
San Mateo 6470 3280 3670 '
" )
5610 6700
Santa Clara 17070 -5890 -8550 10360 25500
Solano 5280 3720 3360 4190 2600
, Sonoma i 1350 8460 5510 5130 5500 , I
I Source: ABAG; EDD 1 , ,. April of each year;'89-90,'90-91 (Actual);'91-92 (Estimate);'92-93 (Forecast1o 1 .. . , -,,~---.::-~---.~-. ,:"':',.,,~,j ,Ii .-~~·--~--"',:;r-:'''------''··~----: '~t1tt ~~'-~-..
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Average Annual Percent Growth in Total Personal Income
By County: 1971-1990, 1991-1993
County
Alameda .'.--;lj','",-,;'c.'j"yr .. ,',r".J'I,' ,'':" "",-'1 . '.' 8.3 ,.,. /1111 /11 .. _
Contra
.1971-1990
01991-1993 u
Marin , u
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r, San
San Mateo . , .. ~ !:' ·.;l:~· "r.·, I ~". 1 8.3
Santa Clara , 4 10,0
Solano 10,7
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Sonoma ;;;;;; ;;1)",,$1' :,. .. '!~,' !."'" '!J?~', _', _!",~;f:·. ',,~ '!t: ,..,.:.:;:~. 1~,6
Region
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0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
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Percent ~ -I ,
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Annual Percerh Growth of Total Taxable Sale~
San Francisco Bay Region
1981-1990, 1991, 1992. 1993
County
San Mateo
S C -o.~ anta lara
10.4
Solano
11.7
Sonoma
Region
I r----,
-2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
Source: ABAG
Current$
-
Percent
8, -f I
8il19B1-90
01991
I 1i§l1992 1.1993
! , . , , --. Average Sales per Store: 1970, 1980, 1990 ~
San Francisco Bay Region
Group 1970 1980 1990
tiff'Total Sales 331 310 281
Retail Stores 555 648 500
Nondurables 481 604 418
Durables 856 799 875
Bus/Pers Services 88 101 118
All Other Outlets 209 163 171
App.9.rel Stores 547 432 353
General Merchd. 2094 2530 3151
Specialty Stores 374 346 207
Food/Other Stores 521 513 444
Eating/Drinking 285 340 311
Service Stations 104 1566 1293
Home Furnishing 387 304 328
Building Materials 647 928 1014
Auto Dealers 1591 1462 1685
Corlstarlt 1987$, thousands