Volume 1, Number 6
All Signs Point to Economic Growth in the East Bay
By Tina Hansen
By many major economic indicators, today the East Bay region is thriving.
The East Bay Economic Development Alliance (EBEDA) recently published its East Bay Economic Outlook (EBEO) report for 2017-2018 with these findings. The EBEDA is an organization dedicated to growing the economy based on the specific needs of the East Bay. EBEDA collaborates with East Bay leaders to nurture a healthy and vibrant economy. They partner with the companies, research institutions, community organizations, small business leaders, and local government agencies to position the East Bay to not only be competitive in the current economic market but to lead the way.
Two of the markers of a strong economy noted in the EBEO report are job growth and local consumer spending. Trends shown by these indicators are signaling continued economic growth, and that the East Bay region has developed a firm foundation for a prospering economy.
Job growth in the East Bay is increasing faster than in any part of the state and is among the highest rates in the country. The optimistic findings in the East Bay Economic Outlook report are further underscored by the East Bay’s unemployment rate which fell to 4 percent as of this February, compared with 4.3 percent nationally. Over this last year, the healthcare sector led job growth with 5,600 jobs along with the professional, scientific and technical services sectors which saw a 5.5 percent increase in jobs. According to a recent report from the Bureau of Labor Statistics, healthcare jobs are projected to be the fastest-growing job sector over the next decade.
According to Emsi, an economic and labor market advisor, Pleasanton has significantly contributed to job growth in the region. In 2009, there were roughly 54,000 jobs with earnings averaging $75,300. That number increased to about 65,100 in 2016, with earnings averaging $97,300. In terms of sectors, Pleasanton has seen significant growth in the HMO Medical Center Industry as well as the data processing, hosting, and related services industries.
Hacienda and Pleasanton have also contributed to the residential development of the region as a result of several new projects which have been under construction over the last few years. From 2013 to 2015, Pleasanton had the most permits with 1,353 in the East Bay for multi-family units and the highest percentage of permits as a share of housing stock at 22 percent, according to the EBEDA’s report.
New construction starts have always been a barometer of a healthy economy and indicate economic confidence. This proves true in the East Bay as developers continue to pursue new residential and commercial development opportunities.
EBEDA’s report indicates that the construction sector will continue to have the biggest gains as the region’s need for new commercial buildings and residential homes has increased. From February 2016 to February 2017 there has been an increase of 2.3 percent in construction jobs, and over the last two years, there has been a 12.9 percent increase in the East Bay.
Another source reporting on the region’s economic future is Beacon Economics, an independent research and consulting firm that provides economic analysis. According to a report Beacon Economics released in March, they concur the construction industry is becoming the East Bay’s most robust industry. “Cities are recognizing the pressing need for more office space and housing,” Beacon reported. “Developers are continuing to take notice of the immense opportunities in the East Bay for residential and commercial developments.”
The EBEO report observes that job growth in the East Bay differs from San Francisco and San Jose. The East Bay is more concentrated in healthcare, life science, retail trade, government, and construction, which are mostly inward-facing industries that serve and benefit the local population. According to the report, there has been a specific shift in the kinds of sectors that have had the most growth in the East Bay region. Today, jobs in professional, scientific, and technical services jobs have increased by 3.2 percentage points in the East Bay than 20 years ago. This outpaces California as a whole, which saw shares rise by 1.7 percentage points over the same period.
The report also points out that the East Bay has a higher concentration of small businesses than other parts of the region. Over 90 percent of businesses in the East Bay region have less than 100 employees.
The region has experienced economic recovery and growth faster than other areas in the country. The EBBO report indicates growth in the East Bay from December 2015 to December 2016 went from an estimated 2.7% to 3.1%. That translates into an additional 4,700 new jobs across nonfarm employment sectors and puts the East Bay well ahead of the 2.2% growth in the nation overall over the same period.
According to the Beacon Economics report, projected East Bay employment will continue to grow at more than 1.5 percent in 2017. This estimate means the unemployment rate in the East Bay will likely remain near 4 percent, well below historical norms.
As noted previously, a second indicator of a strong economy is local spending. According to the EBEO report, taxable sales grew 5 percent from 2015 to 2016, increasing from $45.4 million to $47.7 million. This put the East Bay ahead of San Francisco (2.5 percent), the South Bay (3.2 percent) and the state average (3.9 percent).
Both the EBEO report and the Beacon Economics report project the East Bay economy to have continued economic expansion in the year ahead with strong consumer spending activity.
Per the EBEO report, increased spending activity in the East Bay has been further driven by local residents’ increased earnings, which they expect to grow by 6 percent, and the job category projected to see the highest wage increase are professional service jobs with an increase of 13 percent.
In the East Bay, median household income in 2015 was $82,410, an increase of nearly 17% from 2010 to 2015. In Alameda County, personal income rose to $61,900 in 2015, while in Contra Costa County it rose to $66,400. By contrast, median household incomes in Pleasanton are at $123,608.
Building on the gains achieved in 2016, economic growth in the East Bay is expected to continue in 2017 and 2018 which also means more people are expected to move into the area. Per the EBEO report “The supply constraints that have hindered the East Bay housing market in recent years took deeper root in 2016, as homebuyer demand continued to be driven by the East Bay region’s relative affordability advantage, sustained income and population growth.”
Because of relative housing affordability and higher paying jobs, there has been a significant shift in population growth to the East Bay. According to the EBEO report, population growth in East Bay has outpaced many other Bay Area areas and the state as a whole. In 2016, the East Bay added 31,405 individuals, mostly coming from San Francisco, San Mateo, and Santa Clara counties, with a population increase of 1.1%, outpacing California (0.75%) and Santa Clara County (0.78%).
Over the last several years, Hacienda has been both a witness to, and a role player in furthering these very same trends. Job growth in Hacienda has increased significantly over the last several years; particularly in the sectors noted in the EBEO report. Likewise, in addition to the tax dollars generated by new and expanding businesses, consumer spending has likely followed the same trends noted in the region from both the increase in new residents to the area as well as the increase in wages for new and existing residents. This foundation for local economic health has been further buoyed by the development of innovative hubs for technology and life science businesses. As EBEDA reporting notes, the development of industry-specific hubs can contribute to the ongoing innovation that helps grow and sustain an economy.
“Hacienda and Pleasanton are where businesses can be successful because of its campus-like environment with amenities and support services. The surrounding community offers highly-rated public schools, great connectivity and an educated, diverse workforce that meets the demands of growing industries. As companies continue to move out of the Peninsula and San Francisco because of high costs, they are discovering the benefits of Pleasanton/Hacienda,” says David Le, Economic Development Analyst for EBEDA.
As the EBEO reports, the flourishing regional economy will continue in the coming year. Hacienda, as a vital component of economic growth in the East Bay, is perfectly positioned for to beneift as well as it continues to provide the entrepreneurial foundation for businesses to grow and succeed.