Silicon Valley Reaches "Upper Bounds Of Hype & Craziness" - Job Growth Worst Since Lehman

Tyler Durden's picture

Authored by Wolf Richter via WolfStreet.com,

Commercial and residential real estate bubbles choke the economy. The upper bounds of hype and craziness have been reached.

The San Francisco Bay Area has seen an astounding jobs boom since the Great Recession. The tsunami of global liquidity that washed over it after the Great Recession, central-bank QE and zero-interest-rate policies that sent investors chasing blindly after risk, a blistering no-holds-barred startup bubble with the craziest valuations, one of the greatest stock market bubbles ever – whatever caused the boom, it created one of the craziest housing bubbles ever, a restaurant scene to dream of, traffic jams to have nightmares over, and hundreds of thousands of jobs. But it’s over.

In May, employment in San Francisco dropped to 542,600 jobs, the lowest since June 2016, according to the data released on Friday by the California Employment Development Department. The employment peak was in December 2016 at 547,200.

The labor force in the City fell to 557,600. That’s below March 2016! This confirms a slew of other data and anecdotal evidence: People and businesses are leaving. It’s too expensive. They’re voting with their feet.

The blue line in the chart below shows the decline in the labor force (the number of people who live in San Francisco and are deemed to be in the labor force). The red line shows employment (the number of people working in the City regardless of where they live, including the many who commute from other areas):

The year-over-year increase in May of 4,900 jobs in San Francisco was the lowest year-over-year increase since the plunge during the Great Recession.

Between December 2009 (the low point during the Great Recession) and December 2016 (the high point since then), the City created 131,400 jobs. An increase of 31.6% in seven years! The city created on average 18,800 jobs per year over the period, a breath-taking employment boom for a city of 850,000 people. And San Francisco accounts for only 11% of the Bay Area population of 7.68 million.

This chart shows the year-over-year employment gains (blue) and losses (red) since January 2009. Note the trend from the job creation peak in the fall of 2014:

Across the Bay, in Alameda County, whose population is about twice the size of San Francisco’s, and which includes Oakland, Berkeley, and other cities, a similar scenario is playing out.

Employment fell to 804,100 in May, down 6,800 jobs from the peak in December 2016, and below July 2016. The labor force fell to 832,000, down 13,000 from the peak in October 2016, and below February 2016. People are leaving:

The county created 134,000 jobs between the end of 2009 and the employment peak in December 2016. That’s an increase of 19% over seven years, or on average 19,000 jobs per year. But in May, the year-over-year increase was only 4,500, the lowest since January 2011 and December 2010, and before then since 2009.

This charts shows the year-over-year changes in employment, the boom and how the trend over the past year has been deteriorating and is now heading into the lean times:

Don’t get me wrong. The Bay Area isn’t “collapsing” at this point. When you walk around in certain parts of San Francisco, you see tourists in astounding numbers. It’s still tough to get into popular restaurants though the other Saturday we were able to get a reservation for 8:30 PM, peak dinner time, by calling two hours ahead. Before then, we couldn’t duplicate that by calling two days ahead. But it might have been a fluke. By 9 PM, the place was full. Traffic is still a nightmare seven days a week. Home prices in San Francisco, after flat-lining for two years, suddenly spiked in May to another crazy record. Commercial real estate is hanging on by its teeth to sky-high prices, though apartment rents have dropped from their peak.

But there are a surprising number of shuttered retail shops and restaurants, including some favorites. Landlords have become too greedy, and when they jack up rents at lease renewal time, the equation no longer works for the business. This doesn’t mean business is bad. It means commercial rents are too high. This has been duplicated in the office sector. There is still demand, but a number of companies, including Charles Schwab, are sending jobs to cheaper states.

And when the work force is hightailing it though there are still plenty of jobs, it means that housing costs are too high. This is a universal complaint in the Bay Area. Nearly half the millennials said they’re “likely” to leave.

This is how commercial and residential real estate bubbles with their uneconomical prices choke the economy.

On top of the cost factors, there is the startup boom that is now grappling with a new sense of reality. A number of startups, such as NerdWallet, and more mature companies, such as Twitter, have laid off people. Others have stopped hiring. A slew of them shut down. Some companies are still getting funded, but the frenzy has been dialed down. And Uber, a San Francisco darling that is moving its headquarters to Oakland, is in a world of hurt.

But this time, there is no financial crisis, which set off the last bust. And this time, the Nasdaq isn’t collapsing, which triggered the bust starting in 2000. The Nasdaq is hovering near all-time highs. Excess liquidity is still sloshing through the system. Financial stress is at historic lows. And the Fed’s policies, despite the upticks in its target rate, are still highly accommodative. The whole system is set on “go,” but in the Bay Area, it has reached the upper bounds of bubble hype and craziness and can’t go anymore.

And so the big employment boom of San Francisco and surrounding Bay Area counties is over and tech skills are suddenly “abundant.” Read…  It Starts: Hiring Falls in San Francisco Bay Area, Says LinkedIn

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
zanza's picture

It's a NOT Hotdog

ACP's picture

Wherever you people go, please stay in California.

max2205's picture

Greeeeen acres is the place to be.....

El Oregonian's picture

I ran from 'Frisco in 1981... and never looked back. Let Sodom burn.

Wulfkind's picture

SINCE LEHMAN !!!

CHUG !!!

KimAsa's picture

Don’t get me wrong. The Bay Area isn’t “collapsing” at this point.

Dang nabbit. Now my day is ruined. Can we at least have little cave-in? How about a "matter", can we have one of those?

buzzsaw99's picture

the rent is too damn high?

I am Jobe's picture

I thought shuffling ones and zeros was cool in Silicon Valley ?

Sudden Debt's picture

Silicon valley is destroying itself with the librarytools that make programming a shitload easier.

 

pitz's picture

Silicon Valley destroyed itself when it allowed its "Silicon" industry to leave unabated. 

desertboy's picture

You got that right.  Should be called Silicone Valley now.

pitz's picture

Not many gold-diggers there either.  Its just one giant Indian sausage party for the most part.

desertboy's picture

Silicone as a preferred drug-delivery means of Big Pharma - nothing as interesting as breasts.

Icewater Enema's picture

Half of millenials are considering leaving...

Sure, millenial coders work at one of the FANGs or some other hot dotcom to polish their resume. Then they try to leverage that and the high salary in some other place where they can actually afford to live. Because despite all that social justice BS they want more money and more stuff just like everybody else.

pitz's picture

Not many American millennial coders at the FANGs.  Mostly just foreign nationals. Its absolutely bizarre how dead the nightlife is in the Valley.  You'd think, if the narrative that the SV tech companies cast was actually true, that there'd be all sorts of entertainment, or even all night places to eat, but try getting a burger after your plane is delayed getting into SJC after 10pm.  Good freakin luck.  I've seen more nightlife in the retirement communities of the west coast of Florida than exists in the Silicon Valley. 

ElTerco's picture

It's been like that in SV for decades.

pitz's picture

I distinctly remember it was much better in 1998/1999.  Not a total graveyard. 

Oh regional Indian's picture

I'll say this myself, Indians don't know/like to party American style. Bars/Pubs.pick-ups, wingmen....this is all strange to first gen Indians.

They do have the craziest parties at home though.... I should know, I was there....

 

desertboy's picture

Not much hard technologies here anymore either -- 95% of VC is now programmers and biotech.

pitz's picture

Yeah a lot of 'reinventing the wheel' is what I see.  The real innovation in devices and materials is increasingly occurring in Asia.   The industrial byproduct of a competitive electronics manufacturing sector they have in Asia, but definitely not in the United States.

desertboy's picture

Depends on what "innovation" means.  Actually a  lot of the solid state stuff in US is moving inland to places like Boulder, Austin, and Phoenix.  But anything developed here will get outsourced eventually as IP of a fabless semi company.  

markar's picture

True. San Jose has to be the most boring, non-descript city with a million people on the planet

ElTerco's picture

This doesn't necessarily mean people are leaving. Maybe more people are just dropping out of the labor force? While SF is expensive, it is also where many of the wealthiest people in the country live. Many people can retire or stop working and stay put with no consequences.

That would explain why employment is actually growing faster than labor force in both of your curves (aka the gap is closing), even if there is a slight downturn in both numbers at the moment. Am I missing something?

ElTerco's picture

I got five down votes and no up votes for the above comment. I just pulled the census data and saw that San Francisco county population is growing at a 0.65% rate and Alameda county population is growing at a 0.4% rate. I thought the ZH audience would appreciate being able to look at a graph and cut through the bullshit. I still don't get the down votes.

montresor's picture

For a good laugh.. pay a visit to craigslist sf bayarea  .. check out what's for rent out there.. 

The lovely silicon valley at $2 per square foot.. https://sfbay.craigslist.org/sby/off/6181471351.html

silverer's picture

Great jobs are waiting for those Evergreen college grads.

itstippy's picture

Back in the day (50 years ago) San Francisco was THE destination for every stoner, flower child, homosexual, genius, aspiring artist, reprobate, bongo drummer, and harmless dreamer Wisconsin produced.  Otis Redding's The Dock Of The Bay was their siren call.  My, how times change.  

I Write Code's picture

This is one of the stupidest posts I can remember on ZH ... all these stats are within the noise bands, mean nothing.

nightshiftsucks's picture

I'm a line maint. tech,I work in SV and our facility is being shutdown in a couple of months.I thought I would be screwed but other companies are calling  trying to find techs and a couple are desperate which really suprised me.

disagreeableness's picture

So to be clear, we're 30k to the good y/y 2009?

Sky flyer's picture

I assumed a "Worst since Lehman" headline should be good for a 20 point green shoot on the futures. I was correct.

LeftandRightareWrong's picture

Tell SV to open dev centers in US inner cities, and offer apprenticeships to US citizens. If anybody can afford to, SV certainly can.

pitz's picture

US citizens already have the skills for nearly all SV jobs currently occupied by foreign nationals.  The SV VCs and CEOs just hate Americans that much.

divingengineer's picture

NOT SINCE LEHMAN!!!!!
Oh, god help us!

decentralisedscrutinizer's picture

 

Why waste time on this alligator when the swamp’s most critical economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their dominant military force resides. The US Constitution is therefore the “kingpin” of an all-inclusive global financial empire. These fictitious entities now own the USA and command its military infrastructure by virtue of the Federal Reserve Corporation, regulatory capture, MSM propaganda, and congressional lobbying.

 

The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual states, smaller sovereign nations, and eventually to buy out the USA itself. The only way The People can regain our sovereignty as a constitutional republic now is to severely curtail the privileges of any corporation doing business here. To remain sovereign we have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't afford to privatize our Treasury to transnational banks anymore. Government must be held responsible only to the electorate, not fictitious entities; and banks must be held responsible to the government if we are ever to restore sanity, much less prosperity, to the world.

 

It was a loophole in our Constitution that allowed corporate charters to be so easily obtained that a swamp of corruption inevitably flooded our entire economic system. It is a swamp that can't be drained at this point because the Constitution doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 option to do this, for which the electorate will need overwhelming consensus beforehand. Seriously; an Article 5 Constitutional Convention is rapidly becoming our only sensible option.

 

This is what I think it will take to save the world; and nobody gets hurt:

 

28th Amendment:

 

Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:

 

1, prohibitions against any corporation; a, owning another corporation; b, becoming economically indispensable or monopolistic; or c, otherwise distorting the general economy;

 

2, prohibitions against any form of interference in the affairs of; a, government, b, education, c, news media; or d, healthcare, and

 

3, provisions for; a, the auditing of standardized, current, and transparent account books; b, the establishment of state and municipal banking; and c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.

    

PleasedToMeatYou's picture

decentralisedsc...

Copies and pastes here at ZH the verbose rants that he writes to himself. 

...sorta like Bruce Wilds, but without his own blog.

Yen Cross's picture

 A wise Man never reveals his trade.