SAN JOSE — The economy and job market in Silicon Valley chalked up an “astounding” year in 2015, but the region’s boom cooled in the final three months as the stock markets weakened, according to a new Silicon Valley Index report released Wednesday.
“Silicon Valley in 2015 had an amazing year,” said Russell Hancock, chief executive of Joint Venture Silicon Valley, a partnership of business, academic and political leaders that analyzes the Silicon Valley economy and advocates for improvements in the region, which released the report. “We are seeing record-breaking numbers despite the fourth-quarter slowdown. The growth is astounding.”
The job growth rate in Silicon Valley was 4.3 percent in 2015, the highest level since 2000, the final year of the dot-com bubble that burst in 2001. Silicon Valley in the report is defined as Santa Clara County, San Mateo County, the Fremont-Newark-Union City area and the Scotts Valley area near Santa Cruz.
“Silicon Valley and the Bay Area have recovered all the jobs they had lost during the Great Recession,” said Rachel Massaro, senior researcher with Joint Venture Silicon Valley.
However, this year’s report arrived with some hazards in tow. The 2016 Silicon Valley Index warned of a shrinking middle class, fewer jobs available at mid-level wages, rising housing costs and worsening transportation. These problems, the study warned, could imperil the boom.
For now though, the hot economy is spreading across most Silicon Valley cities and most sectors.
“Tech is driving this growth,” Hancock said, noting that about 37 percent of the job growth is in technology.
In fact, the jobs boom is so robust that of the 46 industries tracked by the report, 38 sectors, or 83 percent, gained jobs in 2015. In 2014, 25 of 46 industries, or 54 percent, gained jobs.
“This means that the job growth is not just technology,” Massaro said. “It started with tech. Now the growth has propagated throughout the region and nearly all industries.”
Incomes also surged in Silicon Valley during 2015, the study stated. Average annual wages, adjusted for inflation, totaled $110,634 in 2015, which was up 5.4 percent from the 2014 average of $104,728. Wages in 2014 grew at 1.7 percent.
Silicon Valley added 64,000 jobs during 2015, San Francisco gained 30,000 jobs, and Alameda County added 26,000 jobs. Overall, the Bay Area added 129,000 jobs in 2015, according to the Silicon Valley Index.
Including additional earnings such as bonuses, average annual earnings totaled $122,000 in 2015. That was nearly double the average of $63,000 for the United States and 67 percent higher than the $73,000 in average annual earnings for California, the report stated.
The huge regional gains in jobs and earnings, however, are not sustainable at those levels, according to most analysts who track the trends.
“There is a gorilla in the room today,” Hancock said. “There was a fourth-quarter slowdown.”
The sluggishness in the October-through-December period was measured primarily by a severe downturn in venture capital financing unleashed by fears over the stock market slump and China’s slowdown.
“Is this the beginning of the end? Has the bubble burst? We don’t know,” Hancock said. “But there was a slowdown.”
Economists are confident that one quarter’s slowdown won’t derail the trend of a surging Bay Area and Silicon Valley economy.
“There is a freak-out in the financial markets, and technology stocks are getting punched,” said Christopher Thornberg, principal economist and founding partner with Beacon Economics. “The financial markets are a highly flawed, erratic representation of the real world.”
Put another way, Main Street continues to be on a much more solid footing than Wall Street, and that sturdy foundation bodes well for the Bay Area and Silicon Valley.
“In the real economy, the labor market is still expanding, corporations are still making money, companies are still investing in information technology, consumers are still spending,” Thornberg said.
Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy, is also optimistic about the underlying strength of the economy for the coming year.
“The expansion has legs,” Levy said. “This won’t last forever, 2016 won’t be as strong as 2015, but this will still be a good year.”
Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.
SILICON VALLEY INDEX 2016
Here are some of the key findings in this year’s report:
