Where are Bay Area based companies hiring now? How does remote work play a role?
The Bay Area lost over 650,000 jobs at the start of the pandemic. Since then, the region has made a full recovery, gaining back all of its pre-pandemic jobs and adding 40,000 more (as of July 2022). While the Bay Area has remained consistent in the face of ongoing inflation pressures and interest rate uncertainty, the region has still produced slower job gains compared to peer regions, particularly those along the nation’s sunbelt. As the Bay Area struggles to maintain its full recovery of pre-pandemic employment, cities like Austin and Dallas have not only regained the jobs they lost, they’ve dramatically exceeded them. Most of the Bay Area’s lag can be attributed to blows to the service and hospitality sectors that have yet to fully recover, and slower growth in “knowledge industries” e.g., tech, R&D, legal etc.
One factor contributing to this discrepancy is a switch in where companies are headquartered or hiring. As of May 2022, Texas officially became home to the nation’s most Fortune 500 companies, overtaking California and New York. While Texas has been the number one destination for companies leaving California for last 12 years, the pandemic shifted the way many companies thought about hiring and the cost of doing business. A study by the Hoover Institute found that tax policy, regulatory climate, and talent availability were the top three reasons CEOs chose to relocate business outside of California. Before the pandemic, Fortune 500 companies based in the Bay Area concentrated hiring in San Francisco and Silicon Valley, where many leased or owned office space. During the pandemic, many companies increased hiring elsewhere. Total job postings fell among the Bay Area’s top tech cities, while places like New York, Austin and Charlotte saw more job postings for Fortune 500 companies with Bay Area HQs than former local hubs like Santa Clara and San Jose.
So, what makes our region different?
While San Francisco is not unique in its shift to remote work, our region saw a more dramatic shift than its peers. In 2019, 260,000 residents in the Bay Area worked primarily from home, in 2021, that number skyrocketed to 1.2 million, a nearly 5 fold increase. In San Francisco proper, 46% of residents worked from home in 2021. By comparison, only 21% of California as a whole worked from home, and only 18% of people nationwide worked from home. In big cities with high levels of remote eligible industries, like tech in San Francisco or government in Washington D.C., the outlying suburbs saw massive increases in remote work. The Bay Area’s 4.7x increase trailed only the DC region (5.1x), but what makes our region more susceptible to longer-lasting effects of remote work is that our economy is driven by office-based industries that have cemented remote work into the fabric of our economy.In the years following the Great Recession before the onset of the pandemic, approximately 40% of the region’s growth came from two office-based industries: professional services and information. In San Francisco proper, office work was responsible for 72% of the city’s gross domestic product pre-pandemic.
Where are we headed?
Tech layoffs that made headlines towards the end of 2022 and the start of 2023 were not necessarily indicative of a "dot com" type crash, but instead a correction. A significant portion of pre-pandemic employment growth was concentrated in San Francisco as some of the city’s technology start-ups grew rapidly and Silicon Valley companies opened satellite offices to attract talent from a broader geography. Now, with an increased focus on profitability, many of them are discovering they may have grown too quickly. Some cuts and closures could be seen as maturing companies making prudent, but difficult, decisions given their individual circumstances rather than the beginning of a bigger technology-led slide.
Several months ago, nearly 13,000 layoffs were expected to take effect in the region based on the state's Worker Adjustment and Retraining Notification (WARN) Act report, which requires employers to give a 60-day notice to the affected employees and both state and local representatives before closures or a mass layoff. Moving forward it remains to be seen whether the region has already weathered the worst of its layoffs or if there will further periods of negative job growth. Despite the region experiencing this period of low or slightly negative job growth, it is unlikely to be catastrophic in the long run. Still, hiring decisions throughout 2023 will answer an important question: is the Bay Area’s economy robust enough to absorb layoffs within the region's biggest technology firms?