The economic blows that most of the nation has felt over the last year have been somewhat softer in San Francisco — the housing market has stayed afloat, new businesses seem to be plugging away, and unemployment rates haven't risen dramatically.
This week might change all that.
What's being described as “the mother of all Mondays” hit Wall Street yesterday, when it became clear that financial powerhouse Lehman Brothers was declaring bankruptcy and that Merrill Lynch was sold for a pittance to Bank of America.
Concerns over the future of other financial companies, A.I.G. and Washington Mutual, added fuel to a 500-point slide in the market by the end of trading on Monday.
Though the convulsions occurred in Manhattan, there's no doubt the shockwaves will hit downtown San Francisco as all of the companies have offices and employees in San Francisco, said local experts.
Michael Cohen, the city's economic director, said San Francisco has been thus far “been remarkably resilient economically,” given what's been going on in the rest of the country.
“But the modern economy that we live and operate in is incredibly interconnected, and a severe downturn in the U.S. economy will undoubtedly have an impact on San Francisco,” said Cohen.
Economics professor David Vencill of San Francisco State University said the last time shifts of this magnitude happened in the U.S. economy was the Great Depression — and that San Francisco is likely to feel the pain.
“You're going to see an increase in our unemployment rate, restaurants will see a lot of empty tables at night. Tourism might save us – but the dollar's increasing in value, so we may be seeing that come to an end,” he said.
Chamber of Commerce president Steven B. Falk was quick to point out that the picture isn't all dark: San Francisco-based Wells Fargo may be in a stronger position after Lehman's fall, and investment firm Hellman & Friedman LLC is rumored to be interested in buying some of Lehman's asset management unit.
But he said he hopes city officials take the economy's vulnerability seriously and work to protect local business.
“San Francisco has a bad reputation for mandates on business, so this should be a wakeup call for The City that the economy is actually more fragile than it would appear,” he said.
A Bank of America representative stated the company has not determined how the merger will impact employment or real estate leases in the Bay Area. Calls made to Merrill Lynch and Lehman Brothers were not returned Monday.
Separately, Peninsula-based Hewlett-Packard announced plans Monday to lay off at least 24,000 of their employees over the next three years as part of a recent merger.