San Francisco's top financial analysts say there are no signs of an economic bust for at least the next four years, which would make the current economic growth period The City's second longest since 1900.
That's the assumption city officials are operating under as they make financial decisions related to The City's $7.9 billion budget. Although tax revenues continue to climb, The City's spending is increasing at a faster rate, forcing city officials to make budget cuts as they debate about spending priorities related to everything from street lighting to the 27 labor contracts currently being negotiated.
San Francisco's local economy has improved since the beginning of the Great Recession at a much faster rate than other cities thanks in large part to the technology industry, according to city officials. The industry has received the support of officials such as Mayor Ed Lee, who spearheaded such policies as a mid-Market Street tax break for Twitter.
Since the world of startups, apps and social media helped San Francisco rebound it has become more of an integral component of the local economy and more closely watched for signs of weakness. A potential tech sector bust would have greater impact than the previous dot-com bust of 2001, according to city officials.
“This rapid expansion of the technology sector in San Francisco increases the City's exposure to volatility in the sector,” said a new city report forecasting the budget through June 2018. “The relative timing of a national recession and/or a downturn in the technology sector are critical for the San Francisco economy over the next four years; signs of overvaluation in our local technology sector may be the best leading indicators of an impending downturn.”
City Controller Ben Rosenfield said, “An economist rarely will predict a recession.” He noted there seem to be few risks associated with The City's strong economic forecast, which has city tax revenues, like business and property taxes, increasing by 26 percent between fiscal year 2012-13 and fiscal year 2017-18. Revenues are anticipated to climb to $2.96 billion during that time, an increase of $613.4 million.
“We don't see signs of a bubble forming for example in our local technology industry. Although we are now more exposed to technology as an industry than we were in the dot-com boom and bust,” Rosenfield said.
Job data is one clear indicator of how tech is playing a larger role in the local economy. The total number of jobs in the technology sector increased from less than 2 percent in 1997 to more than 6 percent in 2012, based on data from the Bureau of Labor Statistics. Since 2010, San Francisco has added approximately 32,000 new jobs, of which more than 30 percent have been in the technology sector.
The current tech-fueled economic boom in San Francisco is 57 months old – the average length of the nation's 22 economic recoveries following a recession since 1900 has been 46 months – and by June 30, 2018 the tech boom would have extended for 107 months. The City's longest economic growth period was for 120 months, between April 1991 and February 2001.
As a cautionary note, Rosenfield said, “None of us had predicted those downturns in 2008 or 2001 either — looking forward four years.”