Silicon Valley will recover faster from COVID-19, report says; local economists unsure

A Bloomberg report found that according to economic infrastructure and demographic metrics, Silicon Valley ranks first among the top 100 U.S. metropolitan areas most likely to recover from the COVID-19 pandemic the quickest.

“Known for their information technology, electronics manufacturing, venture-capital funding and research universities, the economies in the Bay Area boast industries that have benefited from the pandemic: think Zoom Video Communications Inc., Netflix Inc. and Instacart Inc.,” stated the report.

But while Silicon Valley’s massive tech infrastructure allowed companies to quickly shift to a work-from-home model, South Bay economic minds say the findings, published in June, might be a bit premature.

They point to local essential businesses, which have seen massive revenue losses due to COVID-19 restrictions. The region’s service industry has been hit particularly hard, widening the income gap between the region’s tech industry and its in-person businesses.

Now that the Bay Area has moved into a stay-at-home order this month that strictly regulates retailers and outright bans on-site dining, while tech workers are becoming only more productive, that gap is set to widen.

“The country has recovered, except for the in-person economy,” said Russell Hancock, chief executive officer of Joint Venture Silicon Valley, a nonprofit that analyzes the region’s economy. “It’s cruel, it’s unfair, but the rest of the economy is continuing. In fact, Silicon Valley, you could say, we’re actually thriving.”

According to Joint Venture’s numbers, while the Bay Area’s tech employment recovery has been impressive, overall it has been considered middle of the pack — faster than New York, Los Angeles and California but slower than Denver, Seattle and the United States overall.

As of October, the leisure and hospitality industries have lost 22% of workers, while tech and other information workers have lost around 8%.

Other factors unique to the region, such as soaring rent, an affordable-housing shortage and large communities of color, must be considered, according to Jeff Bellisario, executive director of the Bay Area Council Economic Institute, a think tank that analyzes the area’s economy.

An unintended consequence of allowing remote work is that workers are now free to live where they please, which could mean tech workers who work in the Bay Area can move outside the area or even to other states. Fewer people in an area generally means less money flowing in a local economy.

“The one thing I don’t think is included (in the study) is what’s happening in where people choose to live. The economies that grow the fastest are also the ones that grow population the fastest,” said Bellisario.

“There’s a direct correlation between people and economic growth. But what remote work has done has kind of pushed people to rethink where they live. The main question I have with the study’s methodology is that it looks at what was happening pre-COVID to make a post-COVID projection when I really think a post-COVID world can look totally different,” Bellisario said.

While the numbers are encouraging, local experts caution they might overrepresent the tech industry. Joint Venture cited that other industries, such as construction, have done well, owing to new safety guidelines that were put in place when construction workers returned to the job in April.

One thing local experts can agree on is that the service industry is facing a grim future even after the pandemic.

“The in-person economy requires a vaccine. Simple as that. It won’t recover until we can do things in person again,” said Hancock.

But for some experts, the simplest explanation might be the most sensible. Matthew Holian, the chair of the economics department at San Jose State University, said he believes the region is doing well because, as the cradle of tech innovation, Silicon Valley has always done well.

“The fact that our region has done fairly well throughout the pandemic might mean we don’t see much of a change after the pandemic ends,” Holian said. “On the other hand, places like Las Vegas that have been hit hard may see a major boom when it ends — especially if people who have been home-bound for a year are eager to get out and socialize.”

He added, “Although people described the 1920s as the Roaring 20s, I think the term could apply to the 2020s too.”

Contact Lloyd Alaban at [email protected] or follow @lloydalaban on Twitter.