Although hiring is in a slump, median household income is on the rise, according to the Silicon Valley Index 2024, a closely watched annual report released Monday.
Overall, Silicon Valley’s economy remains relatively healthy, according to the new assessment from Joint Venture Silicon Valley, the San Jose think tank that released the new report on the region’s economic mosaic.
“This is still a growing economy,” said Russell Hancock, the group’s president.
Nonetheless, hiring has shifted into low gear in Silicon Valley, according to the Index 2024 report. The index defines Silicon Valley as Santa Clara County, San Mateo County, the southern Alameda County region that includes Fremont, and a section of Santa Cruz County.
Over the one-year period that ended in June 2023, Silicon Valley added about 2,700 jobs, the report determined. That’s a sharp slowdown from the 88,000 jobs the region added during the one-year period that ended in June 2022.
The report comes amid a steady, dreary drumbeat of tech industry job cuts. At the same time, companies are retreating from office space, creating high vacancy rates and upending the commercial real estate landscape.
“The pandemic was a bonanza for the tech industry, which did some over-hiring,” Hancock said. “Our largest tech employers did some re-calibrating. Tech companies have been doing some right-sizing.”
Despite the slowdown in employment growth, household income is showing some improvement in Silicon Valley, according to the report. In 2022, the most recent year for which statistics are available, median household income was $149,588. That was higher than the 2021 level for the income benchmark but below the 2020 level, the 2024 Index report determined.
The tech sector now embraces what Hancock describes as a business approach focused on reining in costs and keeping Wall Street placated.
“Silicon Valley goes through what I call fads,” Hancock said. “The current fad is efficiency.”
What is certain is that tech companies are hiring in some promising sectors such as artificial intelligence and at the same time chopping jobs in segments they see as less likely to boom.
While the current slowdown — and even outright job losses — in tech is brutal and painful for affected workers, the current bout of employment reductions isn’t nearly as severe as it was during the dot-com meltdown.
In 2023, tech companies chopped 14,600 Bay Area positions, as measured by the technology industry’s job totals in the Bay Area, according to seasonally adjusted numbers compiled by Beacon Economics that were derived from state Economic Development Department reports.
During the dot-com meltdown from December 2000 through December 2004, tech companies slashed an average of 48,300 jobs a year, based on the aggregate loss of 193,200 jobs during those four years.
This means tech job losses in the Bay Area during the dot-com debacle were three times greater than the number of tech jobs lost in the nine-county region in 2023.
“The health of the tech industry in Silicon Valley is going to be perfectly fine,” said Rachel Massaro, director of research with the Silicon Valley Institute for Regional Studies, the Joint Venture Silicon Valley research arm that prepares the annual index.
The current quest for efficiency in Silicon Valley is being rewarded by a boom in stock prices.
The aggregate market capitalization of publicly held companies headquartered in Silicon Valley and San Francisco reached an all-time high of $14.3 trillion in February 2024, the Silicon Valley Index 2024 report found.
How huge is $14.3 trillion? While the benchmarks don’t measure the same thing, here’s one way to compare the market value of Silicon Valley’s and San Francisco’s companies: In 2023, the value of the entire economic output of the United States, as measured by gross domestic product, was $25.46 trillion, while China’s GDP was $17.93 trillion.
“Tech is going to rebound for sure,” Massaro said. “The record market cap for Silicon Valley is an indicator this will happen.”
The bottom line is that Silicon Valley’s widening quest to slash costs is being rewarded with robust profits.
“The move toward efficiency is working,” Hancock said. “Tech companies are running lean and mean.”
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