Projections 2002: Rethinking the Future OVERVIEW In the confusion since September 11th, we have all rethought the future again and again. While the terrorist attack and subsequent events, including war in Afghanistan, continue to cast a shadow on our lives, people are beginning to regain their confidence. The terrorist attack occurred as a remarkable economic period was coming to a close. A decade of uninterrupted economic growth had been powered, particularly in the Bay Area, by the technological innovation of the Internet. As we recognized the limits on the value of that technology, we were left with a psychologically and economically vulnerable time. Terrorism dealt us a blow when our human frailties were particularly evident. In the long run, we have every reason to be confident. We have overcome traumatic events before. The test of our region came during the 1989 Loma Prieta earthquake. While a different sort of disaster, it also caused us to mourn, to rethink, and to rebuild. And, eventually, we regained our confidence. The factors that lead to our region's recent prosperity -- top universities, an innovative business community, and the region's natural beauty -- are still here. Most of the people who worked to shape that prosperity still reside here as well. However, the long-term future of the region is unlikely to match the economic pace of the last few years. While this region will still be marked by technological innovation, jobs and population are more likely to grow at the historic pace of one to two percent per year, instead of the much higher rates that we have recently experienced. The cost of living in the Bay Area, the changing demographics of our population, and the continued growth in worker productivity will limit this pace. In the long run, we will see an even more diverse region -- a region more closely related to areas surrounding it. And, as we regain our confidence, we will have to return to some of the familiar problems that challenge our region -- housing, transportation, education -- and how we can improve the lives of the people with whom we live. In the long run, we will have to continue to rethink the future. POPULATION The Bay Area continues to attract people from around the world to its warm climate, beautiful setting, recreational activities, top universities, and career opportunities. In fact, about one-half of the growth in the region's population comes from migration. By 2025, the population of the Bay Area will exceed 8.2 million people -- an increase of over 1.4 million from its current level. Santa Clara County's population will top two million. Alameda County will grow to 1.7 million and Contra Costa County will reach 1.2 million. In percentage terms, Solano and Napa counties will see the highest growth during the forecast period, each adding more than 30 percent to its respective population. In this forecast, ABAG is predicting sustained yet moderate population growth in San Francisco. In the past, the limited space of a city located at the end of a peninsula and local policies convinced us that the population of San Francisco had all but reached its peak. However, recent housing construction and people's renewed interest in urban living have caused us to rethink this assumption. Additionally, the City's vast Mission Bay redevelopment project -- already under construction -- will transform a significant amount of real estate and eventually result in a significant number of housing units as well as large numbers of commercial enterprises. JOBS The Bay Area job picture has changed substantially since our last forecast. Most analysts believe that the nation entered a recession in the second half of 2001. The dot-com bubble burst during 2000 and 2001. Predictions by some that we had entered the age of the "New Economy", where electronic commerce and a culture of innovation would allow higher levels of growth and free us from the periodic downturns of the business cycle, have proven inaccurate. The events of September 11, 2001, have also cast a shadow over the nation's economic growth, at least in the short run. However, the long-term prospects for the Bay Area's economy continue to be optimistic. While growth in the number of jobs between 2000 and 2005 is expected to be limited in most of the region, the long-term forecast shows significant change. The engines of the region's economic growth continue to work. The region already has an unusually high concentration of computer electronics, telecommunications, and computer software jobs. Added to that, the Bay Area is one of the leading regions for biomedical research and development. Some of the nation's top universities and research institutes nurture and support these industries. A varied economy that includes finance, tourism, and government completes the picture. While the Bay Area remains one of the costliest places to live in the United States, it also retains the characteristics that cause many to choose to bear those costs. A wide variety of cultural institutions and natural settings attract a talented pool of people that in turn attracts jobs. As a result, ABAG expects that the Bay Area will add almost 1,180,000 jobs during the next twenty-five years. Santa Clara County will see the largest increase in jobs over ABAG's forecast period. The county will add 303,500 jobs. Almost 132,000 of those jobs will be located in the San Jose Subregional Study Area. Alameda County will see the second largest increase, adding over 262,500 jobs during the next 25 years. The addition of almost 50,000 jobs in Oakland, almost 38,000 jobs in Fremont, and almost 28,000 jobs in Pleasanton is indicative of the diverse economic base in Alameda County. As a city, San Francisco will add the most jobs over the next 25 years, more than 162,000. San Jose's 132,000 ranks second. The North Bay city of Santa Rosa will add more than 50,500 during the same period. Today, 39 percent of the region's jobs can be described as being part of the service sector. About 19 percent are in manufacturing or wholesale activities; 16 percent are in retail; and 26 percent are in other categories including government, construction, finance, and agriculture. While some economic activities are concentrated in particular parts of the Bay Area, the economies in each county have generally become more diverse. HOUSEHOLD INCOME Between 2000 and 2025, the mean household income in the Bay Area is expected to rise from $93,800 to $116,400. While income growth is expected to be slow in the near future, we expect to see close to one percent real growth in household income over the period. Some variation occurs between counties. It is expected that the household incomes of various counties will converge slightly due to changes in each county's mix of jobs during the forecast period. ABAG expects that Marin County will continue to have the highest household income in the region. Solano County, although growing significantly, will continue to have the lowest average household income in the region. While averages convey important information, it is important to note that the region will still see a wide distribution of incomes. Individual households in the region may still experience great wealth or significant poverty. As already noted, the high cost of housing in the region means that even individuals with relatively high incomes may have difficulty purchasing a home or affording rents. PROJECTIONS 2002 ABAG HOME