The Bay Area Index: 2009 Report

The Bay Area Index, produced by the Association of Bay Area Governments, is a leading economic indicator used to validate basic modeling assumptions concerning near-term employment growth. The most recent data and analysis are as follows:

Short-Term Economic Forecast
ABAG annually hosts the Bay Area Economic Outlook conference, where state and regional economists present their forecasts for the California and Bay Area economies. At the January 2009 conference, staff presented a regional economic forecast for 2009 and 2010. That forecast anticipates that the region's economy is mirroring the struggles that have been facing the nation as a whole. The forecast anticipates 2009 to be characterized by no growth with a recovery possible some time in 2010.

Recent Bay Area Index Trends
From the Dot-Com era peak of 2.10 in October 2000, the Index fell to a low of 1.53 in May 2003. As with any economic index, there are up-and-down patterns between each period which are attributable to national and regional economic trends. In the case of the San Francisco Bay Area, the largest downward factor in regional trends was the bursting of the Dot-Com bubble. Playing against this larger backdrop are rallies in consumer confidence, as well as precipitous drops, as in the aftermath of the September 11th attacks in 2001.

Since July 2003, the Index has resumed a steady climb, reaching 2.06 in January 2008. It has since dropped to 1.87 for December 2008.

The chart below depicts Index data from 1999 through December 2008.

Analysis
Rising productivity and concurrently rising household incomes between 2003 and 2007 help to account for both increasing retail sales and consumer confidence through to the later half of 2007. These factors in turn push along airline travel and demand for technology products. According to an article appearing on CircuiTree, the circuit board industry newsletter, rising circuit board demand for military uses account for much of the gains in industry bookings.

However, since late 2007, factors mitigating an economic recovery were nixed by the mortgage meltdown, decrease in housing values, precipitous drop in the stock market, as well as the plunging view of overall consumer confidence.

The Index has been decreasing in recent months with a continual drop predicted for the foreseeable future. Given the dismal retail sales for the 2008 holiday season, ABAG's outlook for 2009 and 2010 continues to be downbeat, with recent decreases in the stock market value likely to be a factor that could reduce future Index values.

About the Bay Area Index
ABAG's Bay Area Index is a leading economic indicator used to validate basic modeling assumptions concerning near-term employment growth. The index is calculated using data from the Bureau of Labor Statistics' Consumer Price Index, regional sales data, airline passenger activity, Standard and Poor's 500 Index, and a circuit board book-to-bill ratio. The book-to-bill ratio is a measure of the supply and demand for semiconductor goods. Using 12-month moving averages, these data are equally weighted and calculated to produce the Bay Area Index.

Staff Contact: Hing Wong, Regional Planner, 510.464.7966