For decades, San Francisco has been renowned as a major tech hub. But recently, the Bay Area has seen a slowdown in tech job opportunities, according to UC Berkeley Economics Professor Enrico Moretti.
Professor Moretti noted that declining tech job opportunities don’t only impact the tech industry — it affects the demand for local services through a “trickle down” effect. Less positions mean less income spent on local services, such as housing, healthcare and restaurants.
Moretti, who came to Cal in 2004, researches labor economics and urban economics. He has received numerous awards such as the Society of Labor Economists’ Rosen Prize, the Iza Young Labor Economist Award, a Fulbright Fellowship and the Carlo Alberto Medal.
Professor Moretti recently spoke to Berkeley Social Sciences about the current state of the Bay Area’s job market and how it affects the economy.
What does the Bay Area's job market look like right now?
Enrico Moretti: The Bay Area job market is in a transition phase, the big tech employers — Google, Meta, Salesforce and alike, have really slowed down their hiring. Over the past two years, they have enacted a number of pretty deep layoffs for a number of reasons. Some of these reasons were the increase in interest rates in 2022, along with hiring very aggressively in the years before 2022 and realizing that their headcount was too large.
The tech industry was one of the main sources of labor demand in the past; and I think for the time being, it seems to have weakened significantly. On the other hand, there's been very promising signs of growth in the AI sector.
How is AI impacting the region's job market?
Enrico Moretti: AI is creating job opportunities, mostly in the city of San Francisco and Palo Alto. Those employers have started growing headcount and dimension. I’m optimistic that they might, at least in the future, help with demand for the tech sector.
If less tech workers are being employed, what is the multiplier effect to the rest of the Bay Area's economy?
Enrico Moretti: When a tech employer hires somebody, they don't just create one job in the tech sector, but they also increase overall employment in the Bay Area through the demand for local services. In particular, by creating an extra position, it creates additional income that comes into the region by getting spent into the local service sector. This is a broad sector that includes: retail, housing, restaurants, education, health care, personal services, and so on. So by my estimate, that's actually the main effect of the tech sector on the local labor market.
How long is it taking for job seekers to find employment?
Enrico Moretti: Well, it's definitely taking longer than before, I can tell you that. It's clear that the local labor market is softer than it was two or three years ago. The term “softening” means a decrease in demand. When there's a softening, it takes longer to find a job. However, the length of time it takes to find a job in the Bay Area is not longer than what you see in other comparable regions.
Do you have advice for recent grads seeking jobs?
Enrico Moretti: I think my best prediction is that we have reached a trough a few months ago, and I think the local labor market is bound to improve. I think that the months and especially the years, are likely to offer a good labor market, barring — and I want to stress barring — any national recession. I'm not predicting a national recession, but I'm not discounting it. However, if a national recession doesn't take place, I think that in years ahead, labor demand in the Bay Area should be good relative to other parts of the country.
