2/2024 Blog Topic: Why we need to talk about business attraction in Marin County

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February 2024

Recently, the Marin Economic Forum held our annual Forecasting the Future event with a focus on business attraction. Most people associate business attraction as the act of a public entity proactively recruiting companies to locate in their jurisdiction. Those entities may have different interests for businesses to locate there, such as job creation, infrastructure development, or tax revenues. The most visible example of this is when a state like Texas successfully poached San Francisco-based companies, offering incentives such as tax credits and lower costs.

The reason we chose to focus on business attraction is because, like other regions, Marin County has needs that can be filled by more businesses locating here. Let me present three areas where more growth in businesses will help the county:

1. Better jobs: Marin has among the highest educated and skilled resident population in the country. Over 65% of our residents hold bachelor’s degrees or higher. However, only 35% of the occupations in the county require greater than a high school education. This means many residents must seek employment outside of Marin because we do not have enough middle-skill and high-skill jobs to meet residents demands.
 
2. More economic growth: Most businesses currently operating in Marin serve the local market. That is good from the perspective of available goods and services for locals. However, being dependent on local consumers means limited growth opportunities because we are dependent on a smaller market.
 
3. Greater opportunity for youth: Young people in Marin don’t have robust opportunities for employment post-high school, save for some of the more active local sectors like construction. Most entry level jobs are in the services sector with limited opportunities for mobility. In addition, young college graduates have a shallow pool of professional services firms in Marin where they might secure employment with wages for a comfortable lifestyle.

What is it that Marin has to offer? Plenty. For starters, there is the high-skilled workforce that already lives in Marin. Second, from a commercial real estate perspective, office space in Marin is not only less expensive than peer counties, but we also have the types of office space that meets modern demands like outdoor office amenities, free parking, and lifestyle features in the towns and cities where offices are located (think of that after-work dinner with colleagues or, even better, an after-work hike!). Depending on the sector you operate, there may be other advantages to locating here where there is access to water for prototyping, lab space for R&D, or a central location if you are supplying markets to the north, east or south Bay Area.

How can we undertake business attraction in Marin? The answer is a bit complicated owing to our multiple jurisdictions and the resources normally associated with the task. However, readers should note that some of Marin’s cities, like San Rafael and Sausalito, are proactively focusing on the opportunity to attract new companies, with economic development resources in place to manage any activities should they decide to do so. A big part of the activity is promoting and selling your region to the broader public and that is a place MEF is starting to focus.

As our Chief Economist, Dr. Rob Eyler, mentioned at our Forecasting the Future event, “Marin has the muscle, it’s a matter of whether we flex it.”

SAVE THE DATE: MEF Economic Briefing
March 11 – 9am 

Come join MEF’s first Briefing of 2024 on Monday, March 11 at 9:00 am. Mike Blakeley and Dr. Robert Eyler will present 2024 early data and prospects. We look forward to you joining us.

We welcome your questions in advance of the program. Please submit your question to admin@marineconomicforum.org.
 
You are invited to a Zoom webinar.
When: Mar 11, 2024 09:00 AM Pacific Time (US and Canada)
Topic: MEF Econ Briefing
Register in advance for this webinar:
https://SonomaState.zoom.us/webinar/register/WN_CDSt5OODQkGQZ4NwJAiITA
  
After registering, you will receive a confirmation email containing information about joining the webinar.

Mike Blakeley, CEO
Marin Economic Forum

12/2023 Blog Topic: MEF’s Year in Review

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December 2023

MEF’s Year in Review
As we get ready to turn the calendar to 2024, we wanted to share some of the most significant activities and events led by the Marin Economic Forum (MEF) during 2023:

Putting a Spotlight on “Economic Equity”: In late 2022 the Marin County Board of Supervisors unanimously adopted the “Marin County Economic Vitality Strategic Plan” (“EVSP”) created by MEF. In early 2023, MEF met with community partners to pursue activities under Initiative #4 of the EVSP: “Create Pathways to Economic Mobility for Marin Residents.” MEF met with the County of Marin to discuss indicators that could be adopted by county agencies to track the economic progress of residents, via some of the key programs the county is implementing such as the “Race Equity Action Plan (REAP).”

MEF also dedicated its annual conference, “Forecasting the Future”, to the issue of economic equity. The conference included presentations of programs and activities led by three of Marin’s foremost organizations supporting economic equity in Marin: the Marin Community Foundation through their “MarinMOMentum” project, Community Action Marin and the economic justice program, and a presentation from the County Director of Equity Jamillah Jordan on the REAP program.

Supporting the Permit Process throughout the County: MEF is partnered with the Marin Builders Association (MBA) for the “Permit Improvement Program” (PIP). The PIP is an analysis of processes and customer feedback for municipal permit offices with a goal of improving efficiency and quality of services. During 2023, the County of Marin approved the second phase of their PIP produced by MBA and MEF, assuring residents In county unincorporated that improvements are occurring. The City of San Rafael also completed Phase II of their effort during the year.

Ensuring Continuity of the County and the MEF Board of Directors: In 2023, former Marin County Supervisors Judy Arnold and Damon Connolly left the MEF Board for other pursuits. Ms. Arnold was a founding member of the Marin Economic Commission, which later spun out to become MEF. Under her leadership, MEF not only grew in stature and supporters, but she was a champion voice in the county for economic vitality. Her colleague on the Board of Supervisors, Damon Connolly, was also a staunch supporter of the Marin economy and is now representing Marin County in the State Assembly. Following their resignations from the Board, two new Marin County Supervisors, Mary Sackett and Eric Lucan, were unanimously approved to join the MEF Board of Directors, ensuring the important relationship between the county and MEF continues. We welcome the additions of Supervisors Sackett and Lucan to the Board.

New Partner Program and Issue Platform: The MEF Board of Directors also approved two new programs that are intended to allow the community to have deeper engagement into MEF’s activities. The first approval was for a new “Partner” program, that allows community organizations to join MEF and participate in several activities, from committees to networking opportunities with Marin’s leaders. The second program is an “Issue Platform” whereby the MEF Partners and Board will select issues for the organization to focus during the calendar year. In 2024, MEF will focus on “workforce development” and “business attraction.” We welcome community Partner candidates from all across Marin and in every sector.

Happy Holidays from MEF!
 
We have enjoyed working with the Marin community this year and can’t wait for 2024! Please see some of our exciting upcoming events below.
Marin Economic Briefing – Jan 24
 
Join MEF Chief Economist, Rob Eyler, for the first economic briefing of 2024 on January 24th at 9am. Registration details forthcoming.  
___________________________________
 Forecasting the Future – Feb 7
 
MEF’s signature annual event, Forecasting the Future, will be on February 7th at the College of Marin Novato campus. This year the event will focus on “business attraction” and feature a line up of excellent speakers talking about doing business in Marin County. Register here for tickets or sponsorship opportunities.

Mike Blakeley, CEO
Marin Economic Forum

10/2023 Blog Topic: West Marin labor issue shows the need for collaboration

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October 2023

The Pt. Reyes Light recently published an article about West Marin restaurants need to cut hours of operation due to lack of staff, whether it be a part-time barista or a highly skilled, well-paid chef. The situation is doubly frustrating for these restaurants as tourism activity is surpassing pre-pandemic levels.

One of the reasons for their struggle is a small labor force in West Marin due in part to a shortage of affordable housing. Yet the housing issue has persisted for a long time, and it will take a long time to resolve. Without a strategy to expand the local labor force or entice non-locals to commute, the business sector in West Marin could shrink. That would leave precious tax revenues for public services also shrinking. In a way, what is happening in West Marin is a microcosm for all of Marin. Since the pandemic, the Marin labor force has remained about 5% smaller, with retirements, out-migration and population decline all playing some part.

In some cases, raising wages or paying sign-on bonuses may help temporarily, but broader labor force challenges need to be addressed through a comprehensive and collaborative approach led by government, employers and the business community, education providers, and workforce development officials. There are some examples of how this is occurring.

The Committee for Economic Development (a national group), has been promoting a set of recommendations for employers and policymakers to address the labor shortage, largely by engaging prospective employees from groups that may have been overlooked in the past, including older adults, formerly incarcerated individuals, recent high school graduates, and people with disabilities. Their recommendations largely put the burden on employers, but the public sector can help with incentives as can philanthropy and the non-profit sector.

The labor shortage is heavily felt in the construction industry, which has experienced high demand and job openings since the economic recovery of the pandemic. A new federally funded program between the Department of Labor and the National League of Cities aims to address the shortage of over 1 million construction workers by identifying and training workers for the industry, with an emphasis on women and youth. The program will start in 12 cities across the U.S. as a pilot, with a goal to add more.

Locally, a great model of collaboration is the Marin Builders Association North Bay Construction Corps., which provides high school students the training to secure a job in the construction trades immediately after graduating. This program creates a pipeline of talent while offering individuals good quality jobs. Another program that provides training on auto repair and other skilled occupations is underway at Terra Linda High School, supported by the Marin County Office of Education and the Charlie and Barbara Goodman Foundation. College of Marin regularly partners with private employers to do customized training, albeit in small volumes but scalable.

These programs are good examples of how public-private collaboration can meet demand. Marin’s challenge is to take these successful models and replicate them across the county, while also focusing equally on sectors like IT and life sciences that have middle and high-wage occupations. One of the places to start would be in West Marin.

In our effort to responsibly share data and information with our external audiences, we pay careful attention to data and other privacy rights to ensure compliance. In some cases, this means we can cite a source but we are unable to include access to the source itself as a link, attachment or otherwise, and it also requires careful attention to the reuse of that data for our own purposes.

Mike Blakeley, CEO
Marin Economic Forum

09/2023 Blog Topic: Marin’s labor force shortage continues to be a challenge

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September 2023

Recent articles on the U.S. economy (including those from the Marin Economic Forum) have discussed the growing concern over a labor shortage that has persisted since the pandemic. Marin’s own labor force is down over 5% (about 6,500 workers), a figure that has remained since 2020. The Bureau of Labor Statistics reports there were over 8.8 million jobs open in August 2023 across the U.S. and anyone who has strolled one of Marin’s downtowns has noticed a “We’re Hiring!” sign in windows. it seems to be a problem that won’t go away, and here is why that is a concern for the Marin economy:

Stifled Economic Growth: A prolonged labor shortage hinders economic growth by restricting the potential output of businesses. Economic growth in Marin is not about new buildings and more traffic – – it is about having a tax base of personal and business incomes that fund critical public services. The alternative to economic growth is higher costs or taxes to offset losses of traditional revenue sources. That would be even harder on our low-income residents.
 
Inflationary Pressure: The labor shortage can lead to wage inflation as employers compete for a limited pool of talent. While an argument for higher wages in the costly Bay Area can be made, many of our small, locally serving businesses are price sensitive, meaning they cannot absorb higher costs without passing on to their customers or limiting operations. This is already occurring in local food and energy sectors as well as some basic healthcare services like the dentist.
 
Skill Mismatch: As the labor market tightens, employers may struggle to find workers with the specific skills they need. This can lead to a skills gap, where available jobs and the skills of the workforce do not align. In Marin, we have many high-skilled residents that must seek employment elsewhere and a lot of demand for lower skilled jobs, which we cannot fill with the existing labor force. High skilled occupations in the trades sector do not have sufficient talent pipelines to meet demand, at a time where cities have pledged to build more homes.

All three issues are pain points for Marin residents, whether they be business owners or employees. But solving these issues is difficult because Marin has unique challenges that exacerbate our own labor shortage issue, especially our high cost of living. These unique challenges do not allow us to take the most traditional approaches to labor shortages such as:  

Investing in Training: Regions that successfully combat labor shortages invest in training programs that align with the needs of local industries. However, in Marin our largest industry sectors are those with locally serving businesses, like foodservice, real estate, and retail sales, which are not attractive investments for training entities given the relatively lower wages paid. That makes it difficult to build talent pipelines to feed those industries.
 
Attract and Retain Talent: Regions compete for talent by creating vibrant and livable communities and having a robust ecosystem of employers. Marin’s quality of life is a major draw to live or work here, but we do not possess those deep pools of firms that can motivate a young professional to locate here. With just a few companies in sectors like life science or technology, it can be a risk for an employee to relocate to Marin without multiple employer options.
 
Immigration: Labor shortages can be mitigated by providing a legal pathway for skilled immigrants to work in the U.S. For example, Silicon Valley has benefited from a diverse and highly skilled immigrant workforce that has played a crucial role in its growth. The Bay Area has long been a magnet for immigrants and our region’s economic growth will depend on this population for the foreseeable future. 

Since these traditional approaches are not widely used (or available) in Marin, we are going to have to find other methods to grow our labor force, or suffer a decline in productivity, economic growth and potentially those very important revenues for public services. Some of the approaches that should be considered include business attraction that encourages firms to locate here, investment into local entrepreneurs that can grow businesses, especially those that utilize remote or distributed workforces or that require high-skilled and well compensated employees, and deeper partnerships between public sector, academia, and private sector to determine and build talent pipelines that respond to future growth opportunities.

Our challenges are unique and require crowdsourced solutions. MEF is ready to convene leaders in Marin to collaborate in finding solutions to our labor force challenges. If you want to be part of the solution, I hope you will reach out and signal your interest (mblakeley@marineconomicforum.org).

In our effort to responsibly share data and information with our external audiences, we pay careful attention to data and other privacy rights to ensure compliance. In some cases, this means we can cite a source but we are unable to include access to the source itself as a link, attachment or otherwise, and it also requires careful attention to the reuse of that data for our own purposes.

Mike Blakeley, CEO
Marin Economic Forum

08/2023 Blog Topic: From a tax perspective, Marin’s economic recovery from COVID looks strong

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August 2023

Although COVID made a late summer cameo, it has for the most part been forgotten as a factor affecting today’s economy, as inflation, the stock market and mortgage rates dominate economic headlines. However, MEF continues to monitor the economic recovery from the pandemic times, considering it had such a significant impact in Marin in terms of business revenues, closures, and the labor market. In the “Monthly Economic Briefings” provided by MEF, we normally present a set of economic indicators that we rely on to measure the county’s economic health. Most of those indicators are routinely used by economists and policymakers while on occasion we identify alternative measures that help us understand the situation. Recently, sales tax revenues and newly available data on household tax returns, reported by the Internal Revenue Service (IRS), have been a relevant datapoint for analysis on the COVID economic recovery, including measuring Marin relative to the greater Bay Area.

Let us start with the issue of migration and household income by county during the pandemic. Recall the narrative of the “Bay Area exodus” from urban cores, like San Francisco, as individuals gained the opportunity to work remotely. The appeal of relocating to a lower cost region became a compelling offer for many Bay Area residents. Companies like U-Haul regularly reported data confirming the flows of people moving and we learned that Bay Area residents were locating to places such as Sacramento and Seattle. The departure of major local corporations, like Tesla and Charles Schwab, also occurred at the same time, suggesting the Bay Area’s days as a leading region for high paying jobs and talented workforce were numbered. According to the IRS, (and analysis by EIG), Marin County aggregated household incomes increased by $216 million during the tax period of 2020-2021. That means despite the adverse impacts such as job loss and slowing of economic activity, Marin’s aggregated household incomes increased following the height of the pandemic in 2020. For comparison, Contra Costa County experienced a loss of $131 million while Alameda, San Francisco and San Mateo counties experienced losses of household income in the billions of dollars. We also know that population loss did occur in Marin at the same time, suggesting that the households that migrated to Marin County in the period had higher reported incomes than the net value of households which left. Strictly from the perspective of economic recovery, higher household incomes are a positive indicator.

The next area of analysis is in tax revenues, specifically sales tax revenues across the county. In 2019, pre-pandemic, Marin County (all jurisdictions) collected $57 million in sales tax revenue, higher than the previous 4 years. In 2020, as expected, that figure dropped to just $52 million as business closures and other pandemic impacts affected the economy. In a sign of surging recovery, sales tax revenues jumped to $64 million in 2021 and $65 million in 2022 (Marin County Budget Overview FY 23-24). Again, from the perspective of tax revenue, or local sales of goods and services, Marin County has dramatically recovered economically to a level unseen before.

Turning again to IRS data, Marin County was recently named “the best place for small businesses” according to SmartAsset, a free online service connecting consumers to financial advisors. SmartAsset analyzed tax returns of households in Marin County and found, relative to other counties in California, that there was a higher proportion of households filing as businesses (42% compared to just 25% of all Californians). This data suggests a high proportion of our residents are business owners and have likely weathered the severest moments of the pandemic storm. At the same time, local jurisdictions have reported that business license applications have increased over 2019 levels following a nation-wide trend that has seen new business starts up over 20% since pre-pandemic times.

COVID itself is not necessarily in the rear view and MEF recognizes that not all businesses were able to survive the effects of shutdowns or even disruption to business models that may affect revenues. However, when looking at tax data as one form of measuring recovery, Marin County has performed very well, in fact better than most of its regional peers.

In our effort to responsibly share data and information with our external audiences, we pay careful attention to data and other privacy rights to ensure compliance. In some cases, this means we can cite a source but we are unable to include access to the source itself as a link, attachment or otherwise, and it also requires careful attention to the reuse of that data for our own purposes.

Mike Blakeley, CEO
Marin Economic Forum

05/2023 Blog Topic: Why the tourism sector is so important for Marin’s future

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May 2023

When the pandemic hit, California’s tourism industry effectively shut down. Even when hotels and restaurants were permitted to resume operations, there wasn’t much interest to travel considering the high risk of contracting COVID. However, a recent report commissioned by “Visit California”, the state’s tourism agency, suggests tourism in California is almost to peak levels in 2019 and well on its way to a full recovery. As a $135 billion industry, that is good news for the state and the many businesses and employees that associate with the sector. But what about Marin? How are we doing and what is our outlook?

Starting with the 2022 annual report of the Marin County Visitors Bureau, the organization that promotes tourism in Marin, hotel occupancy increased by over 11% from 2021 to 2022, averaging 72% occupancy. The portion of room revenues collected through the Transit Occupancy Tax (TOT) scheme from participating jurisdictions amounted to over $1.5 million in 2022, up significantly from the almost $1.1 million collected in 2021. So, clearly more people are staying in Marin, which is a more important metric than people visiting Marin from a revenue perspective, given the average spend of an overnight guest is $147/person compared to just $59/person for day trippers (MEF 2019).

Circling back to the state report, Marin’s overall tourism performance is impressive, with total travel spending in Marin reported at $852.2 million, surpassing the $832 million reported in 2019, which itself was a seven-year high. These revenues generated over $73 million in state and local taxes, while providing employment to an estimated 5,600 persons. According to MEF’s own figures, the number of workers in Marin County that serve the tourism market could be as high as 30,000 – a huge portion of our approximately 120,000 jobs in the county, when occupations at hotels, restaurant, retail and other entertainment is considered.

So, strictly from a numbers perspective, the importance of the tourism sector cannot be understated. Ask local elected leaders of our many cities and towns and they will collectively agree on the important economic opportunities visitors bring their downtowns. But there are reasons beyond local spending why tourism is important in Marin:As an industry, tourism leverages the existing natural beauty resources of the county, and doesn’t require a large footprint of buildings, relative to some other big industries. Marin County has made a tremendous effort over decades to protect open space and coastal areas not only for preservation but so residents (and visitors) can enjoy these spaces with a light footprint. The win-win effect is that we safeguard our environment while creating economic opportunities that are a direct result of the conservation effort.

There are low barriers to entry for tourism-related local businesses. While Marin’s economy includes sophisticated sectors like biotech, IT and healthcare, which can require huge amounts of upfront capital to launch, most of the small businesses operating in the tourism sector rely on simple business models and minor capital requirements. From kayak rentals to event planners to charter fishing, tourism entrepreneurs have proven models and more immediate business ownership opportunities.
Tourism will always be an important sector in Marin. The Marin economy is diverse, however, over time some industries have come and gone, while new ones (like biotech) were not even considered in Marin just 20 years ago. With protected natural assets, a dynamic regional economy, and always high interest in neighboring wine country or the many sporting and corporate events that draw visitors to the Bay Area, there will always be interest to visit and play in Marin.

Tourism leads to growth in additional sectors. Visitors to Marin do not just come for the views. In West Marin, farms and ranches have been hosting tourists for meals and direct to consumer sales, bringing more economic activity to that sector. Most jurisdictions in Marin host some kind of event, be it the Fairfax Festival, the County Fair or otherwise, that rely on local labor, talent and businesses. The direct and indirect spending effects from tourism are among the most important of any sector in Marin.
The most recent data regarding our tourism sector confirms it is on a steady return, on pace to surpass our previous high levels pre-pandemic. The data underlies a sentiment most of us residents already had, that our natural assets, if well managed, can provide economic and social benefits today and for years to come.

In our effort to responsibly share data and information with our external audiences, we pay careful attention to data and other privacy rights to ensure compliance. In some cases, this means we can cite a source but we are unable to include access to the source itself as a link, attachment or otherwise, and it also requires careful attention to the reuse of that data for our own purposes.

Mike Blakeley, CEO
Marin Economic Forum

01/2023 Blog Topic: Pandemic impacts are cyclical and structural. We must understand both.

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January 2023

As we enter 2023 and anticipate what the year holds for our local economy, it is critical to understand what impacts the pandemic has had and what should be considered cyclical or structural. Among the reasons the 2023 economy is so hard to predict is that we don’t know what is temporary (inflation?) or structural (remote work?). Let’s start by looking at what impacts are envisioned to be cyclical, meaning there is a high degree of fluctuation in the situation expected:

E-commerce: As the pandemic hit, consumers underwent a “digital shift” to online shopping. According to Forbes, COVID-19 accelerated the growth of e-commerce by 4-6 years. However, sales via e-commerce have significantly declined as consumers shift back to in-person shopping. Over the next three years, e-commerce growth is expected to average between 4-5% by 2026 due to a mixture of preferences and economic conditions that, as of now, suggest slower economic growth.

Despite e-commerce slowing as a form of commerce, Marin retailers likely won’t slow momentum towards accommodating both online and physical purchases. Consumers will continue to want goods and services “just one click away.”

Commercial Real Estate (CRE): Real estate is always cyclical and despite the many warnings of commercial real estate’s doom early in the pandemic, many markets have either been resilient or experienced limited impact. In Marin County, where the limited volume of Class A properties keeps the price relatively stable, we haven’t experienced a precipitous drop in vacancy like our neighbors to the south (see “San Francisco”). While there was the exit of one large company (Autodesk) that could skew the vacancy data, albeit temporarily, most CRE firms operating in the market predict Marin to be stable, but with caution for 2023. With many office buildings owned by local owners, there isn’t expected to be a lot of turnover of properties, especially with higher relative interest rates. Although some larger footprint spaces, such as the Fireman’s Fund and Northgate Mall properties have been targeted for reconfiguration that includes housing, there aren’t many other properties in the county that might be candidates for such a transformation.

We haven’t yet seen the impact of remote work on the CRE sector in terms of high vacancies, and more companies are signaling a return to office, perhaps even at a greater rate than the current hybrid approach (see “Twitter”). Where there does remain concern (and where officials might have to get creative) is the downtown retail segment.

Consumption: At the outset of the pandemic consumers put a premium on all goods and services that made their homes more comfortable or efficient for work. Exercise equipment sales also skyrocketed, with bike stores barely able to keep inventory. For Marin retailers, it became a story of what you sold – you either experienced record sales or were barely able to keep afloat as the world shut down. Along with high demand came troubles in the supply chain which also affected consumption – even those retailers who could sell didn’t have the inventory to do so (think cars). Fast forward to the post-pandemic environment and observe how larger retailers are having to dump inventory. For example, while sporting goods retailers have been able to replenish inventory, consumers over-purchased in some cases and the used sporting goods market has surged with inventory, leaving local retailers flush with expensive inventory.

Meanwhile, very important to the locally serving Marin economy, people have returned to in-person activities including restaurants, gyms, and movies (although not yet at pre-pandemic levels). According to the U.S. Census Bureau, U.S. selected services total revenue for the third quarter of 2022, was over $5 billion, an increase of 2.2 percent from the second quarter of 2022 and up 9.0 percent from the third quarter of 2021.

Perhaps of greater interest is where we perceive structural changes in the economy and how that may affect performance going forward.

Remote/hybrid work: As companies continue to determine their workplace policies, there is broad consensus that remote and hybrid work is here to stay. As reported in the North Bay Business Journal, a Nelson Staffing survey of 140 employers showed 40% of employers had chosen a hybrid model, 24% required workers back in the office full time, and 12% were letting employees decide where they want to work. Marin County already had a relatively high number of people working remotely or from home prior to the pandemic. The Bay Area Council estimates that at least 38% of current Marin jobs could be performed remotely although that does not account for the many sole proprietors or others that do not typically rely on an office.

One of the opportunities generated by the evolution of remote work is the proliferation of non-degree jobs that can be performed remotely. Jobs such as data entry, customer service/scheduling, even some certification-based software jobs may provide the same benefits of remote work (thinking about childcare here) that have traditionally been reserved for the professional class.
Public gathering activities: Although it is noted above that the services sector is recovering due to people’s desire to be in physical spaces, that doesn’t mean that all public gatherings are back to normal. For starters, many of the venues, including medical offices or even private venues still have COVID protocols in place. Masking in the grocery store, movie theatres, or on planes is still a common sight. When MEF speaks with Chamber of Commerce leaders or businesses themselves that rely on in-store consumption, there is broad consensus that a certain percentage of the population will not gain the confidence to be “out and about” at pre-pandemic levels.

In the business meetings environment, there remains an interest for in-person meetings and events yet the evidence does not yet suggest this format maintains the appeal it once did (in 2020 MEF hosted a conference that had over 300 attendees; in 2022 the total was just 75).

Job quality and benefits: The pandemic was noted for shining a light on the relationship individuals have with their employers. Beyond the approach to health and safety that employers had to consider, job responsibilities and benefits came under scrutiny by employees. What started as a fair debate about sick leave policies opened the door to discussions about hours, wages, and benefits, especially those like maternal or bereavement leave at the height of the pandemic. As these debates were raging, disenchanted employees began a wave of quitting which became the “great resignation” and metrics like the “quit rate” exploded. Some employees chose to quiet quit, which was more challenging to employers who observed productivity rates drop (see “Salesforce layoffs”).

These cyclical and structural changes appear in the Marin economy everyday and support the need for strong employer-employee dialogues and careful analysis of the national, state and local economic conditions. MEF views the structural changes to the economy as both positive and negative, but that depends on the specific business. It suggests that business owners and entrepreneurs are going to have to consider these impacts in ways they may not have had to just 3 years ago.

Mike Blakeley, CEO
Marin Economic Forum

12/2022 Blog Topic: Year-end review and what to look for in 2023

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December 2022

As 2022 ends, MEF wanted to share our observations of the year’s biggest economic news in Marin County and what to look for in 2023. Make no mistake, 2022 was a tough year economically, especially at the national level. Will we see more positive changes in 2023?

At the top of the news cycle is the continuing effects of the pandemic on local businesses, concentrated in recovery of small businesses and how the local economy fares given the differences in pre and post pandemic dynamics. From MEF’s perspective, one of the most troubling issues is the reduction in the labor force by more than 5% (or about 6,000 workers). Marin already faced a challenge to hire individuals, especially in the lower-wage occupations that many businesses rely on. That problem does not seem to have a solution in the near term, considering other, lower-cost Bay Area counties where Marin could draw workers, also face similar tight labor markets. Whether it be early retirement, potential health issues arising from contracting COVID, relocation out of Marin, or the need to provide child or elder care, Marin employers faced a hiring challenge throughout the year that constrained recovery. Going into 2023, one area of optimism is that some of the workforce will return with an increase in childcare slots, driven in part with new resources from the county for childcare providers.

The other related issue is inflation, which at one point reached a 40-year high, and the Federal Reserve’s attempts to manage it by raising interest rates. The resulting increase in interest rates has adversely affected one of Marin’s most important revenue stream: sales of single family homes were down 22% in November 2022 from one year ago. As the Fed continues pursuit of a 2% target for inflation, those purchases relying on financing could continue to slip, which would affect Marin retailers and public sector coffers that collect sales tax.

The issue of housing continued to be a focus during 2022 as the county and jurisdictions managed the preparation of “housing elements” in response to the “Regional Housing Needs Allocation (RHNA)”, which quantified the number of new units to be built in the period of 2023-2031. Each Marin jurisdiction will need to provide a housing element in 2023, setting the stage for extensive debate across the county, ultimately to plan to build over 14,000 new units in the 8-year period.

Tech layoffs in response to economic slowdowns also made headlines towards the end of the year considering many Marin residents work in that sector. It’s too early to tell what the impact will be locally, especially since highly skilled workers continue to be in strong demand more broadly, but it remains something we are watching going into 2023 where we expect the economy to slow.

These issues dominated the headlines, mostly because of the impacts on residents, both positive and negative. At the MEF-level, we had several successful activities in 2022 that we believe will lead to continued economic vitality in 2023.

In March of 2022, we presented “Forecasting the Future” which highlighted local entrepreneurs who were able to navigate pandemic issues and even leverage the new dynamics for business growth. Whether by launching new ecommerce capabilities, streamlining communications to parents, or helping public entities identify funding opportunities, Marin’s entrepreneurs recognized the moment and the opportunity to build companies right here. MEF continues to follow the nascent start-up ecosystem in Marin while promoting its importance to good job creation. Look for our next “Forecasting the Future” program in March 2023.
MEF partnered with the County of Marin to produce the first ever economic strategy for the county. The strategy is focused on delivering growth in key economic sectors in Marin while creating more middle and high wage jobs, so our residents don’t have to look outside of the county for good employment opportunities. The strategy puts equity upfront with initiatives to improve economic mobility and support greater opportunities for entrepreneurship among Marin’s BIPOC community. In 2023, the County will be reaching out to inform and listen about the key project opportunities to implement in the strategy.

Finally, MEF continued outreach and engagement of the community and the non-profit sector to ensure all stakeholders have access to our economic data and analysis. We hosted web-based “economic briefings” each month with our insights of the economy helping leaders understand the risks and opportunities for their organizations and beneficiaries. In 2023, we hope to increase our audience so spread the word!

While 2022 presented significant economic challenge, the year ahead sets up to be one of resiliency among the local business community and capitalizing on new commitments to more housing and jobs in Marin County.

Mike Blakeley, CEO
Marin Economic Forum

11/2022 Blog Topic: The way supply chains work suggest no easy relief for Marin businesses

Written on . Posted in Blog, Recent News

November 2022

The business news headlines in recent weeks have been dominated by stories of tech layoffs, seemingly more and more every week. The numbers of job losses are not only startling but WILL have impact in the tech rich Bay Area; according to research from the Bay Area Council, each Bay Area tech job is responsible for 4 additional jobs (often in the services sector). The business media and policy makers are trying to gauge the fallout and what it might mean for local economies.

It is important to understand that the layoffs are driven by business dynamics and not a single, large, exogenous event (think the subprime meltdown that created the Great Recession). The pandemic created a massive shift to digital that required tech service providers to scale rapidly. For example, Meta/Facebook grew from 58,000 to 72,000 employees between 2021-2022, which puts into perspective their recent layoff of 11,000 employees (2,564 are in the Bay Area). A correction from massive growth had been previewed earlier this year when it became obvious the economy would slow in 2023.

Another key factor is timing, specifically that many publicly traded companies release their earnings reports a couple weeks after a quarter, so the layoff news that started trickling in October reflected lower-than-expected earnings for the quarter ending in September for several brand name companies. Also related to timing is the annual planning most companies go through before the next fiscal year; those companies who run Jan-Dec fiscal years submitted budgets and annual operating plans that would have enacted layoffs before the holidays.

There are likely positive and negative impacts to the Marin economy. Firstly, there are limited and lagging data sources that track what sector our residents work but, anecdotally, we know a lot of our neighbors are in tech. We also know from an earlier report from the San Francisco Business Times that the new residents to Marin in 2020-2021 had higher adjusted gross incomes (AGI) than those that moved out of Marin, likely some of those being tech workers leaving the city for the suburbs. 

The most obvious negative impact would be a drop in consumption driven by lower discretionary income to spend on non-essential goods and services. Many Marin businesses are built to serve the more affluent consumer, with services like cosmetology and fine dining and goods, including clothing and cars. A drop in consumption among these businesses will not only impact the revenues of the businesses themselves but the funds that are generated for public entities through sales and other taxes. According to the Silicon Valley Business Journal, Bay Area tech salaries averaged $174,000 in 2022, which seems like a lot until you factor in the high cost of living across the Bay Area and Marin, where housing alone tends to gobble up well over the generally accepted ratio of 30% of income. That doesn’t leave a lot left over for a new TV, especially if that tech salary isn’t coming in.

Lower consumption could set off a bit of a chain reaction among the small business sector which is just coming up for air following the pandemic. A survey of business owners by MEF in 2021 showed that business loans, credit card debt, and personal finances were increasingly keeping businesses afloat. The prospect of lower revenues or higher debt to sustain in a slow economy suggests more pain on the horizon, not only jeopardizing jobs but potentially lowering business investment and local consumption of everything from office furniture to website design.
Policymakers have limited response mechanisms to business slowdowns as we saw during the pandemic, where the only response was either temporary regulatory relief or, in extreme cases, cash via grants. Neither is a likely option going forward. So where might there actually be positive effects from these layoffs?

For starters, professionals in the tech sector will be demanded in other sectors, whether they be non-profits or newly emerging segments like food tech or climate tech, which happen to be popular subjects here in the nascent Marin start-up community. Further, there are already stories of laid-off employees starting new companies, and Marin is a great place for some of our resident tech experts to launch their company. The small tech community that is in Marin might potentially see some easing of their hiring challenge through a new crop of available talent – recall not all tech companies are laying off employees – mostly the large ones that grew so rapidly over the past couple years.

MEF is projecting some slowdown and ‚ headwinds for the local economy going into 2023 and an uptick in unemployment among our high-income tech professionals could further exacerbate small business challenges. However, local leaders can seek the silver lining by continuing to find ways to support the local entrepreneurship ecosystem, especially for new generation start-ups, or by supporting the types of networking and conferences that connect professionals and create linkages to employment.

Mike Blakeley, CEO
Marin Economic Forum

10/2022 Blog Topic: The way supply chains work suggest no easy relief for Marin businesses

Written on . Posted in Blog, Recent News

October 2022

Early in the pandemic, I suggested to a KTVU news reporter that economic recovery in Marin would depend on a “resumption of consumption.” That is, once all businesses were allowed to be open and consumers felt safe to leave homes and spend money, they would, ushering back the robust, pre-pandemic, consumer-driven economy in Marin. Little did we know at the time, even with money to spend and stores to frequent, supply of goods, and not demand, would influence recovery. This fact was recently confirmed with the 2.0% GDP growth rate reported for Q3 2021 against an expectation of 6.8%; supply chain issues were the chief culprit of the slower rate of growth according to economists. That slow down in economic activity is also being felt in Marin, where all kinds of businesses cannot get the products they need or their customers want.

To understand the supply chain issue, you must first look beyond the narrative that it has mainly to do with COVID-induced worker shortages. The production and movement of a good across the globe is a complicated feat. That water bottle or those shoes you purchased are the result of materials, production, energy, transportation and, yes, labor. A fault in any one of these factors of production can result in a temporary delay or price increase as we recently saw with lumber, which was a materials issue.

However, in a recent congressional hearing convened by the House of Representatives Committee on Small Business, supply chain experts declared the early shutdowns from COVID set manufacturing and transportation behind, resulting in a higher-than-ever demand, exacerbated by long standing infrastructure issues. What is constraining supply chains goes beyond a shortage of workers they stated.
What is driving demand? It really comes down to two main factors. First, spending habits have changed because of the pandemic. More money is flowing into goods, like home furnishings, than services, including travel or entertainment. Second, for multiple reasons, from government stimulus to increased asset values, people have more money to spend (household savings rates have never been higher) and borrowing costs for big purchases like cars and homes are extremely low.  

To bring this down to the local level, demand for goods has remained high because many Marin residents’ income was not affected by the pandemic with easy shifts to remote work. Second, many small businesses were able to pivot to online selling, food delivery, or curbside pick-up which enabled consumers to consume, thus reinforcing the notion that goods were available when desired, despite a pandemic. In fact, county-wide sales tax revenues (including online purchases out of the County) increased during 2020 by over 10%. The high demand certainly enabled Marin businesses to sustain — they now need additional supplies.

This is where the problem lies in Marin’s economic recovery. At the national level, spending on goods dropped by 9.2% between June and September, a direct result of lower inventories to sell. This was the first decline in spending since early in the pandemic when stores closed. So economic recovery is now less a factor of demand, which many of us considered the key to recovery, and more a factor of supply to feed demand.
This dynamic is also problematic for Marin businesses who, simply put, are the furthest downstream in the global supply chain (as they sell to the final customer). That means these businesses yield little influence on production or delivery of goods they need, relative to larger operators, like national retailers or direct wholesalers/importers. Further, the relatively small market and business size in Marin means retailers that rely on global branded products may be lower priority for distributors, again, constraining retailers’ ability for throughput sales that would increase revenues.

When will this end? In a recent Wall Street Journal survey of 67 economists, 33% predicted supply chain issues to be resolved by Q2 of 2022 (June) while an additional 47% predicted them to persist into Q3 and Q4. Even the world’s largest furniture maker, IKEA, announced it expects supply chain delays “well into 2022.”

Is there an opportunity here? Perhaps. A recent study on manufacturing by the Bay Area Council Economic Institute evaluated opportunities for near shoring, reshoring (bringing manufacturing back stateside), and other manufacturing in the Bay Area region. There was some indication that the North Bay could do so with food and beverage, but not much else.

Likely businesses and consumers will have to wait this one out. There are few, if any, policy tools to influence global supply chains (demanding opening a port 24/7 might be one but that remains to be seen). In the meantime, shop local, even if it’s a different color jacket or chair, because that is what is available and what our businesses need.

Mike Blakeley, CEO
Marin Economic Forum