1. The San Francisco Bay Area Economic Outlook By Anne Ramstetter Wenzel, M.A. Econosystems

2. www.Econosystems.com The SF Bay Area Economy at a Glance

3. www.Econosystems.com The Bay Area Accounts for 27% of California’s Total Personal Income

4. www.Econosystems.com The Bay Area Remains a High Earning Region:

5. www.Econosystems.com

6. SOURCE: EDAB.org

7. www.Econosystems.com Job growth has been very slow: The Oakland metropolitan area (Alameda and Contra Costa Counties) now has the largest number of jobs of the 6 MSAs in the SF Bay Area (1 million out of 3.2 million). The San Jose area boomed to no. 2 in 2000, but employment there has fallen back to 1996 levels (employment now ranges from 866,000 to 867,000 depending on season). The North Bay economy is growing, but represents just 12% of the SF Bay Area total employment.

8. www.Econosystems.com A few industries show growth: Construction: Won’t outlast historically low interest rates. Leisure and hospitality: Normally a cyclical industry, it’s benefiting from the economic recovery. Finance, insurance and real estate: Also benefiting from low interest rates. Healthcare: Growth is here to stay as baby boomers age and biotech grows. Biotech: Small but growing: +20% in ‘05.

9. www.Econosystems.com There has been a structural reduction in the number of Business Services and Manufacturing jobs in the Bay Area.

10. www.Econosystems.com Commercial real estate recovers: Vacancy rates finally dropping for office space, despite very slow employment growth. Leasing space at low prices in anticipation of growth? Small businesses requiring less than 5,000 square feet are fueling demand. –Small businesses usually drive employment growth.

11. www.Econosystems.com Apartment rents will eventually recover: As employment grows slowly, so will population and demand for rental units. The “Baby Boom Echo” is coming of age, will drive demand for apartments. High price of recent rental property purchases will necessitate aggressive landlord pricing policies as soon as the market allows.

12. www.Econosystems.com VC investing has slowed: Tough IPO market, tough markets overall may be dampening enthusiasm that was emerging in 2004. The U.S. economy overall is slowing: only 78,000 payroll jobs were added in May. The global economy is slowing, too: The IMF lowered their forecast of global economic growth to 4.3% in 2005, down from 5.1% growth in 2004.

13. www.Econosystems.com The Bay Area’s structural adjustment is over, but: Not much help from the overall economy for help stimulating jobs. Recovery from steep losses will continue. Optimism is high for small and medium sized firms – unless spirits are crushed by an economic shock, payrolls should continue to grow. Slow jobs growth will continue even when  interest rates hit finance & construction.