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October 25, 2011 > Study highlights East Bay economic assets and challenges

Study highlights East Bay economic assets and challenges

Submitted By Guy Ashley

A new study shows innovation drives the East Bay economy. The presence of three national research laboratories (Lawrence Berkeley, Lawrence Livermore, and Sandia) and UC Berkeley, means the East Bay's concentration of scientific research and development is more than three-and-a-half times than in other regions. Projected to grow at an average annual rate of 3 percent over the next eight years, the region's professional, scientific and technical service industries are expected to significantly drive growth and the East Bay, according to the report.

"It's clear professional, scientific and technical activities, including life science and clean energy firms, play a vital role in our regional economy," said Alameda County Supervisor Keith Carson, Chair of the East Bay Economic Development Alliance (East Bay EDA) which produced the report. "They're the drivers of economic growth in the East Bay and, as the report shows, critically linked to the East Bay's strength in advanced manufacturing, too."

The study, "Building on Our Assets: Economic Development & Job Creation in the East Bay," was produced by East Bay EDA in partnership with Workforce Investment Boards in Alameda County, Contra Costa County, Oakland and the East Bay Community Foundation. Funding for the research and analysis was provided, in part, by Bank of America, Kaiser Permanente and the Y & H Soda Foundation.

Despite the current economic situation, the East Bay has underlying assets that bode well for the region's future: a highly educated workforce, world-class research and development institutions, growing innovation industries in life science and clean and renewable energy, a central location, vital goods movement infrastructure at the Port of Oakland. Moreover, a wide variety of housing options, open space and recreational opportunities give the East Bay an edge over other regions.

The report examines trends in Alameda and Contra Costa Counties over the past 15 years and looks ahead to ways to keep the economy strong and growing.

"With these assets identified, now comes the task of taking action to maintain their strength and to allow employers and job seekers to benefit from them and from all the East Bay offers," said Karen Engel, East Bay EDA's Executive Director. "Although the recession has taken a heavy toll on East Bay jobs and recovery is currently limited, the report shows why the region is poised to return to prosperity in the long term - across a variety of industry sectors."

Venture capital trends reveal strength of innovation sectors in the East Bay
In a 2010 national ranking of U.S. counties, Alameda County was in the top 10 in receipt of Venture Capital (VC) funds in nine of the 14 industries tracked. It ranked second in three industries, just behind Santa Clara County in each case. In three of those industries - industrial (or clean) energy, semiconductors, and electronics instrumentation - East Bay firms received more than 11 percent of all such investments nationwide. The East Bay is also a leading recipient of computer technology, consumer and business products and biotechnology. The East Bay's top ten VC investments exceeded $1 billion in 2010.

Advanced manufacturing offers hope
The report reveals the East Bay's advanced manufacturing sector's strength. The East Bay is seeing an increasing concentration of employment in advanced manufacturing even while employment in manufacturing overall continues to decline. This reveals a more subtle story: the key role the East Bay plays in providing production space for high technology companies in Silicon Valley and elsewhere in the East Bay. In fact, the report provides evidence of the very close economic ties between Silicon Valley (Santa Clara and San Mateo Counties) and the East Bay in terms of employment and establishments.

Company moves not a big factor in job change
The vast majority of jobs in the East Bay are created by establishments that start and expand in the East Bay. While the East Bay is a net job importer, companies moving into the region are not a major factor in job change. In an average year, companies moving to the region represent 7,600 jobs - or less than 0.7 percent of all jobs in the region. Similarly, companies moving out of the East Bay in an average year represent about 5,400 jobs - or less than 0.5 percent of all jobs.

Business survival rates healthy
Like other regions, most of the employment in the East Bay is created by small to mid-sized establishments with three to 100 employees. Very small firms of one to two employees comprise two-thirds of all businesses, but only create 15 percent of the region's jobs. One third of the East Bay's jobs are created by establishments that employ more than 100 people.

The survival rate of new businesses is consistent with state trends. The ability of East Bay businesses to survive past their 5-year anniversary is also comparable to firms in the state. Slightly more than half (54 percent) of the East Bay's new business establishments survive more than 5 years, compared to California's survival rate of 53 percent.

Education and workforce development a top priority
The report recommends the East Bay makes education and workforce development its top economic priority. In particular, it examines the region's challenge of addressing the growing demand for skilled workers. The availability of a skilled workforce is one of the East Bay's major competitive advantages in attracting new investments and business expansion in the region. Nevertheless, seven out of every 10 job openings in the East Bay over the next decade will be due to the need to replace an existing worker.

"The baby boom generation is gradually leaving the workforce and has the highest educational attainment of any American generation. The succeeding generations must surpass the educational attainment rate of the boomers or they will not be able to fill the jobs of those who are retiring from the labor force," said Stephen Baiter, Executive Director of the Workforce Development Board of Contra Costa County, which assisted in developing the regional study.

East Bay EDA is collaborating with workforce development partners to identify ways to address these challenges. According to the East Bay Community Foundation's Nicole Taylor, it is critical to address educational challenges at all levels to create opportunities for individuals and their families across the region.

Employment and infrastructure
The East Bay's transportation and commercial real estate infrastructure is critical to its economic recovery and success. The report finds that the East Bay's job growth is happening in existing employment centers but the share of employment near transit has actually dropped over the last 15 years. In addition, the areas with older commercial infrastructure have seen persistent declines in employment while areas with newer developments have seen the most growth.

Copies of the report can be found online at www.eastbayeda.org

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