Uber Technologies Inc, Lyft Inc and Airbnb Inc have slashed thousands of jobs. Salesforce.com Inc and Visa Inc are letting employees work remotely for months; Twitter Inc and Square Inc are allowing them to do so for good.
For the companies’ hometown of San Francisco, the moves are early signs of a dire blow.
In a city with a long history of booms, busts and natural calamities, the COVID-19 pandemic has suddenly upended nearly a decade of prosperity. While municipalities across the US are grappling with economic fallout from the virus, San Francisco stands to take a deeper hit given its high concentration of office jobs that make remote working easier, a tech industry battered by layoffs and a pricey real-estate market that has already driven out some residents.
Photo: AFP
The city’s leaders predict a US$3.6 billion budget shortfall over the next four years, with the unemployment rate — as low as 2.2 percent a few months ago — to be at about 15 percent through September.
If business taxes, the second-biggest source of revenue, continue to decline and the property tax base erodes, “all city services would suffer,” city Controller Ben Rosenfield said in an interview.
It is a marked turn from the years of growth that made San Francisco a symbol of massive wealth — while also fueling gaping inequality and a homelessness crisis that has led to people sleeping on streets alongside swank office towers.
The pain wreaked by the pandemic is only accelerating negative trends for the city, such as the departure of companies, conventions and residents to less-expensive areas, Berkeley Haas Fisher Center for Real Estate and Urban Economics chairman Ken Rosen said.
“The boom is over and the question is how deep will the bust be,” said Rosen, who warned that the city might have diminished appeal to the tech industry. “We are going to need dramatic changes if we’re going to keep our golden goose here.”
Rosen expected San Francisco’s recovery to lag that of other US cities, which combined might lose about US$360 billion of revenue through 2022 because of the pandemic, a National League of Cities analysis showed.
As a whole, more densely populated, expensive locales might find themselves hit harder than others. Why live in a metropolis heralded for its bars and restaurants if you cannot safely patronize them or take mass transit without fear?
“The appeal of living in such large cities is definitely going to deteriorate in the next year or two, if not up to five years,” Moody’s Analytics economist Laura Ratz said. “If it takes two, three years to get a vaccine, these large cities like San Francisco are going to suffer for it.”
Major companies around the world are retooling office space for fewer workers, scouting suburban sites and considering permanent telecommuting.
In the Bay Area, there might be a particularly profound effect: About 40 percent of jobs depend on traditional office-using industries, double that of the US, according to Moody’s Analytics.
Most large firms in and around San Francisco are preparing at least partial remote-work policies, according to a survey this month from the Bay Area Council, a business organization.
About one-third of newly remote workers surveyed by brokerage Redfin Corp expected to remain so even when restrictions ease and more than half would consider moving away from San Francisco if they never had to show up to jobs in person.
Facebook Inc, based in Silicon Valley, has said that half of its workforce might be remote in 10 years.
In the meantime, San Francisco is dealing with the immediate hit to its revenue. The city and surrounding counties were the first in the mainland US on March 16 to order residents to stay at home to slow the spread of the virus — a move that has been credited in helping the region fare better than others in managing the outbreak, while also lengthening the blow to the economy.
The city’s payroll tax is calculated on work performed within its borders, and telecommuting is leading to an overall 8 percent drop in business taxes this year from the previous one. They were originally estimated to rise 15 percent. The tourism and convention industry has cratered, and hotel taxes next year are expected to drop by almost 60 percent from last year.
San Francisco Mayor London Breed is to release an interim budget tomorrow reflecting the turnabout in the city’s fortunes. She has already told departments to cut costs by 10 percent for the next fiscal year and to decide which municipal jobs can become permanent work-from-home positions.
The city is to adopt its final budget by October.
Still, San Francisco has suffered economic collapses before only to emerge stronger, and corporate policies are in flux. Remote work can help companies ride out the pandemic, which might ultimately help the city’s economy. If larger firms give up some real estate, that presents an opportunity to smaller businesses and nonprofits struggling to get space, former city supervisor and California Senator Scott Wiener said.
Another possibility: Companies might end up taking additional office space if they need to implement spatial distancing and other practices to reduce the virus risk, city Assessor Carmen Chu said.
She is one of the chairs of a city economic recovery task force that is not only addressing the immediate crisis, but sketching out ideas for how businesses can succeed.
“We have a city full of problem solvers,” said Rodney Fong, cochair of the task force and president and chief executive officer of the San Francisco Chamber of Commerce. “Creativity and innovation will bring San Francisco back to maybe an even more dynamic place than it was, over time.”
ENERGY ISSUES: The TSIA urged the government to increase natural gas and helium reserves to reduce the impact of the Middle East war on semiconductor supply stability Chip testing and packaging service provider ASE Technology Holding Co (日月光投控) yesterday said it planned to invest more than NT$100 billion (US$3.15 billion) in building a new advanced chip testing facility in Kaohsiung to keep up with customer demand driven by the artificial intelligence (AI) boom. That would be included in the company’s capital expenditure budget next year, ASE said. There is also room to raise this year’s capital spending budget from a record-high US$7 billion estimated three months ago, it added. ASE would have six factories under construction this year, another record-breaking number, ASE chief operating officer Tien Wu
The EU and US are nearing an agreement to coordinate on producing and securing critical minerals, part of a push to break reliance on Chinese supplies. The potential deal would create incentives, such as minimum prices, that could advantage non-Chinese suppliers, according to a draft of an “action plan” seen by Bloomberg. The EU and US would also cooperate on standards, investments and joint projects, as well as coordinate on any supply disruptions by countries like China. The two sides are additionally seeking other “like-minded partners” to join a multicountry accord to help create these new critical mineral supply chains, which feed into
For weeks now, the global tech industry has been waiting for a major artificial intelligence (AI) launch from DeepSeek (深度求索), seen as a benchmark for China’s progress in the fast-moving field. More than a year has passed since the start-up put Chinese AI on the map in early last year with a low-cost chatbot that performed at a similar level to US rivals. However, despite reports and rumors about its imminent release, DeepSeek’s next-generation “V4” model is nowhere in sight. Speculation is also swirling over the geopolitical implications of which computer chips were chosen to train and power the new
TECH WINNERS: Taiwan and South Korea reported robust trade, which suggests that they have critical advantages in the rapidly expanding AI supply chain, an official said Exports last month surged to a new high, as booming demand tied to artificial intelligence (AI) infrastructure fueled shipments of advanced technology components, underscoring the nation’s pivotal role in the global semiconductor supply chain. Outbound shipments climbed to US$80.18 billion, the highest ever for a single month, rising 61.8 percent from a year earlier and marking the 29th consecutive month of growth, the Ministry of Finance said yesterday. “The surge was driven primarily by global investment in AI infrastructure,” Department of Statistics Director-General Beatrice Tsai (蔡美娜) said. The mass production of next-generation AI computing systems has accelerated procurement across the semiconductor supply
RSS