Q&A: Steve Levy sees bright spots and challenges for Bay Area economy
Veteran economist Stephen Levy has his finger on the pulse of the Bay Area’s dynamic — and often befuddling — economy.
The Bay Area has unleashed numerous boom and bust and boom cycles that have given birth to and killed off countless cutting-edge companies and Levy is keeping track of all that.
This news organization spoke with the director of the Palo Alto-based Center for Continuing Study of the California Economy about the Bay Area’s restless economy.
Q: What is your assessment of the Bay Area economy right now?
A: 2023 is coming in a little better in the Bay Area than I had expected. But it’s still going to be a slow year in the Bay Area. Interest rates are very high and they are a problem.
Q: How do things look farther down the road for the Bay Area?
A: Long-term, I’m very optimistic about the future of the Bay Area economy. Things look particularly good if we can address the region’s housing and transportation challenges.
Q: What are some of the reasons that lead you to believe the Bay Area has a bright outlook?
A: Between the electric vehicle technologies, artificial intelligence and clean energy, the Bay Area is really in pretty good shape to be competitive over the long term.
Q: Is the Bay Area able to withstand these ups and downs fairly well?
A: We have a record of resilience from the 2000 dot-com bust and the 2008 foreclosure crisis. This time, after COVID, we are still adding jobs on a net basis.
Q: What’s your assessment of the California economy overall in the near term?
A: California is in pretty good shape and Southern California is actually doing fairly well.
Q: Could the strikes affecting Hollywood studios create a downturn in Southern California?
A: We do have the actors’ and the writers’ strikes in Southern California. But we also see a track record of strikes getting settled in Southern California. The dock workers’ strike against the shippers was settled fairly quickly. The ports are doing better in California and the airports around the state are improved.
Q: How does the California economy look over a longer-term period?
A: I feel optimistic. The state has to solve its housing and transportation challenges, however.
Q: Some experts predict the economy will slow down to stop inflation yet not slow down so much that we have a recession. Is a soft landing possible for the economy?
A: The U.S. jobs report for July showed that hiring has cooled off and it’s in line with the idea that a soft landing is now possible.
Q: How likely is a soft landing at this point?
A: We haven’t had a soft landing in a while. It would be a one-time, very lucky event if it happens. But the signals are there that it’s possible.
Q: Where are we now with the tech layoffs in the Bay Area?
A: I view the layoffs as a short-term rebalancing of tech workforces. These layoffs are painful for the people who are losing their jobs. But we may be seeing the end of the layoffs.
Q: What is the goal of the rebalancing?
A: The tech companies see the potential for artificial intelligence and electric vehicles, the new industries. If you look at the big tech companies, they are all doing really well. You are seeing more optimism now for tech.
Q: Will tech companies shift from layoffs back to a lot of hiring?
A: We may be entering a period of renewed growth for tech. It will probably be easier for the very skilled tech workers who got laid off to find jobs fairly quickly.
Q: How has the move to work-from-home because of COVID-19 impacted the downtown areas in San Jose, Oakland and San Francisco?
A: Work-from-home has hit the downtowns a lot, downtown San Jose, downtown Palo Alto, where I work. People still have income, but they are not physically in the downtown areas, so they are not physically spending their money downtown. There is now some momentum for hybrid work, however.
Q: If hybrid work is the future, should cities and counties change how they approach housing?
A: We should focus on building housing in the downtown areas to build up the customer base for stores and restaurants that are downtown.
Q: Is the Bay Area economy turning the corner from the COVID problems and the tech layoffs?
A: The Bay Area overcame much more serious challenges in job losses and threats in 2000 with the dot-com and 2007 with the housing bubble than we do now. The job losses were much more substantial in 2000 with the dot-com collapse. We have a history of resilience.
Q: What is the long-term outlook for the Bay Area economy?
A: The production of electric vehicles and batteries, as well as clean energy and A.I., bolstered by the Chips Act and the Infrastructure Act — all of these factors put us in pretty good shape. But we have to be able to get people to work and to have housing near their jobs that they can afford.
Q: What are the biggest challenges for the Bay Area economy?
A: We have a transmission capacity challenge for our electricity grid. We are going to need a lot more electricity for the technologies of the future. But right now, we don’t have the capacity and the transmission technology to really prevent blackouts.
STEVE LEVY
Organization: Palo Alto-based Center for Continuing Study of the California Economy (CCSCE)
Job: Senior Economist and Executive Director
Age: 81
Birthplace: Los Angeles
Residence: Palo Alto
Education: Massachusetts Institute of Technology, bachelors in economics; Stanford University, masters in economics
Family: Wife Nancy, son David, and grandchildren Maverick, Daisy and Monroe
FIVE THINGS ABOUT STEVE LEVY
— Married for 45 years to Nancy, described by Steve as “the love of my life.”
— Their son David married Lacey, a “most wonderful daughter-in-law and “awesome mother” of the Levys’ grandchildren.
— At age 59, Levy started Russian kettlebell training, which has kept him fit and competitive. He also has played high-level tournament bridge.
— He is passionate about volunteering in support of more housing for all and expanding workforce opportunities.
— His hobbies now are reading, walking, following sports, and most of all, spending time with his son’s family in Ventura and on vacations.