San Francisco Likely to Remain Economic Hub Despite Setbacks, Wells Fargo Study Concludes

This city “epitomizes the post-industrial, service-based economy” and should continue to prosper despite its diminished role as a site for corporate headquarters, according to a study released on Tuesday by Wells Fargo Bank.

“Most cities would give their eye teeth for San Francisco’s economic prospects,” contended Joseph Wahed, Wells Fargo’s chief economist.

But Wahed warned that those prospects might go unrealized unless the city improves its business image, reduces obstacles to growth and upgrades its infrastructure.

In particular, he said, the city’s long-term economic future is dependent upon approval of Santa Fe Southern Pacific Co.’s 210-acre Mission Bay development in the area south of Market Street. The proposed office, light industrial and residential project has been snarled in red tape for years.

The report by Wells Fargo, which is based in San Francisco, appeared to be an attempt to counter negative publicity that the city has garnered in recent years as a result of the loss of nearly half of its large corporate headquarters through acquisitions, mergers or moves to the suburbs.

Major corporations lost by the city in recent years include Natomas, Crown Zellerbach, Itel, Castle & Cooke, Consolidated Freightways and Crocker National--which was acquired and merged out of existence, ironically, by Wells Fargo.

Still, the report noted that San Francisco is the focal point of the fourth-largest economic region in the United States, and predicted that the 10-county Bay Area will overtake the Chicago area early in the 21st Century to become the nation’s third-largest economic region behind New York and Los Angeles.

San Francisco itself “is the modern equivalent of a business broker, a go-between offering a wide range of specialized and sophisticated services,” the report found.

“This important function has made it rich and will keep it competitive in the years ahead,” according to the report. “Indeed, San Francisco could be called the Switzerland of the United States.”

San Francisco’s 1986 per-capita income of $21,219 was the highest of any major city in the nation, the report noted, well above the national average of $14,461.

The Bay Area also ranked as the nation’s most affluent region, with per-capita income last year of $19,767, compared with $16,567 in and around Los Angeles.

Small business has become a vital engine for the region’s economic growth, the report found, with new business starts up 4.5% in 1986 and 15.6% for the first two months of 1987.

But the report noted that the recent increase in small business activity “may have been a one-time surge” fueled in part by the declining number of big corporate headquarters.

“Job cuts due to acquisitions, consolidations, relocations and layoffs have released a large pool of skilled labor and entrepreneurial talent onto the local market,” the report said.

Overall, the report predicted overall economic growth for the Bay Area averaging 3.5% per year between now and the year 2000.

Still, Wahed said, “San Francisco cannot sit back and live on its past glory. The city will have to fight to achieve economic growth.”

SAN FRANCISCO ECONOMIC PROFILE

Forecast 1980 1986 2000 Market Size* (billions) $15.4 $19.1 $29.0 Population (thousands) 679 745 800 Per-Capita Income* $18,881 $21,219 $30,000 Employment (thousands) 563 569 670 Unemployment Rate 6.1% 5.5% 5.0%

Source: California Department of Finance; California Employment Development Department; Market Size estimated by Personal Income Forecast: Wells Fargo Bank