SOURCE: Bay Area Council

November 15, 2005 08:00 ET

Bay Area CEOs' Confidence in Local Economy Falls Significantly -- To Worst Level in 33 Months

Executives Say Their Bay Area Hiring Will Slow

SAN FRANCISCO, CA -- (MARKET WIRE) -- November 15, 2005 -- Today the Bay Area Council announced it has found a considerably large drop in confidence in the Bay Area's economy in its quarterly survey of the region's CEOs. The "Bay Area Business Confidence Index" -- the number that distills the survey findings -- fell 7 points since last quarter, down to 55 out of 100. Hiring in most sub-regions of the Bay Area will also slow in the next six months, said the 517 CEOs and top executives surveyed during October 10 - 28, 2005.

Last quarter, in July, only seven percent of executives expected the local economy to worsen in the next six months. Now 20 percent predict rougher conditions and another 41 percent foresee no change. A modest 39 percent of respondents anticipate improvement. This is the worst outlook for the local economy in 33 months.

"These numbers are certainly troubling, but not yet a cause for a full alarm," said Jim Wunderman, President and CEO of the Bay Area Council. "With the two hurricanes and sustained spike in energy costs, we expected confidence to fall. The real test will come over the next few months. The Bay Area recently -- and I would add, finally -- began a sustained job recovery this past year. We are still down about 375,000 jobs from the peak of employment nearly five years ago. Full recovery is still a long way to go, and hopefully this shock won't further postpone its arrival."

Though employers are less bullish on new jobs, they still expect hiring to outpace layoffs, with 33 percent planning increases in their Bay Area workforce in the next six months and 10 percent planning decreases. In comparison, last quarter 38 percent planned increases and eight percent layoffs.

The best place to find a new job appeared to be San Mateo County (based on 44 interviews, a proportional number), where an astonishing 65 percent of respondents will enlarge their work force and none will cut back. Job seekers will likely have a more difficult time in the North Bay counties of Marin, Napa and Sonoma, where only a quarter of employers plan increases, as well as Contra Costa and Solano Counties, where slightly more -- 28 percent -- expect increases.

In the past few years, smaller Bay Area employers accounted for much of the hiring, but this quarter 45 percent of the largest employers -- those with more than 10,000 Bay Area workers -- are increasing local employment, while smaller companies are trimming expectations.

"Executives in the region are still looking to grow their businesses and their employment, but recent events caused them temper their enthusiasm," said Lenny Mendonca, a director at McKinsey & Company, the international management-consulting firm that helped develop the "Survey." "Risk -- be it natural disaster, energy costs or just normal business and economic uncertainty -- is back on management's agenda."

Bay Area Business Confidence Survey

The Bay Area Council developed the "Bay Area Business Confidence Survey" to measure employer expectations of the Bay Area economy. The fall survey is the sixteenth in a series of quarterly measures of business confidence. "Survey" findings can be accessed from the "Vault" at www.bayareacouncil.org.

The confidential survey of Bay Area business executives is conducted quarterly by Evans/McDonough Company Incorporated for the Bay Area Council with the assistance of McKinsey & Company. All members in the database were invited to participate through e-mail and the Internet. The "Survey" results are weighted to reflect the approximate percentage of employees in each Bay Area county.

Bay Area Council

Founded in 1945, the Bay Area Council (www.bayareacouncil.org) develops and drives regional public policy initiatives and researches critical infrastructure issues. Led by CEOs, the Bay Area Council presents a strong, united voice for hundreds of major employers throughout the Bay Area region whom employ more than 490,000 workers, or 1 of every six private sector employees in the Bay Area. Jim Wunderman has served as president and CEO of the Bay Area Council since April of 2004.

McKinsey & Company

McKinsey & Company (www.mckinsey.com) is an international management consulting firm that helps leading corporations and organizations make substantial and lasting improvements in their performance. With approximately 6,000 consultants deployed from eighty-two offices in forty-three countries, McKinsey has expertise on strategic, operational and technological issues.

Evans/McDonough

Evans/McDonough Company Incorporated (www.evansmcdonough.com) is a full-service opinion research and strategic consulting firm serving a broad range of corporate, political and institutional clients. Founded in 1989, EMC principals have been involved in thousands of public opinion studies, ranging from political and public policy strategy polls to extensive market share and customer satisfaction surveys.

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