The San Francisco area saw the most precipitous drop among any large metropolitan area in an annual economic ranking tallying U.S. metropolitan areas' economic trends.
Before the pandemic, the regions of San Francisco and San Jose regularly topped the list, released by the nonprofit Milken Institute, which measures performance based on factors like job and wage growth, economic opportunity and equality, housing affordability and a host of other factors.
The San Francisco area came in 126th in the latest Milken Institute report, a drop of nearly 100 spots in a report that ranks 200 metro areas and 203 small cities across the U.S. The report looked at the most current data available through 2023.
The San Francisco-Redwood City-South San Francisco metropolitan area fell in the rankings in part because of soaring housing costs. It also pointed to tech job losses that crimped growth and opportunity.
“This ranking is a brutal wake-up call for the Bay Area that highlights the urgent need for bold leadership to address housing and other challenges that are eroding our competitive edge, discouraging investment, and pushing talent and jobs elsewhere,” said Rufus Jeffris, a spokesperson for the nonprofit Bay Area Council, a business association made up of hundreds of the region’s largest employers, in an email.
“We simply can’t afford to ignore or deny warning signs like this that are screaming at us that the future of our innovation economy is at grave risk,” Jeffris said, adding top business and political leaders have a responsibility to “restore our region’s rightful place as an economic and innovation powerhouse.”
To give a better sense of change over time, some metrics assessing job growth, wage growth and a few other areas were broken out over a six-year period and also from 2022-2023. The San Francisco region ranked last in job growth among large metro areas during the 2018-2023 period, according to the report, although it came in 53rd in wage growth during the same period. The area came in a dismal 153rd for housing affordability in 2023, a reflection of the Bay Area’s ongoing struggle to build enough homes.
It is not all bad economic news for the region however. A forecast last year from Oxford Economics predicted San Francisco, Dallas, and Boston would lead the way for metro area GDP growth during the 2024-2028 period, citing high-growth sectors like tech. The San Francisco region remains one of the largest regional economies in the country, in part because of its technology and financial sectors. The San Francisco area also had the highest median household income in 2023 out of the country’s 25 largest metro areas.
The results shouldn’t come as a surprise, said Sean Randolph, a senior economist with the Bay Area Council Economic Institute, but the numbers lack key context as well.
“The fall in this particular ranking has to do with the decline of tech,” Randolph said of an industry that has been hit by layoffs in recent years but that he views as a core economic driver that includes some of the most profitable businesses anywhere, facts not fully reflected in the rankings.
He said the report’s 2023 cutoff also failed to the capture the frenzy of economic activity around artificial intelligence companies large and small in San Francisco in the past year, with billions of dollars in venture funding flowing into the industry.
“The concentration of venture capital here is undiminished,” he added.
San Francisco and the Bay Area have seen tens of thousands of tech layoffs since the pandemic at companies including Google and Salesforce, with Facebook owner Meta announcing thousands more cuts Tuesday. Randolph said the biggest tech layoffs of the past few years were largely due to over-hiring during the pandemic, and that tech workers moving to other somewhat less lucrative jobs may be contributing to slow than usual wage growth.
“The San Francisco, Oakland, and San Jose metropolitan areas have all been affected by the slower growth in high-tech employment during 2022 and 2023,” Maggie Switek, senior director of research at the Milken Institute and and the lead author of the report, said in an email.
“As a result, all three metro areas have experienced below national average growth in total employment since 2022,” she said.
Slow job growth and sluggish increases in pay put further economic pressure on “a population that was already suffering from the low availability of affordable housing in these metros,” Switek added. “As people have struggled keeping up with the costs of living, some residents have decided to leave, with the three metro areas experiencing a net outflow of domestic migrants in recent years.”
Underlining how much the San Francisco area is struggling, the region ranked No. 1 in the 2020 Milken rankings and regularly edged toward the top of the list. The region ranked 24th in 2021, 27th in 2022, and 35th in 2023.
The drop points to pandemic era challenges that the region continues to struggle with. The top ranked large cities or regions in the 2025 report with at least 250,000 residents were Raleigh, N.C.; Ogden, Utah; Salt Lake City; Huntsville, Ala. and Colorado Springs.
The San Francisco area was not the only Bay Area region that struggled to crack the top of the rankings.
The San Jose-Sunnyvale-Santa Clara region also saw a sharp drop, going from 44th place last year to 108th this year. The South Bay region, where numerous tech giants are headquartered, fared better when it comes to wage growth, coming in 67th during the 2018-2023 period. The area also came in 144th in housing affordability in 2023, the most recent year of data available.
The Oakland-Hayward-Berkeley metro area saw its overall rank go from 112th last year to 131st this year, after coming in 61st in 2023. The region also saw stagnant wage growth in recent years, coming in 125th during the 2018-2023 period according to the report, and it too ranked near the bottom of the list for housing affordability among large metro areas.
Reach Chase DiFeliciantonio: [email protected]; X: @ChaseDiFelice
Jan 15, 2025
Reporter
Chase DiFeliciantonio is a reporter at the San Francisco Chronicle where he covers tech and how AI is changing the city and the region. He previously covered business, labor issues, and San Francisco's recovery from the pandemic's economic and other effects. A fifth-generation San Franciscan, prior to joining the Chronicle in early 2020 he covered legal and business news at the North Bay Business Journal and the Daily Journal.