Bay Area CEOs' Confidence in Overall Bay Area Economy Falls; But Conditions in Santa Clara and San Mateo, or Silicon Valley, Apparently Improving.

SAN FRANCISCO -- Today the Bay Area Council announced it has found a drop in confidence in the overall Bay Area economy in its quarterly survey of the region's CEOs, yet, in a silver lining, conditions appear to be better in the Silicon Valley counties of Santa Clara and San Mateo. The Bay Area Business Confidence Index -- the number that distills the survey findings -- fell 5 points since last quarter, down to 55 out of 100.

Only one third of the 509 CEOs and top executives in the nine Bay Area counties surveyed between July 12 - August 2, 2006 say the local economy will improve in the next six months, 21 percent predict a decline, and 48 percent think the economy will be the same.

Thirty-nine percent of the more than 500 employers surveyed plan to increase their Bay Area workforce in the next six months, 11 percent plan reductions, and 48 percent will maintain current levels. This is a small drop in hiring plans from three months ago when 44 percent planned hires and 8 percent planned layoffs.

"There appears to be a cautious attitude among business executives, but we are careful not to read this data too pessimistically," said Jim Wunderman, President and CEO of the Bay Area Council. "The Confidence Index is still in positive territory, and nearly four executives are planning to hire to every one that plans layoffs, a trend that holds steady across various sizes of companies. We are also heartened to see that Silicon Valley conditions are looking up, after many sustained quarters of cynicism."

In Santa Clara and San Mateo counties, approximately half of the CEOs surveyed said that local economic conditions are either moderately or substantially better than they were six months ago, the most optimistic sentiment in the Bay Area. In Contra Costa and Solano, for instance, only 32 percent say conditions have improved in the past half year and 25 percent report conditions are worse.

The best place to find a new job appeared to be San Mateo County (based on 44 interviews, a proportional number), where an 50 percent of respondents will enlarge their work force and five percent will cut back, a ten-to-one margin. Job seekers will likely have a more difficult time in Alameda, where 36 percent plan increases and 12 percent plan decreases a three-to-one margin.

"Silicon Valley added jobs last year for the first time since 2001," said Lenny Mendonca, a director at McKinsey & Company, the international management-consulting firm that helped develop the Survey. "When you couple the new jobs with the recent positive earnings reports of some bellwether Valley companies, it's no surprise that business confidence is growing in Silicon Valley."

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.

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.