Editor’s note: This is the first part of our coverage on what comes after the pandemic. Read Part II here.
The multitrillion-dollar technology industry has taken some hits in 2020. We’re talking consolidation, layoffs, and ongoing reputational fiascos from Facebook. But its giants — your Apple, your Google, and yes, Facebook too, among others— are not only enduring, they’re showing signs of growing stronger at a time when almost every other industry is anemic or near dead.
At first glance, that should make the average San Franciscan optimistic. Thank goodness Salesforce, Airbnb, and other names in the sector are here to keep the floor from giving out under us completely, right?
In practice, though, the idea of a city dominated even more by technology, whether that’s in fiscal or cultural terms, makes a lot of people really queasy. “There was an era of being wildly optimistic and deeply uncritical” about the sector, says Margaret O’Mara, a historian with the University of Washington and the author of the Silicon Valley history The Code. These days, after at least two booms, we are seeing that “these companies are — well, I’m not saying they’re evil, but they’re very large and very powerful.” (In a New York Times column, O’Mara writes that Big Tech is having its “Ralph Nader moment.”)
“Everyone was deeply in love with tech, until we fell deeply out of love,” O’Mara tells The Frisc.
With sectors like tourism, dining, retail, and even city government pummeled by the pandemic, SF’s long-standing anxieties about change, future shock, and the plight of local stores and corridors got a tremendous bandwidth upgrade that nobody wanted.
Yet tech is the bizarro industry that in many ways is getting stronger while everyone else buckles. Not only are the titans wealthy enough to weather the COVID storm, their services are more in demand than ever. In fact, they’re virtually the only businesses that many people can patronize at all. (Editor’s note: There’s more on the state of the tech sector in Part II.)
The COVID-19 outbreak is creating crises in households and shutting down some locally owned businesses, there’s no question about that. What we’re left to worry about is the damage: How bad will it be? If tech becomes the only game in town, where does that leave the rest of SF?
A fleet of sinking ships
Yelp, the business directory, estimates in its most recent data that between March and June 15 some 5,079 total businesses closed in the greater San Francisco-Oakland-Hayward metro area. June saw some significant reopenings (the number of closures was over 5,800 in the previous month), but since then the state and many counties have clamped back down on regular business operations and public gatherings.
The site data does not distinguish between permanent and temporary closures, but a Yelp spokesperson reports that nationwide, the site estimates that 14 percent of closures are permanent.
At the beginning of March, the unemployment rate in San Francisco was a mere 3.1 percent. By the time April rolled in, that had leapt to 12.6 percent with over 50,000 jobs lost. According to the state’s Employment Development Department, the city had not ever had a double-digit unemployment rate before for even a single month, going all the way back to 1990.
“I organize over 100 people in the Tenderloin and SoMa, and 89 percent of the people we’re working with lost their jobs,” says Lorenzo Listana, a community organizer with the Tenderloin Neighborhood Development Corporation. “Most work in small shops, retail, hotels,” and are the kind of workers who are in limbo and unsure whether they’re temporarily laid off or permanently jobless. Listana notes that he considers it a good week when just two people he interacts with go back to their positions.
SF had not had a double-digit unemployment rate before for even a single month, going all the way back to 1990.
Restaurants, which have burnished San Francisco’s image worldwide, are in really deep trouble. A recent survey by the Golden Gate Restaurant Association has 60% of its respondents losing money by keeping their eateries open, and 87% say they are working in the red just doing takeout and delivery. Of about 4,000 restaurants in San Francisco, as many as half may close this year, a representative of the SF Chamber of Commerce tells The Frisc.
“I don’t want to imagine that, but it’s going to happen, and it’s going to be sad,” says Yvonne Hines, proprietor of Yvonne’s Southern Sweets on Third Street. “These are people’s dreams.”
Hines, who has owned her Bayview business since 2006, got a big break this year in the form of a kiosk in the new Chase Center, doling out baked goods to Dub Nation. In the course of a few weeks, that and almost all of her other business collapsed, although she continues to fill orders from her home. (More than 2,000 food-service workers at Chase Center and Oracle Park have lost their jobs as well.) She says that fellow Bayview merchants are a hardy lot, but fears that they won’t hang in there indefinitely.
Some neighborhoods and certain demographics — including Latinx folks, already vulnerable to gentrification and displacement before the pandemic — are reeling hard from both the health emergency and the related bust. Many longtime merchants in the Mission, for instance, were slow to adapt to digital advertising and marketing, and not prepared to port their businesses online.
“In the Latino community, a lot of small business owners are old-timers,” says Carlos Solórzano-Cuadra, CEO of San Francisco’s Hispanic Chamber of Commerce. “They rely on the kids to help them out, and it doesn’t work a lot of the time.”
Some owners and entrepreneurs borrowed time via the federal Paycheck Protection Program. That fund, however, is tapped out. “The PPP loans were structured to last about two and a half months. It really demonstrated that people did not take this as a long-term problem,” says Jay Cheng, spokesperson for the SF Chamber of Commerce.
The worst of it is also in front of us: Stanford economist Nicholas Bloom predicts “a tsunami of business bankruptcies” this year. “Right now the virus is the boss,” Bloom tells The Frisc. “The U.S. cannot recover until we get this virus under control.”
And as for its effect on neighborhoods? Nobody can divine the future, but Bloom brings up “hysteresis” — the notion that some things, once changed, can never go back to the way they were before. “If you bend a piece of plastic, it doesn’t bend back” the exact same way ever again. That’s true of certain things in economics too, “one being bankruptcies, the other being people losing their jobs,” he says.
For every local business that closes, a wave goes out to capsize ventures that the average resident isn’t even aware of. VegiWorks, a 27-year-old SF-based grocery supplier with more than 60 employees, said it would shut down by the end of July. “With the uncertainty of how the food and beverage industry will bounce back, the grim reality has hit home harder than any past crisis since our inception,” the company declared on its web site.
Just deserts
Lindsey Passenger Wieck, an assistant professor of public history at St. Mary’s University in San Antonio, Texas, who has studied class struggles in urban spaces, says that businesses like many in the Mission district serve as community anchor points, as well as places to buy goods and services.
“We see these networks where people come, and they find a lot of businesses where people speak Spanish and they can get news and bilingual media and social services, and these act as hubs where they’re not just selling you bread or groceries” but are in effect enabling your way of life, explains Wieck.
As those networks break down, a neighborhood can lose economic vitality and also see a decrease in the social rationale for others to remain. “Once a family leaves, it’s very rare, maybe 1 or 2 percent chance, that they’re going to come back,” remarks Solórzano-Cuadra of life in working-class neighborhoods. “If they’re gone, they’re gone.”
It’s a sort of gentrification in reverse: The more folks move and storefronts get vacated, the empty commercial spaces that were already there become less attractive as sites for new businesses. Without stores and services, neighbors that stay put must range farther away for basics and for jobs.
One scenario of what this can look like are America’s rural communities. “I’m from rural Pennsylvania, an area that has been devastated by Walmart,” says UC Berkeley economist Sylvia A. Allegretto. “You have a Walmart come in and every hardware store goes bust and everyone has to travel 50 miles” to get anything.
Nobody’s saying that in future we’ll be schlepping 50 miles around San Francisco for necessities. But with fewer nearby businesses, we’re going to have to stray further and spend more at the Walgreens or Safeway or Lowe’s that survive the crisis, or simply fill up a shopping cart at an e-commerce giant like Amazon or SF-based Instacart to have stuff delivered. The merchants that still manage to open will see falling foot traffic and lower sales, and you get the picture. It’s bleak.
“It is true that in SF in recessions, the tech industry did better than other sectors, and blue collar and retail are what struggle the most,” says Ted Egan, SF City Hall’s own resident economist. “It’s hard to imagine a lot of capital flowing into those sectors with this dark cloud over them.”
Most Californians and others are familiar with the concept of “food deserts,” generally referred to as a place without a grocery store within one mile. Now imagine the problem of living in a hardware desert, or pharmacy desert, or dining desert — or all three.
A 2012 study by the state’s Department of Food & Agriculture about food access shows that the more people must travel for necessities, the more likely they are to pay more, to settle for lower-quality products, to be limited in what they can buy and transport, and to pay hidden costs in things like transit time.
“We have people in wheelchairs, seniors, that will need to travel or walk” farther for basic errands, TNDC’s Listana warns, noting that with Muni slashing some 40 transit lines, the neediest residents may end up stranded, and in some cases unable to remain in their living situation in the city.
The counterpoint to all this doom and gloom is that in time, new businesses will invariably emerge to meet the existing demand. But COVID-19 takes a lot of the established thinking about the way things work and makes a hash of it.
“We’ve seen a trend in recent years of big destination restaurants, and those provide jobs and some connective tissue,” says Norma Paz García, director of policy at the Mission Economic Development Agency, known as MEDA. But what sober investor would back a big dining room these days? “I don’t know how a lender might perceive risk, given the changing landscape,” she adds.
The story of spring, summer, and now even fall 2020 is simple: If it’s in the economy, it will be in decline.
With one exception.
Next: “If you hate what the last 10 years have done to the San Francisco economy, you’ll hate this more,” the city’s economist says. Read Part II here.
Adam Brinklow has lived in and written about San Francisco for 13 years, covering local communities for outlets like Curbed SF, SFGate, San Francisco magazine, SF Weekly, and EDGE SF.
